ERM Team Paper

Whenever an individual purchases a product he or she has certain expectations. One expectation may be that the product works the way it is advertised. Quick Take Video is in dispute with Non-Linear Pro for an alleged faulty video editing program. Team B will identify the potential risks that arose in the product liability dispute, identify the tort violations, and use the seven-steps process to apply the risk management process mitigating the business risks associated with the violations.
Identification of the Potential Risks that Arose in the Product Liability Video
Entering into a contact creates the potential for tort risks and violations. Regardless of the type of contract that we enter when purchasing a product, when one expects the product to work for the purpose in which it was intended. In the product liability video that Team B viewed, Non-Linear Pro implied that their video editing system was an easy to learn, top-of-the- line video editing system. After putting the equipment to use, employees began to realize that the top-of-the-line system was everything but top of the line. Inadequate memory, the Non-Linear Pro’s editing system could not keep up with the high-resolution and crashed constantly. Employees had each taken a one-day course with their trainer, reviewed the video tutorial and read the manual, without any positive results. It is very clear that the Non-Linear Pro misrepresented the quality of their product to Quick Takes Video. When a product that is sold or leased does not perform and operate the way it is supposed to, as in the product liability video, the customer can seek several different types of damages. In this case, Quick Takes Video leased video editing equipment expecting certain benefits as a result. Because the equipment did not perform to the promised standards, Hal calculated what benefits he would have gained had the product work well, and Quick Takes Video would be entitled to those damages. Hal could also seek damages by calculating the amount of time two of his employees wasted on working with the equipment and determine the amount of profit that Quick Takes would have gained had the two employees been engaged in productive editing activities. Last, because of the misrepresentation of the editing software, Hal has the option of asking for a rescission of the contract. In this case, Quick Takes Video would be entitled to terminate the contract immediately and would be removed from any liability under the contract.
Identification of a Tort Violation in the Product Liability Video Product liability occurs when a consumer can sue a manufacturer of the product or service if the product does not operate, faulty or not meeting the standards required to function properly. According to Cheeseman (2010), “Product liability is the liability of manufacturers, sellers, and others for the injuries caused by defective products” (Cheeseman, 2010, p. 94). Negligence is an example of product liability. In addition, negligence is a violation, which defective products breached a duty of care where the product had caused harm or injury to the plaintiff (Cheeseman, 2010). In the product liability video, Quick Takes Video rented video editing equipment on a trial basis from Nonlinear Pro Video. However, the video editing equipment is faulty, not working properly, and not working as promised. In addition, statements are made indicating how easy the video editing program was to use. The employees at Quick Video Takes had one-day training, read the manuals, and watched the tutorial provided. Employees could not manipulate the product to work and cannot to enable the video editing program to stop crashing.
Therefore, the video editing program did not operate as promised, thus causing a breach of contract and breach of warranty specifically an express warranty. Specific statements were made by Nonlinear Pro indicating that the video editing program would be operational in one day. This did not occur it took two weeks for the video editing program to be installed.
In addition, to the malfunctioning of the video editing equipment, an employee’s finger was cut trying to insert the disc drive of the video editing program. Thus causing negligence and this is known as an unintentional tort. According to Rubert (2008),
“Breach of implied warranty is stated in the Uniform Commercial Code at section 2-314: "Unless excluded or modified a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind" (Rubert, 2008, para. 12).
Using the 7-Steps Process to Apply Risk Management Process to Mitigate Business Risk of a Violation
When developing a strong ERM program there are seven main steps that should be followed. These steps include: (1) management commitment; (2) communication and consultations; (3) policies and procedures; (4) training and education; (5) effective and efficient framework; (6) risk management is applied in practice and (7) a constant ongoing monitoring and review (Harb, 2008). The first step, management commitment can be compared to a pep talk. Taking the example of the Nonlinear Pro’s organization, this would mean obtain the management team together to discuss the implementation of an ERM program. Usually this is not a time to go into detail over the specifics of the programs, rather, it is just a generalized meeting to get management to agree to the program and encourage them to implement the program well. The next step, communication, and consultations, begins the conversation of why the organization needs such a program put into place. This means that the organization explores what the various risk factors of the organization are and why it is important that there is a plan put in place to manage these risks. In Nonlinear Pro’s case, this would involve individuals from the management level, development level, and sales level. Each risk posed to the organization needs to be owned by a party of the organization. Representatives from the sales level would be responsible for the sellers and the risks they pose whereas the development level represents the risks posed by the development and design of the equipment, which may cause personal injury, such as the sharp metal that cut Janet. Once there has been communication among management and the parties responsible for the risk, together as a team the structure of the ERM program will begin to be laid. This step is known as policies and procedures. Throughout this step it is important that parties have a clear understanding of the objectives of the ERM program. Only then can an effective structure be created. After the structure is created the team will also work to develop policies and to ensure that the technologies within the organization that will be used in the program work together. In Nonlinear Pro’s case, this step would include laying out the structure of training for the salespeople in the organization and quality control measures for manufacturing. The next step involves training and education. This is the point when the ERM system should be implemented. The various levels of the organization begin to be trained on the new policies and procedures for ensuring the organization is protected from the risks. This means the Nonlinear Pro would focus upon training laborers in the manufacturing division to check for sharp surfaces on the units of equipment and would involve extensive training for the salespeople on express warranties and the way they are expressed. This training would go farther to emphasize way to say the same thing without giving the client an express warranty. It has salespeople giving their client express warranties that have caused the organization to be held liable for a violation of a tort, which has come with financial consequences. The next step, effective and efficient framework, makes sure the organization has hit the major points that were listed under the program’s main objectives. This means ensuring that the organization’s software requirements for implementation are working together, and each party, and several individuals within the system know and understand their roles in the new ERM program. Here Nonlinear Pro’s organization would make sure that the training programs covered the necessary points to avoid risk as well as any other procedures and the remaining structure of the program, which they laid out. Once the previous steps are completed, the organization will fully implement the program. This means that the ERM program would be working full time to ensure that the organization is protected internally from risks that it may be exposed to by their practices or policies. In the case of Nonlinear Pro, this means that salespeople are trained specifically on expressed warranties and how to adequate represent their product so that the organization is not held with the tort risk of misrepresenting its product. The final step is an ongoing step once implementation is completed. This step includes continual monitoring of the program to ensure that the organization is always protected from the risks. This may be done by evaluations at regular and sporadic intervals. Additionally, this step also includes the measurement to make adjustments to the structures and policies if management believes that they are no longer adequately covering the risks, which were originally discussed and included in the objectives.
Conclusion
When an individual purchases a product you have certain expectations of how the product should work. One expectation might be that the product works the way it is advertised and described. Quick Take Video is in dispute with Non-Linear Pro for an alleged faulty video editing program. Team B will identify the potential risks that arose in the product liability dispute, identify the tort violations, and using the 7-step process to apply the risk management process mitigating the business risks associated with the violations. Therefore, understanding the specifics of a contract is imperative. Applying the 7-step process on risk management will ensure the success and feasibility of an organization in resolving business risks.

References
Cheeseman, H.R. (2010). Business law: Legal environment, online commerce, business ethics, and international issues (7th ed.). Upper Saddle River, NJ: Prentice Hall.
Harb, T. (2008). 7 essential elements of erm and the role of internal audit. Presentation at The institute of internal auditors nsw chapter members meeting.
Rubert, W. A. (2008, Fall). Handling cases with claims of negligence, strict liability, and breach of warranty. Brief, 38 (1), 7. Retrieved from https://ehis.ebscohost.com/eds/