Why financial slack (or lack thereof) can prevent or exacerbate legal violations Why are some companies more prone than others to breaching health and safety laws? Sustainable operations expert and ESADE Associate Professor Frank Wiengarten tackled this issue in his latest study, "How does uncertainty affect workplace accidents? Exploring the role of information sharing in manufacturing networks", published in the Journal of Operations Management. In this study, the researchers examined the trade-off between efficiency and workers' health and safety. "Our research looks at how measures implemented to increase efficiency can have a detrimental effect on workers' health and safety," says Prof. Wiengarten. "We also examine what factors make companies more likely to breach health and safety laws in terms of the industries and markets they are situated in." The researchers targeted the manufacturing industry because this is the sector in which most occupational accidents and health and safety violations occur. Financial slack The study shows that financial slack - that is, a company's financial reserves for foreseeable needs - can play a key role in obtaining sustainable operations in efficient manufacturing environments. "Companies that reduce their operational slack are more likely to violate safety laws," warns Prof. Wiengarten. How can these violations be prevented? According to the study, companies can offset this negative relationship by holding financial slack in reserve: "Manufacturing companies that have slack in reserve can still meet their efficiency goals without causing a negative effect on workers' health and safety." The authors also warn that complex markets can influence the tendency to break health and safety laws: "A more dynamic market enhances the negative impact of reducing operational slack and can therefore contribute to having more occupational accidents or breaching safety laws." "If policymakers know that cost pressure leads to legal violations, there could be a minimum threshold of financial reserves that would help alleviate the pressure for the workforce," the authors conclude.

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What makes companies breach health and safety laws?

10/2019

Why financial slack (or lack thereof) can prevent or exacerbate legal violations


Why are some companies more prone than others to breaching health and safety laws? Sustainable operations expert and ESADE Associate Professor Frank Wiengarten tackled this issue in his latest study, "How does uncertainty affect workplace accidents? Exploring the role of information sharing in manufacturing networks", published in the Journal of Operations Management.


In this study, the researchers examined the trade-off between efficiency and workers' health and safety.


"Our research looks at how measures implemented to increase efficiency can have a detrimental effect on workers' health and safety," says Prof. Wiengarten. "We also examine what factors make companies more likely to breach health and safety laws in terms of the industries and markets they are situated in."


The researchers targeted the manufacturing industry because this is the sector in which most occupational accidents and health and safety violations occur.




Financial slack


The study shows that financial slack - that is, a company's financial reserves for foreseeable needs - can play a key role in obtaining sustainable operations in efficient manufacturing environments.


"Companies that reduce their operational slack are more likely to violate safety laws," warns Prof. Wiengarten. How can these violations be prevented?


According to the study, companies can offset this negative relationship by holding financial slack in reserve: "Manufacturing companies that have slack in reserve can still meet their efficiency goals without causing a negative effect on workers' health and safety."


The authors also warn that complex markets can influence the tendency to break health and safety laws: "A more dynamic market enhances the negative impact of reducing operational slack and can therefore contribute to having more occupational accidents or breaching safety laws."


"If policymakers know that cost pressure leads to legal violations, there could be a minimum threshold of financial reserves that would help alleviate the pressure for the workforce," the authors conclude.

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