Changes in the Legal Environment
Asset
managers have a unique responsibility with regard to the management of risk.
The actions or omissions of the maintenance effort contribute directly
to the level of risk that an
organization, its workers and, at times, the surrounding communities, are
exposed to. Over the past two decades in particular, this unique role has been
recognized through rafts of legislative and regulatory changes around the world.
This has included changes in Australia, the United Kingdom, Canada, and the United States.
For instance, in Canada changes were made to the Criminal
Code that imposes criminal liability on business and individuals in the event
of workplace accidents. These changes became applicable law as of January 1st of
2004. These changes in law were made in response to the Westray Mine Disaster
where 26 miners were tragically killed in an explosion in Nova Scotia in May of
1992. The public inquiry that investigated the disaster uncovered a serious
disregard for workplace safety by the corporation and its managers.
The Act provides significant penalties in the event of a
conviction. This includes imprisonment to a maximum of 25 years for individuals
and fines of up to $100,000.00 for corporations. It is important to note that
these penalties would be in addition to any existing penalties provided by
provincial occupational health and safety legislation or other regulatory
statutes. The Act’s provisions will not supersede the existing penalties
provided by these statutes but will add additional criminal liability.
Upon conviction, the Act also provides a number of new
factors that will be considered in any sentencing. These factors include
whether the organization realized any advantage as a result of the offence, the
level of planning involved, the cost of the investigation, and any regulatory
penalties imposed and any actions taken by the organization to reduce the
likelihood of future occurrences.
The Act also expands the scope of individuals who may be held
liable. It broadly defines those who are involved in directing the work of
others within an organization. It places a positive burden on such individuals
to take reasonable steps to prevent bodily harm to employees. This provision
could result in personal liability for individuals such as floor supervisors,
managers and anyone else directing the work of others.
The Act also applies to “representatives,” which is defined
as persons who play an important role or are responsible for managing an
important aspect of the organization’s activities. They include directors,
partners, employees, members, agents, and contractors. The terms “important
role” and “important aspect” are not defined and will likely be the focus of
much litigation in the future1
.
In
the light of other events in the United Kingdom, which are still underway at
the time of writing of this book, this global trend looks set to continue. It
is becoming increasingly clear that in the future decisions regarding physical
asset management will be subject to greater questioning. It is also becoming
clear that it will be individuals rather than corporations who will be asked to
provide the answers.
________________
1
Joe Morrison - Goodmans LLP - Criminal Liability for Workplace Accidents Posted
on www.mondaq.com
Perhaps
the strongest and most recent example of this lies in the recent publication of
the report titled “Final Report on the August 14, 2003 Blackout in the United States and Canada - Causes and Recommendations” published in April of 2004. This report was a
joint US – Canada investigative effort which was completed over an 8-month
period.
The
very first recommendation of this report, which is also alluded to in the covering
letter, reads as follows-
Make reliability standards mandatory and
enforceable with penalties for non-compliance.
Although
currently merely a recommendation, it clearly indicates the overwhelming trend
towards more accountability in asset management decisions. In this case it is
with specific reference to reliability standards. Further details throughout
the report speak of further formalization of accountabilities and practices
throughout the institutions and regulatory bodies involved with this particular
industry. At the time of publication, there were several bills being considered
by the U.S. Senate with regards to the enforcement of regulation in the area of
electrical network and energy reliability.
Wide Ranging Impact in the Areas of Risk Management
The
change in technology for managing assets is a good example of where the impacts
of these changes in legislative pressures may be felt. During the last decade
of the 20th century the world went through the most dramatic advance in
technology ever. Today large-scale ERP, EAM and CMMS2 systems are in
place in most organizations whether they are small operations or large
multinationals. This has evolved to a stage whereby the growing reliance on
software, to resolve issues related to asset management, is one of the more
prominent features of early 21st century asset management.
As
a result of the dramatic change in the use of technology, there has been a
large influx of professionals from other functional areas making, or managing, decisions
regarding the management of assets. Often these professionals have no depth of
knowledge or experience in the area. This is particularly true when it comes to
areas such as system selection, implementation, and ongoing management. More
and more often, decisions are being made based on other issues and not driven
by the issues affecting the assets themselves or asset managers.
________________
2
These are three commonly used terms to refer to software used for the
administration of asset management
ERP
– Enterprise Resource Planning,
EAM
– Enterprise Asset Management,
CMMS
– Computerized Maintenance Management System