Captive Insurance Association President Raises a Risk Flag for Human Trafficking in Supply Chain

A law that went into effect in January that addresses transgressions of human trafficking and slavery in the global supply chain, should be a concern for retail and manufacturing risk management professionals and captive insurance company owners.
By: Gregg Sgambati
 
March 12, 2012 - PRLog -- This January California's Transparency in Supply Chains Act of 2010 (TSCA) went into effect and now requires certain companies with business in California to comply with its provisions. The law requires retail sellers and manufacturers doing business in the state to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains. While this is the first state law to require compliance of this nature, other state laws and prevailing federal laws address transgressions of human trafficking and slavery and future legislation should make it a going concern for organizations and risk management professionals.

Not complying with the provisions of the TSCA carries the risk of injunctive relief. Proven transgressions in your supply can also be penalized under federal laws. Even with compliance, the manner of compliance is important to how well future risks are mitigated. In addition, reputation risk should be a major concern for affected organizations. The overall idea is that without a deep understanding of the your global supply chain, particularly relating to trafficking and slavery, you are at risk of negative publicity, business interruptions, potential lawsuits, public protests, loss of customer trust, and loss of shareholder value.

Complying with the law might be addressed simply with a “publicly available disclosure” of what extent, if any, your business engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery. However, lacking the back-office framework for carrying out evaluations and a having a structure for promoting a supply chain free of transgressions, both internally and externally, could present your organization with a public relations challenge. Simply stated, a disclosure stating that no efforts are being made to address these issues or a lenient approach to addressing them is being made, can become a reputation risk.

Affected companies should be prepared to address this law through a process of auditing, training, and creating procedural mechanisms to prevent or eradicate human trafficking and slavery in their supply chain. Since these disclosures are unending, companies should establish policies and procedures to monitor their supply chain going forward.

Reputation risk can easily turn into legal risk. Federal laws levy civil and criminal penalties for human trafficking traceable to your supply chain (i.e., Trafficking Victims Protection Reauthorization Act (TVPRA) of 2008). Federal judgments can include punitive and criminal punishments for violations. According to federal law, victims of these crimes are allowed to sue in U.S. courts and a defense of not being aware of infractions in your supply chain carries a high burden of proof. Additional state and federal legislation related to human trafficking and slavery has been introduced (H.R. 2759, the Business Transparency on Trafficking & Slavery Act.

Companies should evaluate their risks, establish protocols, and comply with the TSCA. They should develop a specific approach to demonstrate their commitment to respect of human rights in their supply chain. This should include standardized practices for recruiting vendors and examining and assessing supply chain risks. Public companies should include an abstract of their effort in their annual report. And companies should monitor their suppliers, contractors, and sub-contractors and periodically trace their raw materials lineage for identification of compliance “hot zones”.

Several large and small consulting companies conduct supply chain risk assessment audits. Business-aligned consulting organizations can address these issues as part of a strategic corporate social responsibility initiative. Companies may also address risk management through reputation risk insurance or other appropriate risk transfer vehicles. Captive insurance companies provide a beneficial mechanism for managing esoteric risks that are not adequately addressed by traditional insurance policies.

The question that begs an answer is--is your organization committed to eradicating human trafficking and slavery wherever its raw materials and products are sourced or manufactured? A good starting point is to embrace these principles by making an organization commitment to the United Nations Global Compact. This March, the New Jersey Captive Insurance Association applied as a non-business participant of the compact to set the table for further participation in the Compact by the captive insurance industry.
End
Source:Gregg Sgambati
Email:***@njcia.org Email Verified
Tags:Captive Insurance, Corporate Social Responsibility
Industry:Insurance, Manufacturing, Retail
Location:New Jersey - United States
Account Email Address Verified     Account Phone Number Verified     Disclaimer     Report Abuse
New Jersey Captive Insurance Association PRs
Trending News
Most Viewed
Top Daily News



Like PRLog?
9K2K1K
Click to Share