Monthly Archives: December 2010

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Egyptian Shark Attacks Prompt Insurance Warnings

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A Egyptian tourist website featuring the resort town of Sharm El-Sheikh touts the area as having luxury five-star hotels, exciting water sports and a variety of shopping and entertainment options. What the website doesn’t tell the potential tourist is that the waters off the coast of Sharm El-Sheikh have become home to massive carnivorous creatures known as whitetip and mako sharks, and they’re attacking.

The shark attacks have been blamed for killing one tourist and badly injuring four others in the Red Sea waters off Sharm El-Sheikh during the last week alone. From the beginning, experts have called the attacks highly unusual for the species of shark in question, but that hasn’t quelled the tourist’s fears.

Richard Pierce, chairman of the Shark Trust and the Shark Conservation Society, said: “This spate of attacks is unprecedented. “For either of these species to make repeated attacks on humans is unheard of — they simply do not go around attacking people for fun. “To see so many attacks in such a short space of time is terrifying and very difficult to understand. Behind this, there is undoubtedly some kind of human trigger. “It is also very important to realise that both these species are endangered and you would not expect to see either of them as far north as Sharm el-Sheikh at this time of year.”

Three shark experts from the United States are traveling to Egyptian resort town to “form an advisory team to try to assess and advise on the best course of action following the shark attacks in areas north of Naama Bay this week.”

Because of the recent attacks, the Foreign Commonwealth Office has issued an insurance warning for people traveling to Egypt. The purpose of the warning was to remind travelers to include activities such as diving and snorkeling in their travel insurance coverage.

“Unusually cheap operators may not provide adequate safety and insurance standards,” the FCO said. “Ensure that your travel insurance covers you fully before you dive. Diving beyond the depth limit of your insurance policy will invalidate your cover.”

Authorities have banned water activities for the meantime, which could have an affect on tourism in the Egyptian resort town that many people frequent specifically for its beaches and water sports. The whole episode is frightening and eerily reminiscent of the well-known thriller Jaws.

Q&A: Food Safety Modernization Act

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The Food Safety and Modernization Act (S.510) of 2010 is the first major overhaul of the FDA’s food safety provisions since 1938. And after a year that saw recalls of numerous processed foods, meats and eggs (check out the nine major snafus of the decade according to the Huffington Post), an overhaul food safety regulations is exactly what Americans need. To better understand the new act, I contacted Bernie Steves, managing director of Aon Risk Solutions’ crisis management practice, and Rick Shanks, national managing director of Aon Risk Solutions’ food system, agribusiness and beverage practice.

Will there be an expected increase in the number of recalls as a result of the legislation? If so, why?

BS & RS: Aon expects the number of recalls to increase if the proposed legislation becomes law. The FDA will be able to insist on a recall based on “reason to believe” rather than providing credible evidence of the contamination. We are already seeing an influx in recalls. To date, recalls have been on a voluntary basis and increasing for several years.

What are some examples of new regulatory requirements for manufacturers, importers and distributors as outlined in the Food Safety and Modernization Act?

BS & RS: A full hazard analysis will be required, identifying and evaluating known or reasonably foreseeable hazards that may be in association with the facility. These include an extensive list of hazards specifically given as examples in S.510. The hazard analysis must include food defense, which identifies and evaluates hazards that may be intentionally introduced by acts of terrorism. A full plan will need to be developed.

What implications will these new regulations have on recall insurance?

BS & RS: Food companies will need to reevaluate coverage, limits, terms and conditions. Studies show that the average recall costs $10 million, not including damage to brand.  Several insurance markets have been able to include government recall as an endorsement to product contamination policies. Certainly those endorsements will be more applicable in the U.S. with the passage of this legislation. It is important to note that while this authority to order recalls is new in the U.S., many countries’ local food safety authorities have had this power. For instance, the EU has had similar legislation since 1999.

What effect will these regulations have on risk managers in the food production and distribution industry?

