Magazine article Risk Management


Magazine article Risk Management


Article excerpt

A lawsuit filed by residents of Lago Agrio, Ecuador, alleging that the oil company Chevron had dumped wastewater from its drilling operations into the city's lakes and rivers, is being tried in Ecuador despite attempts by the plaintiffs to have a trial in the United States. While Chevron thought that an Ecuadorian trial might be to its advantage, the American company is having some difficulty adjusting to the very different methods of Ecuadorian jurisprudence. Ecuador has recently suffered from political upheaval in its judiciary, and its Napoleonic law code casts the judge in an investigator's role, requiring the entire court to move to alleged dumping sites as the judge searches for evidence to support each side's claims. According to legal experts, the Ecuadorian courts are not well equipped to handle international corporate cases on fine points of environmental law, and have little experience with the type of punitive damages the plaintiffs seek.

Source: American Lawyer; Carlyn Kolker

A group of auditing firms including Deloitte & Touche, Ernst & Young, PricewaterhouseCoopers, KPMG, BDO International and Grant Thornton collaborated on a report that insists liability standards should be eased for accounting firms and that companies and investors should face higher charges for forensic audits, which are more likely to uncover fraud. The firms claim that there is an "expectations gap" between what investors are seeking from audit reports and what firms are able to provide through traditional auditing practices. They also noted that in order to prevent fraud, more in-depth audits would need to be conducted and could be required of firms every five years or possibly on a random basis.

Source: New York Times; Floyd Norris

A European Shopping Spree?

The European insurance market could see greater consolidation if profits in the sector continue upward, insurance premiums remain stable, and claims remain low, according to experts. AXA SA, Allianz SE and Aviva PLC are just three of the insurers with enough cash to strike acquisition deals in order to improve scale and increase profits. Lately, insurers have found that even with strong premiums, their profits have become squeezed by additional competition in the marketplace.

Some analysts are concerned, however, that lower stock prices among European insurers will hinder the ability of these firms to strike deals, although shareholders see deals as a way to increase their returns with little risk involved. Experts do note that if deals do not occur in the market, shareholders are likely to withdraw funds from the market and place them elsewhere.

Meanwhile, many insurers in the market have taken on smaller deals, including AXA's purchase of Alpha Insurance of Greece and Catlin Group Ltd.'s acquisition of Wellington Underwriting PLC. Analysts point out that mid-size insurers have little room to grow as larger firms gobble up business in a variety of markets and smaller niche insurers flourish in their respective markets, which could mean that these middle market insurers are the most likely targets.

Source: Wall Street Journal; Ian McDonald

Under Close Supervision

Companies are increasingly using high-tech gadgetry to monitor their employees' use of the Internet, e-mail and the telephone. This surveillance includes some companies that use GPS technology to follow workers' movements and others that have gone so far as to implant microchips in their employees or hire private investigators to examine what their employees do while on the job.

These aggressive forms of surveillance carry public relations risks, as Hewlett-Packard found out the hard way after spying on its board of directors. Research shows that more than 50% of companies save and examine employees' e-mail messages, while 76% monitor website connections, 65% prevent employees from accessing certain websites, and 35% monitor the time spent at the keyboard, including keystrokes and content. …

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