For many businesses, the decision to implement a contractor compliance management system (CCMS) occurs the day a company realizes that contractor management entails financial, reputation and legal risks of substance which, if improperly managed, could make or break it.
Although the majority of organizations recognize the necessity of standardizing activities and the value of an external contractor compliance management system, some continue to hesitate. They tend to view the implementation of such systems as an expense as opposed to an investment.
However, when all factors both internal and external are taken into account, the equation is simple and the decision to be made evident.
Financial, Legal and Reputational Risks
The risks inherent in outsourcing are neither virtual nor theoretical. They are intrinsically linked to the tasks outsourced to your collaborators and apply to them in the same manner as they apply to you. You are therefore not protected against accidents. In fact, should one occur, you would be required to assume the consequences, regardless of whether the situation involved company or external supplier resources.
If your corporate roadmap is unblemished, you are obviously doing what you do well. But there are no guarantees that an unfortunate incident could not one day tarnish your perfect record. Hence it is difficult to assess the cost of a mishap until the day that the unthinkable happens and compromises your hard earned reputation.
Following are several surprisingly common scenarios which could have disastrous consequences for your company. These examples will doubtless help you determine the value of a contractor compliance management system.
Lost Time an Revenue
When an accident occurs, all operations grind to a sudden halt. After first attending to the injured, if any, you must probe what caused the accident, query workers, report the occurrence to the authorities concerned, draft reports, formulate remedial measures, etc. During this time, operations remain at a standstill. You temporarily relieve workers of their functions, suspend production and operating activities, and your work site or plant takes on an air of desertion.
A typical North American pulp and paper plant can easily lose up to $600 000 in revenue as a result of a complete stoppage of operations. Have you any idea what the cost of an unforeseen interruption of activities would cost your company? If you do, you have ‒ to your credit ‒ doubtless equipped your company with the best available tools for managing risks and avoiding unforeseen accidents and production stoppages. If not, do the math out of curiosity. You could be in for a huge – and truly alarming – surprise.
Fines and Penalties
Whenever a regulatory body finds a company guilty of non-compliance with applicable laws and regulations, violations tend to leave their mark. In substantiated instances of non-compliance, especially when human lives are at stake, violations often result in lawsuits, with penalties imposed by regulatory bodies amounting to hundreds of thousands of dollars.
In 2009, a tragic accident cost four workers employed with Ontario-based Metron Construction Corporation their lives when a swing scaffold gave way. The project manager was found guilty of criminal negligence causing death and a director fined $90 000 for having placed the lives of workers in danger, most notably for having omitted to ensure that they had received written materials in their mother tongue, that company files contained proof of requisite training, and that the scaffold had not been rendered dangerous as a result of the failure to secure all requisite operating materials. The company was fined $750 000. The supplier of the faulty scaffold was ordered to pay an amount of $350 000.
Reputational Damage
Even when a contractor is responsible for a workplace incident or accident, it is not necessarily the latter’s name which appears in the news. In many instances, the media waste no time in broadcasting the name of the company where the event took place. Although professional journalists will dig deeper, seek to trace events back to their source and expose the facts in all their complexity, in today’s world, it is not always the fact-based story that grabs public attention.
It is all too easy for curious bystanders who come upon an ambulance or emergency services in front of a building to take pictures or shoot a video on their smartphones and post their findings on social media, mentioning only the name and address of the company, without any further details. These individuals take on the role of informal journalists who generate news but deform the facts by failing to get to the bottom of their stories. And this all works against you, for you and your company ultimately suffer the brunt of a damaged image.
Recourse to a contractor compliance management system ensures that all important considerations are taken into account and that nothing is left to chance. This helps you avoid the worst while safeguarding your hard earned reputation.
Is your company financially solid enough to absorb the losses of an unforeseen work stoppage? Is your company prepared to jeopardize both finances and reputation, and expose itself to fines, penalties and criminal lawsuits?
In choosing a contractor compliance management system, you can eliminate a wealth of imponderables and be poised to exercise proper control over the risks associated with contractor management. Active risk management helps prevent accidents. If, however, one should occur, you will be able to demonstrate, quickly and easily, that you have taken all requisite preventive action. As a result, your company will be in a position to pursue activities without the fear of an unfortunate event casting a shadow over your professional success.
