1. Law 531 Erm Paper
ERM Paper
AtulGovande, Kyle Cashulin, K.Yamada-Yuge, Miguel Montano
LAW 531
April 2, 2012
JAMES EISENMAN
ERM Paper
Our Team selected option-2 part of the assignment. We watched the Product reliability video.
During the video presentation, Quick Take Video, a video editing company, purchased the video
editing software from Non-Linear Pro. They purchased this software hoping to reduce their existing
video editing time. They selected this software because the sales person from the Non-Linear Pro
Company assured Quick Take Video that the software would accomplish their needs to cut the video
editing production times in half.
The day software was delivered to the company, employee Janet and her associate quickly started
working on it. After completing the training and going through the manuals, they were unable to
make the software perform as assured by the Non-Linear Pro. They were unable to get the software
functioning more than five minutes because of software crashes and lock-ups. Their supervisor
questioned their findings about the software. Janet and her associate explained to the supervisor
that the entire company took one day training and read the manual but still could not get software
working. No-Linear Pro suggested that product training will help the software to be up and running in
a day and will be twice as fast reducing the production time in half. To make thing worse Janet cut
her finger on a sharp flange from the CD drive. The packaging was very poor and there were no
warning labels on the CD drive. On evaluating this scenario Non-Linear Pro is in multiple tort
violations. Here is the list of torts-
1. Tort of negligence for not having a warning label of the likely harm because of unsafe packaging.
2. Tort of misrepresentation because the software did not perform as promised.
3. Breach of contract that was promised to be “up and running in a day and a half and would be
twice as fast.” This product misrepresentation results in a loss of time and money for Quick Takes
Video.

2. Our Team has decided to apply the 7-step process defined in the Harb article. On applying these
step it is show what Non-Linear Pro could have possibly done to mitigate the business risk
associated with the violation.
Enterprise risk management, ERM, is a process that is often used by companies to ensure they
meet organization objectives that are sustainable within the industry. The seven step process of
enterprise risk management allows the organization to mitigate risks. The enterprise risk
management program consists of seven steps or elements. These 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” (University of Phoenix, 2008).
Management Commitment
The management of Non-Linear Pro needs to use the ERM process to mitigate damages associated
with producing a defective product. The management needs to understand enterprise risk
management process and its limitations for ERM to be successful. The Non-Linear Pro management
understands the value enterprise risk management can add to mitigate risk and seize opportunities.
The immediate risk to the organization is that the program is not performing according to
specifications resulting in the possible law suit. The opportunity is that Non-Linear Pro maybe able to
settle out of court through alternative dispute resolution. The management also understands the
limitations of the enterprise risk management process. The management is also aware that
sometimes human judgment can be faulty and responding to risk is costly. Certain failure can be
caused due to human errors. The management acknowledges that any decisions made maybe in
error and proceeds with caution. The management of Non-Linear Pro needs to determine the impact
that a faulty video editing program will have on the organization and develop an appropriate
response strategy. The management needs to gain input from within and outside the organization to
determine the damage the faulty program had on the organization. A process needs to be in place
within the organization that is committed to identify problems and communicate those problems to
management. The management needs to be committed to finding solutions for problems and
developing response strategies that are successful.
Communication and Consultations
Communication is an essential element of enterprise risk management and should take place during
each stage of the process. Communication and consultation risk reports are sent to top
management. Top management makes decisions regarding risk tolerance and priority actions.. The
management decisions are sent back through the communication chain to lower divisions within the
organization. Internal and external stakeholders may be included in the communication process as

