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Lawsuits Question Arkema Emergency Preparedness Plan

Last week officials in Harris County, Texas were granted permission to file a lawsuit against international chemical company, Arkema, Inc., in attempt to recover the costs of responding to the crisis at the company’s plant in Crosby during Hurricane Harvey in August into September. The County has asked a court to review the plant’s environmental practices and disaster preparedness plan and to determine how, if at all, it was updated to reflect the projections of 50-plus inches of rain in the days leading up to Harvey’s landfall.

The New York Times reported that in its risk management plan to the federal government, Arkema indicated that floods and hurricanes, as well as power failure and loss of cooling, were threats to its Crosby chemical plant. In its filing with the government, however, Arkema did not provide contingency plans to address those concerns, the Times said.

As previously reported, several feet of floodwaters caused a power outage which subsequently prevented Arkema plant staff from ensuring that nearly 500,000 pounds of organic peroxides were kept cooled and stable. The chemicals eventually overheated and caused a series of explosions which started in late August into the first week of September. This led to a mandatory 1.5-mile evacuation of the area, affecting about 300 homes and many nearby businesses.

Local media reported that Harris County Attorney Vince Ryan is expected to file the lawsuit this week. “The company’s lack of preparedness caused a crisis on top of this horrific storm,” Ryan said in a statement.

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“Dozens of first responders were required by this emergency caused by Arkema when their services were desperately needed elsewhere.

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According to the County’s statement:

Investigations conducted by the Harris County Pollution Control Services and the Harris County Fire Marshal’s Office uncovered serious violations of the Texas Clean Air Act. Ryan will seek to recover the County’s costs for responding to the week-long incident.

This is the second suit to arise from the Arkema plant’s explosions. On Sept. 7, seven first responders filed a negligence lawsuit against Arkema, alleging they were not warned of the smoke and fumes and their effects prior to arriving. The responders claim they became ill shortly after they began working on the scene following the Aug. 31 explosion; many left vomiting, gasping for air and unable to breathe during and after rescue efforts.

The Texas Tribune reported that the lawsuit was updated in late September, swelling to include six additional first responders and a number of area homeowners. They claim to have suffered “upper respiratory infections, bronchitis, pneumonia, itchy, burning eyes, tight, burning throats and the like—illnesses and injuries that did not exist prior to the explosions and fires at the Arkema facility and illnesses resulting from and exacerbated by the explosions and fire at the Arkema facility.” Plaintiffs are seeking more than million in damages, according to the suit.

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The third lawsuit was filed Oct. 2 by nearby residents who claim their properties were contaminated with toxins. The federal suit details how residents are now suffering from medical problems ranging from scaling and rashes to respiratory problems.

“Based on testing results received to date, Arkema has not detected chemicals in off-site ash, soil, surface or drinking water samples that exceeded Residential Protective Concentration Levels established by TCEQ for soil and groundwater,” company spokesperson Janet Smith said in an email to Houston Public Media.

Harris County’s full statement can be found here.

Reputational Crises Put CEOs at Risk

When reputational crises hit, market cap, sales, margins and profits are all on the line. And these situations are becoming more frequent—and more costly—than ever, with a recent study showing an increase in losses from reputational attacks increasing by more than 400% in the past five years.

But it is not only the corporate entity facing challenges, individuals in leadership—particularly CEOs—face personal risk as well. It has become clear that CEOs need tools to protect themselves as well as their companies’ reputations. Since damage from reputational attacks takes place in the court of public opinion, traditional liability solutions, such as directors and officers coverage, are not effective. But new tools are available in the form of a reputation assurance solution that can help deter attacks from even happening and bundled insurances to mitigate the damage when they do occur.

Research by Steel City Re has found that:

  • Financial losses related to reputational attacks have increased by more than 400% in the past five years, a trend that continues.
  • There is an increase in public anger and, as a result, more blame is being cast upon recognizable targets, such as CEOs.
  • Anger by stakeholders is fueled by disappointment—the gap between expectations and reality—which is all too often fueled by the company’s own actions.

Against that backdrop, the turnover rate among CEOs is increasing, with 58 of the S&P 500’s CEOs transitioning out of their jobs in 2016 according to SpencerStuart (although not all as a result of reputational crises). That is the highest number since 2006, a 13% increase over 2015, and a 57% increase over 2012.

