Author Archives: Emily Holbrook

About Emily Holbrook

Emily Holbrook is a former editor of the Risk Management Monitor and Risk Management magazine. You can read more of her writing at EmilyHolbrook.com.
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Abuses in the Logistics Industry

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Those running shoes you bought from Amazon or that alarm clock you picked up from Target got from where they were made to your neighborhood stores by way of logistics, a trillion-dollar industry in the U.S. Big retailers are able to save money and keep merchandise prices down by, among other things, using cheap labor for logistical purposes. However, a recent study has found that abuse is rampant within the logistics industry.

Jason Rowe of the Kennedy School of Government at Harvard University, in partnership with New Labor, a workers rights group, surveyed 291 workers in New Jersey’s logistics industry and found serious problems in the way companies operate in towns off the heavily trafficked New Jersey turnpike. “New Jersey’s Supply Chain Pain: Warehouse & Logistics Work Under Walmart and Other Big Box Retailers” found the following:

  • More than one in five logistics workers surveyed have incomes falling below the Federal Poverty Level.
  • Less than 10% of those surveyed earn enough to meet the NJ Self- Sufficiency Standard, a measure of a living wage.
  • Almost nine in ten logistics workers are uninsured.
  • Agencies explicitly use gender as a hiring criterion for jobs in the logistics sector. They go so far as to advertise specific jobs for men and others for women.
  • Women seem to have limited access to higher-paying jobs, like forklift operation. Less than 5% of forklift operators in the survey were women.

The study also found that workers employed through agencies make up a sizable share of the sector’s permanent workforce. But these agency workers are paid less than direct-hire workers doing similar tasks, and face other issues because of their dual-employer situation. In addition, more than 13% of the workers surveyed reported being injured while working in a distribution facility, of which only one-fifth received some form of compensation for medical costs and lost income. A staggering 42% reported not always receiving the personal protective equipment necessary to perform their job safely. Suggestions proposed towards state lawmakers to address these problems include:

  • raise the minimum wage
  • better combat wage theft
  • force agencies to be more transparent with workers
  • close any loopholes regarding the unlawful nature of transportation deductions

The state of working conditions for agency workers within the logistics industry nationwide, is dangerous not only to the workers, but also to the big box retailers who use them — potentially affecting their reputation and costing them more money than they have ever saved using low-paid workers.

Electric Cars: The Silent Killer

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Electric cars are great. They’re unbeatable with gas mileage, saving the owner time and money, and most people feel they’re better for the environment. But all the benefits pale in comparison to the one major drawback of electric cars — they can kill.

Battery-powered cars are quiet — too quiet some argue. Pedestrians cannot hear the cars approaching, something that the visually impaired rely on. The issue was serious enough for the National Highway Traffic Safety Administration (NHTSA) to issue a report on the matter, which found that hybrid electric vehicles “have a higher incidence rate of pedestrian and bicyclist crashes than do ICE [internal combustion engine] vehicles in certain vehicle maneuvers.” A recent New York Times review of the electric Ford Focus calls it “Deep-space silent, the quietest of the many electric cars I’ve driven.” That’s a problem.

A silent car puts pedestrians, cyclists and the National Federation of the Blind in an uproar, as it should.
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To help solve this issue, the Pedestrian Safety Act of 2010 was enacted, forcing the NHTSA to initiate a rule-making process for minimal vehicle noise. That’s fine going forward, but what about the fleet of quiet, electric cars already on the road? They could be considered to have a fatal flaw. And what if car companies are reluctant to manufacture cars with such a feature?

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The response of the industry was clumsy. Many, including Honda and high-end manufacturer Tesla Motors, doggedly continued to manufacture hybrid and electric cars that ignored the issue. One motive for Tesla becomes apparent when you read their 2011 SEC filings: The safety feature “could negatively impact consumer interest in our vehicles.

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” Nissan Leafs made a half-hearted effort by installing a grating boop-beep sound—but featured a mute button, something the new law wouldn’t allow. Toyota and Hyundai have been more proactive: This 2010 Japanese video shows Toyota tinkering with the Jetsons-style sound that is now standard on 2012 Priuses.

Car manufactures have no other option than to see this as a critical issue. If they don’t, it represents a serious failure of risk management. And those are never cheap.

Food Safety Reporting: The Best of a Bad Topic

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Reporting on food safety issues is not the most glamorous topic and, truthfully, it’s sometimes disgusting. But it’s also something that’s important and necessary. Investigative reporting, no matter what the field, requires persistence, fearlessness and a little bit of trickery. Here are a few examples of the best investigative reporting on food safety:

  • “America’s Dangerous Food-Safety System” — Author Eve Conant writes about how the lack of inspectors and budget cuts is constantly putting Americans at risk of illness and death. The article is shocking in itself, but also includes some hard-to-believe facts taken from a Newsweek investigation into the matter.
  • “On the Menu, but Not On Your Plate” — Reporters with the Boston Globe found that certain fish being sold at area seafood restaurants were not the same variety as the menu claimed them to be. Many items on the menu were substituted with cheaper, less nutritional types of fish. Also known as “food fraud,” it has become somewhat of an epidemic and not only cheats consumers out of money, but exposes them to possible health risks. (We covered the topic in the April issue of Risk Management.)
  • “How Washington Went Soft on Childhood Obesity” — As the article, published on Reuters.com, explains, “In the political arena, one side is winning the war on childhood obesity — the side with the fattest wallets.” Indeed, as more and more food and beverage companies engage in aggressive lobbying, plans to reduce sugar, salt and fat in food marketed to children have been cut, with little to no explanation. Oh, and did I mention that in April Congress declared pizza a vegetable? Money talks as generation after generation of Americans become heavier and less healthier.

The complete list of the best reporting on food safety is available on ProPublica’s website.

Organizations Lose an Estimated 5% of Annual Revenues to Fraud

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There’s no doubt fraud, committed by both external and internal parties, is on the rise as methods for committing theft become more available and easier to hide due to technology. And according to a recent survey by the Association of Certified Fraud Examiners, businesses around the world lose an estimated 5% of their annual revenues to fraud, for a total loss of more than $3.5 trillion.

The 2012 “Report to the Nations on Occupational Fraud & Abuse” found the following:

  • Fraud schemes are extremely costly. The median loss caused by the occupational fraud cases in the study was $140,000. More than one-fifth of these cases caused losses of at least $1 million.
  • Schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught.
  • Tips are key in detecting fraud. Occupational fraud is more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organization.
  • Occupational fraud is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics and anti-fraud controls are similar regardless of where the fraud occurred.
  • High-level perpetrators do the most damage. The median loss among frauds committed by owner/executives was $573,000, the median loss caused by managers was $180,000 and the median loss caused by employees was $60,000.
  • Small businesses face increased risk. The smallest organizations in the study suffered the largest median losses. These organizations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud.

The report goes on to break down occupational frauds by category, duration of fraud based on scheme type, size of victim organization and initial detection of occupational frauds. Here is the breakdown in graphical form:

The full report can be downloaded here.