Company Overview and Risk Analysis
Orange County Sanitation District is a sewage company located in California. The company has been in operation for the last few decades. However, according to the 2011-2012 financial year results, the company’s performance has been declining, as evidenced by its extremely low production capacity.
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This has necessitated a reflective investigation of the environmental risks of this company in order to decode the underlying operation, instruments, and labor risks that the company faces in its operations. In addition, the identified risks should be aligned with their effects on the eventual outcome of the company’s performance.
This study’s thesis postulates that, providing annotated links to the risks involved in the provision of sewage disposal within the district of California, which enables the project managers of the company to improve their understanding of the major risks involved in their projects, is not only effective strategy of sustainable operations, but also necessary for efficiency in the long-run.
Generally, a risk is regarded as a negative factor in the introduction of new technology because of its associated limitations to the performance of an enterprise. Risk identification is the most important process of risk management, as it is difficult to work on a project before identifying the risks associated with it.
Mostly, using past experience of types of risks that have been recognized within the area or is considered as the general strategy for risk identification. Identifying new risks necessitates greater thought about things and enlarges the scope of dealing with a particular risk.
The implication is that, before carrying out a project, it is imperative to have a good strategy on how to manage the risks associated with the adoption of new concepts such as adoption of new technologies. It is through risk identification that the project managers will be able to plan for the available resources in order to counter the associated risks.
Perils, hazards and potential losses
Perils are the fundamental causes of loses. The Orange county sewage company is faced by a lot of perils which may make the company to suffer huge losses. Some of the potential perils to the company include earthquakes land, slides, fire, floods, etc. though some of the perils may be insurable, some like earthquakes are not since most insurance companies do not insure underground pipes.
Self insurance remains the only option for most of the company’s assets and these posses a great challenge to the risk management department of the company. Also, during rainstorms a lot of water accumulates in the pipes which may lead to the bursting of the pipes and also increases the cost of the sewage treatment because of the increase in the volume of the sewage.
On the other hand, hazards are the conditions that increase the likelihood of a risk occurring. The underlying perils facing the company can be triggered in many ways. The company has done a lot to prevent the occurrence of majority of its most probable risks. Most of its structures are solid hence the chances of the occurrence of fire are very minimal.
The emission of poisonous hydrogen sulfate gas during the waste treatment process of the company also triggers the possibility of environmental pollution. Though very few deaths have been caused by the gas over the recent years, the company has set in mechanisms to ensure that any environmental pollution caused by the gas is well checked.
This is done through ensuring that it employs very qualified risk managers in al its undertakings. Other potential hazardous activities in the day to day running of the company are the damage of personal property resulting from spillages of sewage from trucks or leaking pipes during rainstorms.
Poor handling of sewage by majority of the employees has also been a major predisposing factor to majority of losses suffered by the company.
Reckless driving by some truck drivers over the recent past has led to contamination of water with sewage waste, which has caused a lot of damages to third parties; hence making the company to incur huge expenses. The company sets aside 30000 dollars to cater for such losses which are a big strain to the progress of the company.
The potential losses to the operations of the company may either be internal or external. The internal losses are those that accrue to the company and have no adverse effects to the whole industry in California. Some of the potential internal losses to the firm over the recent past have been theft by employees.
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The company reported to have lost over 40000 dollars as a result of some of its employees stealing some of the company assets on their fields of work. Other losses include bursting of some high temperature sewage recycling tanks as well as busted sewage pipes during rainstorms.
Mostly external losses occur as a result of third parties. Some company trucks hit pedestrians while transporting sewage to the treatment centers which compels the company to compensate them.
Some of the reasons why the company has failed to optimize its operations include a poor business approach, low support system levels, high costs in sustaining top quality services, high costs in building management systems, and poor focus of other related services. Risk analysis on these issues would help in mitigating or reducing the associated risks while delivering better sewage services to the residence of California.
Summary of the Risk analysis( Source: Self Generated)
Identification of Indirect Losses
Indirect losses are losses that do not result from the occurrence of a peril, but result due to another loss. In the orange sewage company, destruction of sewage recycling tanks or the busting of pipes results to a direct loss to the company but the indirect loss would be the loss of profits occasioned by the direct risks.
Indirect losses are very detrimental to companies and therefore the company takes keen measures to prevent them from taking place. Other indirect losses to the company are loss of goodwill and the inability to get the necessary financing because of non insurability of some of its activities because the likelihood of the occurrence of the losses is not easily determinable.
The company also suffers indirect losses when contractors fail to meet the sanitation council specifications which may force the company to spend a lot of resources to renovate already constructed structures.
Occurrence of risks greatly affects the day to day business activities of the company. For instance, in cases of rainstorms, which are very popular in California, the increased volume of sewage posses a great challenge to the company because the normal operations of the company would be interrupted. Truck accidents, although unpopular also interrupts business in the company.
The management has to make sure that in puts in place measures aimed at ensuring that any emergence of such risks is easily mitigated. From an interview of the stakeholders of the company. It was found out that the emission of poisonous gasses also interrupt business in the company. Hydrogen sulphate emitted during the waste recycling pollutes the environment and can also result to deaths.
Contingent Business Interruption
In general insurance, contingent business interruption is the interruption of the business due the stoppage of the normal operations of the business. To avoid some of the contingent business interruptions, the company has set up 15 to 20 projects in progress so as to cater for any damage which may result to the normal functioning of the system.
This is also aimed at catering for tear and wear since each facility takes about 30 to 40 years, for example the “dewatering” facilities. The company is also using an updating technology which is aimed at ensuring that the appliances that are becoming obsolete with time can be upgraded to cater for the changing technologies.
In most cases the company usually incurs more expenses than it budgets for. These is because of loses occurring outside the normal operations of the company. For example, the company has to invest more during rainstorms when the volume of the sewage increases which constitutes to extra expenses of the company.
Also, incase of a truck accident hitting a third party, the compensation of the loss also uses a lot of finances for the company hence constituting extra expenses.
The environmental agency of California postulates that no sewage should sill to the private domain and this calls for strict measures to be taken to avoid conviction of the company. It is also a social responsibility of the company to protect the lives of the people of the community and hence it has to spend resources to improve the livelihood of the unfortunate members of the society.
Building Ordinance and Leasehold Interest
Building ordinances are laws set aside to govern the companies involved in building. These laws govern the construction and repair of damaged structures. In some countries, any building that has been destroyed to more than 50% must be rebuilt again. There was one case in 2012 where a boiler and some machinery exploded and the company bought other new boilers and did not repair them.
In order to avoid more losses most of its materials are constructed using concrete to avoid many losses. Concerning the leasehold interest, the company has a strong capital base which motivates many investors. The company also provides pension schemes to its employees, has a crime policy and takes great regard to the general life of the members of the public.
In conclusion, this paper has discussed the perils, hazards and potential losses of the Orange County Sewage and Sanitation District. Among the perils explored are thunderstorms earthquakes, rainstorms fire and other environmental hazards.
Other perils including internal dysfunctions have also been analyzed. After analyzing the direct risks, the indirect risks of the company were also discussed. Identifying potential risks and adopting appropriate actions is an essential challenge facing managers of this company.