If that weren’t enough reason for concern, history shows that when strong companies and their brands come under fire, their reputations eventually recover, despite the initial and medium-term impacts. Individual reputations of those companies’ leadership are not nearly as resilient, however, especially at a time when society; be it the media, social media, politicians or direct stakeholders; seems intent on personifying crises and affixing blame on individuals in positions of authority. And for CEOs, a reputational crises can affect their career and compensation for many years ahead.

In this environment, it is essential that risk managers understand the tools that are available to protect both companies and senior executives personally. Serving as a third-party warranty and available only to highly qualified insureds, reputation insurance attests to the efficacy of the company’s governance and operational practices, as adopted and overseen by the board and implemented by the CEO. Such coverage can deter reputational attacks in much the same way as a security sign on the front lawn deters burglars. It is a sign of quality governance. And when incidents do occur, it provides a built in alternative narrative to counter the attacks that are bound to occur. Finally, it gives the company and key individuals financial indemnification to mitigate any damage that ultimately does take place.

Just as “doing the right thing” did not protect directors and officers from liability in the era before the wide adoption of D&O insurance, it is no guarantee that attacks in the court of public opinion won’t take a significant financial toll. But it is one of the few solutions proven in the court of public opinion. In today’s culture, reputations are in jeopardy as never before and risk managers must utilize all tools available to protect those on the front lines.

Protecting Employees in the Face of International Risks

Increasing globalization and the growing world market presents employees with opportunities to travel and experience new countries and cultures. With travel comes risk, however. In the event of an unforeseen incident, it is an organization’s top priority to ensure its employees are safe and out of harm’s way.

By following proactive travel risk management strategies, employers can help ensure not only the safety of their employees abroad, but also the success of their businesses while avoiding major financial, legal and reputation costs. When developing travel policies, companies must consider the health, safety and security risks that their employees could encounter.

Security Risks
The frightening unknowns of crises such as sudden earthquakes or airport terror attacks can cause distress and chaos. It is the duty of a company’s human resources department to ensure employees are safe and secure, as being unprepared for such events could have dire consequences. For the best outcome, companies should proactively develop travel risk management plans before disaster strikes. Consider these guidelines for your company’s travel emergency plans:

  • Share information. Ensure employees are educated on how to avoid security risks in their destinations and share corresponding safety advice.
  • Develop a communication plan. Decide how employees should contact HR and/or other crisis response team members and vice versa in the event of an emergency.
  • Give employees information about who to contact if they’re in an emergency scenario. Create staffing patterns or third party resources that can accommodate after-hours calls.
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  • Consider rearranging travel plans if there’s a high security risk. Use technologies, such as video conferencing, to keep business rolling as usual if employees need to conduct in-person meetings in destinations where it may be temporarily unsafe to travel.
  • Encourage employees to enroll in the Smart Traveler Enrollment Program (STEP). The app provides updated travel warnings and alerts via email. It can also help the nearest U.S. embassy or consulate locate individuals in the event of a disaster.

Health Risks
Recent disease outbreaks in several countries have caused concern among business and leisure travelers alike. If organizations have plans for employees to travel to areas experiencing widespread illness, consider exercising flexibility. If a disease epidemic is dominating news headlines, there is a good chance employees will be concerned about going to a destination that’s affected. In these cases, advise alternative options such as video calls or contacting local partners to help out. On the other hand, if employees elect to travel to the location, it is the employer’s job to ensure they have the knowledge and resources they need to have a safe and successful trip.

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 To help protect the health of a traveling employee, HR professionals should:

  • Research and understand destination-specific health risks and share this information with employees. Education is essential to preventing life-threatening situations.
  • Ask employees to fill out personal medical information Forms. An employee should bring a copy on the trip and also leave copies with trusted friends or family. In the event of a medical emergency, the trustees will be able to obtain important personal medical details from the document, such as insurance coverage, current or past medical conditions and emergency contact information.
  • Remind employees to carry prescription paperwork. This can prevent issues at airport security and can be useful should a new or similar prescription be necessary locally.
  • Confirm that employees are covered by health insurance that is accepted overseas. This will help avoid monstrous fees later on.

Potential Costs for the Business
The costs of not following these strategies can be far-reaching. Your employees’ health and safety is always of utmost importance. However, there are also some continuity issues to consider.