3. needed. Communication is an essential part of identifying risk factors that may affect the
organization. The management of Non-Linear Pro’s needs to hold a meeting with key department
officials in order to correct the program defect. Human Resource, Programming, Manufacturing,
Sales and Risk Management department need to be in the meeting. Senior Management also need
to be in the meeting. Programming will address how to fix and test the software so it will function
according to the design. They will be able find fixes for software crashes and lock-ups.
Manufacturing will address the safety of the product. They can also improve the product safety by
appropriately adding warning labels and improving packaging. The sales department will understand
the product better and will explain product better to the customer. They will provide information
regarding overall customer satisfaction. The risk management department will address the risk
assessment and potential issues the company will have to overcome due to the defective product.
The management will create a plan of action. The management needs to balance strategic scope,
timely action in every enterprise risk management process.
Policies and Procedures
The challenge many organizations face is either non-existent policies and procedures or
cumbersome, never ending volumes of them. Policies and procedures have to be applied throughout
an organization. They must be complete, easy to understand and clear; thus, minimizing the
possibility of personal interpretation. In the case of Non-Linear Pro they appear to be non-existent. It
is imperative that they rapidly develop a policy and implement strategy in order to eliminate the
potential of future legal disputes. Their strategy should include at a minimum; a risk management
plan, risk management toolkit including forms and templates. Every person in the organization must
be knowledgeable and familiar with those policies and strategies. By failing to do this Non-Linear Pro
has failed to cultivate a culture of trust and transparency.
Training and Education
Considering that people are the number one asset of any organization. Training and education
empowers them and increases the efficiency of the organization. In the case of Non-Linear Pro,
sales people must be intimately familiar with the equipment they are selling and it must go beyond
“paper knowledge.” When training is superficial it creates opportunities to misrepresent the
capabilities the products. Employees in contact with customers should be trained to resolve
disputes, handle complains and build a long term relationship with the customers. The salesman
from Non-Linear Pro misrepresented his company and failed to deliver a usable product.
Effective and efficient framework

4. When creating a product, Non-Linear Pro is neglecting to make an “effective and efficient”
framework to reduce risk management. They are failing at taking a well-defined, well-structured, and
well-monitored approach to identifying potential risks of their product. They have the responsibility to
create policies and plans if any problems occur with their system. When receiving a complaint, they
must be able to have a plan that identifies who and what area is responsible to handle the
customers’ problems. When Quick Takes Video cannot use the equipment and software, as per
promised, Non-Linear must be able to identify the problem and route the client’s needs to a viable
solution, whether it is training problems, software problems, or hardware problems, Non-Linear must
be responsible and act quickly and effectively.
Non-Linear Pro must also have a plan for testing and monitoring its software product and the
compatibility of linked hardware. As illustrated in the scenario, the hardware that uses the non-linear
editing system is inadequate to use the software properly. This is not only a risk for Non-Linear Pro,
but if the hardware is from a third party vendor, the hardware company is also at risk for providing an
inadequate product for the software. This could become a loss for the third party vendor as
appropriate technology was not identified.
Risk management is applied in practice
For Non-Linear Pro to create a product viable for its industry, it must also have the support to back
up the product. In today’s ever-changing technology market, support, and service is critical to both
the customer and the company. To meet this challenge, Non-Linear should monitor constantly and
evaluate its product during it use by the clients. Feedback, evaluation, upgrades, re-evaluation,
upgrade notification, etc., for products is vital to keeping risks low.
If problems occur, Non-Linear must be accountable and work with clients, outside vendors/suppliers
as well as their own engineering team to resolve the problem and improve the product. Monitoring of
occurring risks and problems is valuable to assessing the product and maintaining product quality
and standards. Understanding risks and how to manage it should be re-processed through the
framework step to ensure that an essential and efficient system continually improves. The
organization essentially needs to start being accountable for examining, exploring, and retaining
data to develop performance.
Constant and Ongoing Monitoring and Review
The periodic risk profile review includes incidents and emerging risks. The review is a regular
process. In addition, formal scheduling and reminder systems are always in effect. This last element
includes for all internal audits, self -assessments, and compliance processes to be effective (Harb,
2008, p. 7). The fact that Non-Linear Pro failed to use ERM, the company became liable because of

5. the defects of their product. Failure to engage ERM, proved costly for Nonlinear Pro. If Nonlinear Pro
would have applied ERM, the defects in the editing system could have been avoided or reported
before the product was released to consumers. This ongoing monitoring system could have helped
expose any unforeseen dangers, issues, and risks. The complete process would of helped to
encourage the quality and exercises for due care.
In conclusion, if Non-Linear Pro would have followed the seven steps of an ERM they probably could
have avoided the possible litigations or alternative dispute resolution, because of their violation of
the tort of misrepresentation. For this very reason, it is imperative that companies utilize an ERM to
ensure that all their bases are covered and any possible tort violation scenario can be avoided or at
least properly mitigated.
Reference
University of Phoenix. (2008, Spring). 7 Essential Elements of ERM and the role of Internal Audit.
Retrieved from
http://www.inconsult.com.au/Articles/Essential%20elements%20of%20ERM%20and%20role%20of%
20%20Internal%20Audit.pdf