Successful Risk Management Requires A View From The Top Not A View From The Trenches

Today I was fortunate to visit a large electronics company in Seoul.  In fact, I was on the 39^th floor of the company located in southern Seoul and had an amazing view of Seoul- as evidenced by the picture to the left. (more…)

After The Dolgorae- The Sewol Ferry Disaster Revisited, A Risk Management Nightmare

How a lapse in enforcing risk management processes once again resulted in a disaster....

The latest maritime disaster  in Korea once again not only raises the spectre of the Sewol disaster but once again reinforces the fact that risk management processes including compliance training  must be vigorously implemented and reinforced on a daily basis.

Recently, a fishing boat  ( Dolgorae) off the coast of Jeju Island in Korea capsized resulting in the deaths of at least 18 people.  It was  caused by a culmination of events leading up to the disaster similar to the Sewol Ferry.  The facts appear to be as follows:  On September 5 a fishing boat carrying at least 22 people capsized off  of Chuja Island.  Apparently more people were on the boat than should have been allowed.  The boat allegedly capsized because of  high waves.  The captain either failed to radio for help or the radio on the boat did not work. When the Chuja Safety Center received a distress call from another boat which indicated the Dolgorae had not responded to its call, the Chuja Safety Center began calling passengers based on the passenger list.  By then it was already too late, as the majority of passengers that died were not wearing life jackets when the boat capsized, according to the few passengers that were ultimately rescued. Because more people were on the boat than indicated by the passenger list, because the captain’s radio did not work after the boat capsized, because the captain went out in questionable weather, because the majority of passengers were not wearing life jackets when the boat capsized and because other safety regulations were not met-not only did the boat capsize but many died that may have lived had adequate risk management processes been followed.  This raises the shadow of to the Sewol Ferry disaster..

Remember- On April 16, the Sewol Ferry left Incheon heading to Cheju Island.  Most of the 476 passengers were high school students going on a school trip.  At 8:52 am , a high school student on board the Sewol issued a distress call.  At 8:58 am the Sewol Ferry finally issued a distress call ( though not though the normal distress channel) on its own.  At 9:00 am  to 9:30 am the Crew issues announcements to the passengers to stay put.  The Jindo VTS informs the Captain that he needs to make a decision to evacuate the vessel or not.  At 9:32 am the first Coast Guard vessel arrives at the scene.  By 10:39, the Sewol Ferry sinks leaving more than 300 people trapped inside the vessel.

When looking at incidents involving disasters such as the Sewol Ferry, it becomes apparent that most disasters are a result of a risk management mistakes, such as not following safety procedures or not repairing critical equipment on time, etc.

Here are some of the risk management mistakes of the Sewol Ferry disaster that stand out:

1. The ship had been modified to hold more passengers.  The modifications led to a change in the ship’s center of gravity and created a structural imbalance.
2. The Ferry had been overloaded with cargo. The ship was authorized to carry 987 metric tons of cargo.  On the day of the accident, it was carrying over 3,608 metric tons of cargo.
3.  Apparently, the cargo was not properly secured. Once the ship   began listing, the containers and vehicles began to fall off the  ship.
4. The third mate indicated the ship had a steering mechanism problem that was reported several weeks prior to the disaster. It had not been repaired at the time of the accident.
5. The Third Mate was steering the vessel at the time of the accident though it was her first time to steer the Ferry.  She was steering the vessel through a narrow and dangerous channel when she hit rocks. The Captain was not on the bridge.
6. The Captain was not on the bridge though the Third Mate was steering the vessel for the first time. The Captain was required by regulations to be on the bridge but he chose not to remain on the bridge but went off to his cabin.
7. When the ship hit rocks and began to tilt, the Captain ordered the passengers to stay put, which most did. One of the reasons was that only two out of twenty four life rafts were functional.
8. It is clear the emergency response was not well coordinated and the tepid result  was not adequate. Only after the vessel sank ( drowning the 300 passengers who did not abandon the ship) did an adequate size  flotilla show up to handle the evacuation of passengers.  But it was too late.

It is obvious, that the Sewol Ferry  or the Dolgorae  are  extreme  examples of a risk management failure.  But it is a reminder that companies as well as individuals that decide to skirt burdensome risk related processes designed to minimize the exposure of risk may be flirting with disaster. This is reminder to all companies and individuals involved in safety related occupations as well as companies in heavily regulated industries that not only should risk management processes be implemented but that such processes need to be  reinforced on a daily basis.   The world may not be kind. Mother Nature may be capricous.  Control and manage the risks that you can.  There is no room for failure.

The Korea Fair Trade Commission (KFTC) has recently revised its unfair trade practices guidelines (UFP Guidelines) to protect consumers with regards to e-Commerce transactions.  The UFP Guidelines took effect as of August 20, 2015 and cover several new types of e-Commerce transactions.  The UPF Guidelines include recommended practices in the field of (i) social commerce transactions and (ii) price comparison websites.  The revisions are quite detailed in nature and cover such areas as follows:

1. Social commerce sites- the UFP Guidelines regarding social commerce websites have been revised to include the requirement that the product or service advertised on the website must clearly describe the previous price it was traded at. The UFP Guidelines also provides that the site operators shall have the service providers not to discriminate between ordinary customers and the users of coupons.

2. Price comparison websites- the UFP Guidelines have been revised to cover  price comparison websites.  The UFP Guidelines provides that in case of price comparison sites, prices must be compared under the same conditions using the same criteria. The site must compare prices that include option items prices, delivery and installation costs.

The UPF Guidelines also includes examples of violations especially with regards to cancellation policies. The UFP Guidelines prohibits e-commerce companies from requesting unreasonable return costs (except for delivery cost) in case of cancellation of the order.  The UPF Guidelines cover these areas in detail and such terms and conditions of sale are subject to KFTC scrutiny.  It is recommended therefore that foreign companies seek advice of Korean counsel prior to selling online to Korean consumers.

I visited Gyeongbokgung Palace in Seoul the other day with a friend who is quite knowledgeable not only about the Joseon Dynasty in general but about the palace in particular. What he pointed out was that the palace is built to certain specifications with the palace layout and structures reflecting the importance of symbols, rituals and geomantic beliefs, etc. (more…)

In Korea, it is vital that you take proactive steps to protect your trade secrets.  A properly drafted confidentiality agreement which contains a restrictive covenant can be an effective tool for preventing trade secret disclosure. But what is meant by the term "restrictive covenant?" (more…)

Trade Secrets- Are You Protected?.....We live in a competitive world. The extent to which a company is able to protect its trade secrets is an important factor in its overall ability to survive and prosper. In the employment context, complicated legal issues arise when a departing employee is in a position to use and/or disclose confidential information to a competitor.

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