At the most basic level, a health or safety issue that affects a traveling employee will likely cause a loss in productivity and, therefore, an impact to your organization’s bottom line. Companies could furthermore face cancellation fees, lost deposits, unused inventory or lost sales. Additionally, medical bills, medical evacuations and security evacuations can pose huge financial burdens on both employees and the company.

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Furthermore, an organization that doesn’t adequately prepare for potential risks and therefore compromises an employee’s safety can lose loyalty quickly. If employees know their colleagues were put in risky situations, they will likely lose trust in their companies—which could cause engagement (and business results) to decline.

Adding to the strain of a disillusioned workforce, legal disputes could arise. An injured worker seeking remedies could bring an injury claim against their employer. The cost a company could face when it comes to duty of care disputes depends on the complexity of the case, the length of time and whether it reaches a full trial. Businesses should be prepared for the possibility of facing court cases by following key risk management strategies before being pulled through lengthy and costly litigation processes.

There are also reputation costs to consider. One of the most damaging scenarios may be that the company’s failure to fulfill their duty of care obligation leads to media headlines resulting in serious brand damage. In this case, the news can mar the company’s reputation, causing stakeholders to pull away and resulting in devastating loss in revenue.

Above all, employees are the backbone of an organization, and their safety and security should be the top priority for every business. Devising a sound risk management plan for travelling employees is crucial for ensuring the safety of employees as well as the longevity of your business.

Firestorm Over Forced Removal Proves Costly for United

United Airlines stock tumbled nearly 4% in early trading Tuesday morning before recovering late in the day as the company continued to deal with fallout after video surfaced showing a passenger being forcibly dragged from a United flight at Chicago’s O’Hare International Airport. United shares were down by as much as 6% in premarket trading Tuesday morning, according to MarketWatch.

Shocked viewers responded with universal outrage Monday to a video appearing to show a 69-year old man being brutally dragged off his flight by three uniformed officers from the Chicago Department of Aviation, one of which has since been placed on leave. The man’s face was bloodied and he appeared disheveled as officers dragged him along the narrow aisle of the plane.

“The incident on United flight 3411 was not in accordance with our standard operating procedure and the actions of the aviation security officer are obviously not condoned by the Department,” the agency said in a statement. “That officer has been placed on leave effective today pending a thorough review of the situation.”

Compounding the Airline’s misery was a letter sent to employees Monday night by United’s CEO, Oscar Munoz, saying that he supported the actions of the flight’s crew in removing the passenger, who Munoz accused of being “disruptive and belligerent.” Munoz later apologized directly to the passenger but his public sentiment was judged disingenuous in the wake of the leaked employee memo.

The passenger was removed from the flight to make room for four United employees, although it was initially reported that the passenger was removed from the flight to Louisville due to overbooking—a standard industry practice of selling more seats on any given flight than are actually available to shield the airline from lost revenue from no-shows. Although the flight was not technically overbooked, United followed the policy in order to seat the four employees.

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In 2016, the 12 largest U.S. airlines bumped slightly more than 40,600 of 659.7 million passengers, for a rate of 0.62 per 10,000 passengers, down from 0.73 per 10,000 in 2015, according to the Bureau of Transportation Statistics, Bloomberg reported.

In this case, the airline requested that four passengers relinquish their seats to United employees. According to reports, the airline first offered passengers $400 in addition to hotel and flight vouchers, and then raised the cash component to $800. When there were no takers, the airline chose four passengers to be removed. Approached by the flight’s crew, the man declined to give up his seat, asserting that he is a doctor and needed to see patients Monday morning.

The incident also sparked an international outrage across China, where it was the top item trending on Sina Weibo, as it was reported the removed passenger was Asian.

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The BBC reported that a passenger seated next to the doctor said the doctor was originally from Vietnam, where there was also widespread negative reaction. The hashtag #UnitedForcesPassengerOffPlane had more than 270 million views and an online petition, “Chinese Lives Matter,” which has some 38,000 signatures and calls for a U.S. investigation into the case, according to Bloomberg.

Reputational damage can be potentially costly as a company may have to deal with expenses related to managing a crises, such as public relations and advertising, as well as any loss to the company’s stock market value. The incident is the second in as many weeks to envelop United, which previously suffered scorn in the court of public opinion after barring two nonrevenue passengers from boarding a flight based on a dress code violation.

United’s largest shareholder is Warren Buffet, whose 9% stake in the airline, worth roughly $2 billion, was down some $90 million when United’s stock was at its lowest point on Tuesday.