Practical Compliance Risk Management
Compliance risk management is not limited to identifying regulatory requirements and monitoring whether you comply with them. An effective ethics and compliance program is much broader. A more holistic spectrum of things to address are whether the company is also in compliance with company policies, procedures, values, codes of conduct, ethical norms, industry standards and guidelines, and technical requirements that can cause non-compliance, present a safety danger, or trigger expensive operational shutdowns for repairs. The most economical and timely solution to identified compliance gaps or risks can be challenging to identify. The best solutions are usually produced by a collaborative effort. The company’s ethics & compliance function adds the greatest value when it helps solve compliance problems rather than just watching for operations to mess-up and find an “I caught you moment.”
Most cruise and expedition ships in the world have an Environmental Officer (EO) onboard. They typically check log books, review data, and conduct rounds to look for evidence of non-compliance that has already happened. Sometimes they are able to identify trends or provide input into voyage planning processes to prevent non-compliance. Prevention is always better than detection. The mitigation of non-compliance risks must be based upon effective root cause analysis. Ship engineers are amazing problem solvers, but they can become frustrated if an EO identifies a significant compliance gap or risk without helping them find a solution. Captains need officers who can collaborate to identify and mitigate root cause(s). It can’t just be an “I caught you moment.”
Large construction projects can face similar challenges. For example, a new natural gas pipeline may need to cross a river, stream, or water body. Rather than excavate a trench across the bottom, a horizontal directionally drilled (HDD) crossing under the river can mitigate the risk of adverse impacts to: any threatened or endangered species in the river, Native American sites along the riparian lands, stream turbidity levels, and navigation. I have seen pipeline project planners specify an arbitrary minimum depth to drill below a stream bed assuming that a drilling mud frac-out will not occur only to drill deeper when it happens. The root cause of such frac-outs, is ussually a failure to understand the subsurface geology. The solution is to hire a geologist to drill several vertical core samples on each side of the crossing to determine the geology. Perhaps the bottom is unconsolidated aluvial gravel fill down to a certain depth. If your HDD drill path is within such an area, there is a significant risk of a drilling mud frac-out into the river that causes a turbidity regulatory violation or losing drilling mud circulation altogether when it disappears into the unconsolidated fill. The extra cost of basing a HDD design on a proper geological analysis is usually far lower than the cost of cleaning up a frac-out or dealing with a stuck drill string. I usually required HDD geotechnical analysis on the projects I managed.
The common thread in these ship and pipeline examples is that compliance problems are often technical, procedural, and regulatory challenges. So how in the heck does all of that relate to the spinning tire in the video above?
I drive an all-wheel-drive (AWD) car with all-terrain tires on it. A few months ago, one of my tires failed and it could not be repaired. A local tire shop was able to quickly replace the tire for me. It was not cheap, but at least I did not have to replace all four tires as they had about 60% tread life remaining. I visited the car dealer last week for routine maintenance, inspection, and an oil change. I casually mentioned to the service manager that I had replaced a tire. He then measured the tire tread depths on the new tires and the old tires. The new tire had a depth of 11/32” while the old tires had a depth of 7/32”. The maximum specified difference can only be 2/32”. He explained that the measured difference of 4/32” causes the new tire wheel to rotate at a different speed than the other three. That speed difference can damage the three differentials on the car, especially the continuously variable transmission. He said the compliance gap could affect warranty coverage. I was suddenly faced with a non-regulatory compliance gap. I asked for solutions.
If I had brought the car to the dealer, they could have ordered a replacement tire that was pre-shaved to a tread depth of 7/32” and that could take a few days. Since I already had a replacement tire that was 11/32”, I could either replace the other three tires with new tires or find someone to shave the new tire down to 7/32”. He said I needed to mitigate the problem quickly but he did not know anyone who could shave my tire! I did not want to buy a complete set of tires, so I called at least a dozen tire dealers seeking one who could shave the tire. None of them understood what I was asking for. They all sell their customers four new tires under these circumstances. None of their shops have a tire lathe. None of them had ever heard of anyone wanting a tire shaved. I eventually found Adair Tire in Gardendale, Alabama. Adair Tire was founded in the 1940s. They had a lathe for tire truing like tire shops did in the 1940s and 1950s. I had my tire shaved there yesterday and it is now in compliance. I highly recommend Adair Tire Pros!
It was rewarding to mitigate a technical compliance problem with a quick and economical solution. It required “thinking outside of the box” and going against the norm. That is what it is often like to solve compliance challenges on ships and pipelines where some people might just “replace all four tires.”
Compliance should not be an “I caught you moment”, it should be a collaborative effort to mitigate compliace problems in creative ways.