BS & RS: Underwriters will require more detailed information on processes, controls, loss prevention, crisis management and product development. Aon advises risk managers to be involved with quality assurance, food safety, food defense and supply system risk management in both manufacturing and distribution for wholesale and retail.

Though this bill has enjoyed strong bipartisan support, it is not yet finalized. When can we expect the Food Safety and Modernization Act to be put into action?

BS & RS: Experts advise that the normal process between the House and Senate may delay the passing of the legislation. Some reports say that the House may streamline the process.

December Issue of Risk Management Now Online

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Faithful readers: the December issue of Risk Management magazine is now online here. Following tradition, we devote the December issue to recapping the Year in Risk. From the Haiti earthquake to flooding in Pakistan to the Greek debt crisis to numerous legal settlements, we cover more than 50 risk management-related issues that occurred in 2010 while offering an in-depth look at the Gulf oil spill, the Toyota recall and the Chilean mine disaster.

Our columns explore topics such as the lack of progress in fighting malaria, legal lessons from the Great Fire of 1906 and the increase in accidents since bans on texting while driving. Also included are monthly staples such as our articles highlighting recent industry reports (Findings) and our book reviews (Shelf Life).

If you enjoy what you seen online, you can subscribe to the print edition to enjoy even more content.

Please let us know what you think in the comments below. And stay tuned to the blog for even more coverage in the future. Lastly, you can follow the magazine on Twitter, “like” us on Facebook and join our LinkedIn group.

Child Labor: A Reputation Armageddon

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For the most part, a company never anticipates its suppliers will be using child labor to provide a product, but for many large corporations with production facilities or suppliers in poorer countries, that is exactly what is, and has been, happening. And the reputation damage inflicted by accusations that a company uses child labor to make a profit, even if unaware, is devastating.

You may remember back in 2007 when Gap came under fire for, apparently unknowingly, using child labor in the production of a line of children’s clothing in India. An investigative reporter videotaped the scene at the factory.

It shows children who appeared to be between the ages of 10 and 13, stitching embroidered shirts in a crowded, dimly lit work-room. The video clearly shows a Gap label on the back of each garment. The reporter, Dan McDougall, said the children were working without pay as virtual slaves in filthy conditions, with a single, backed-up latrine and bowls of rice covered with flies. They slept on the roof, he said.

Though Gap immediately ordered a full evaluation and had a clean record of ethical out-sourcing up until that point, the reputation damage was severe and lingers to this day.

But Gap is not the only company accused of using child labor. In 1998 Nike agreed to root out underage workers and require overseas suppliers to meet strict Unites States health and safety standards after it received heavy pressure from critics.

Nike said it would raise the minimum age for hiring new workers at shoe factories to 18 and the minimum for new workers at other plants to 16, in countries where it is common for 14-year-olds to hold such jobs. It will not require the dismissal of underage workers already in place.

Though the shoe and apparel giant took some steps to ease the concerns of critics, the company suffered boycotts by consumers who refused to support such “sweatshops.” Examples include this boycott petition and this website encouraging the end of support for anything Nike.

More recently, Apple “said it found more than a dozen serious violations of labor laws at its suppliers.” One investigation found that three overseas facilities had hired 11 workers who were 15 years old (the minimum employment age is 16 in those countries). Apple’s reputation damage continued to worsen this year with news of an alarming rate of suicides at its biggest supplier, China’s Foxconn (check out an in-depth article on the topic).

China, India, Bangladesh, Nigeria and Pakistan are among the countries with the most widespread abuses of child workers, according to a report released today by Maplecroft. Below is a map illustrating the ares most prone to use of child labor.

Screen shot 2010-12-01 at 11.24.01 AMAs the report states, there are more than 200 million children working throughout the world, many full-time. Of these, 126 million are exposed to hazardous forms of child labor. As we have seen, many big-name companies have been accused of using child labor, and though they’ve taken many steps to correct their ethical violations, the reputation damage still lingers — and may do so forever.