Non-Compliance Chronicles : Lest We forget

The first chronicle

Fraud, failure, breach, negligence, violation, default, misconduct…

Majority events stemming out of criminal non-compliance are described using these common words. This is the first chronicle about how such events of non-compliance has led to disasters in the past.

Bangladesh Non-Compliance

Fashion Victims – 24th April 2013 – 8.45 AM – Rana Plaza, Garment Factory, Savar Bangladesh.

Background of the case

The organization was aware of the poor condition of the building. Yet, they decided to ignore it and compelled more than 3000 reluctant workers to enter the factory and work. The incident recorded death of 1179 persons and injured approximately 2500. The investigation revealed many other irregularities. The entity has built this edifice primarily for a organization’s commercial use. Once transformed into a factory by the owner Mr Sohel Rana, he decided to add 4 floors to it and generators on the roof to mitigate common electricity cuts issues. Thus, a few days before the tragedy, the building had been certified as compliant and safe by one of the managers of the factory, most probably under the pressure of the bosses.

Through this tragedy many organisations, clothes retailers and most importantly the public became aware that such working conditions still exist. Though some action has been taken this case isn’t isolated.

Analysis

Were the steps taken was enough to tackle such events in future? We can only encourage the buyers, retailers, garment association and factories to be more respectful to the workers and insist on their safety and well-being.

 

Volkswagen Scandal Non-Compliance

DieselGate – 18th Sept 2015 – Volkswagen

Involvement of around 18 million vehicles was declared as the biggest scandal of the automotive industry. Volkswagen purposely decided to hide the emissions (NOx, CO2) of their vehicles using a software. Moreover, it was able to recognize the timing of the emission tests and changed according to the settings to match the United States Environmental Protection Agency (EPA) limits.

Impact

The major impacts of these multiple non-compliance were financial, organisational and reputation impact. Thus, from a financial impact point of view, Volkswagen group spent around $18.32 billion in financial penalties, customer compensation, recall campaign, vehicles refit. Hence, Volkswagen’s stock went down 20% by the first day after the announcement and again 17% when they announced the amount they would have to spend to recover from this fraud.

Management

The process involved a lot of top managers and directors of Volkswagen. The company has to suspend then or tell them to resign. Also, Martin Winterkorn (CEO) and Michael Horn (US CEO) resigned, and they suspended the head of brand development HJ. Neusser, Audi research development U. Hackenberg and Porsche R&D head W. Hatz . Brand reputation is the hardest thing to measure.

Volkswagen lost confidence not only of its customers but also of the regulatory authorities.  The waves generated by this story raised a public demand for more transparency in the automotive sector. Moreover, they demanded vehicle’s emissions parameter check. It had an impact on the working of the group looking after the Euro 6 regulations. The wanted  to make these tests similar to a real time activity like driving

These 2 examples are extreme but prove that it can lead to massive financial and human life loss.

Compliance is not only about following the laws, regulations and standards blindly. It is about showing respect and consideration towards employees, colleagues and  customers!

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