Risk Management and Social compliance issues in Ready Made

Garment (RMG) Sector

Presented byMd. Ahasan Uddin BhuiyanMSSDepartment of Public AdministrationUniversity of Dhaka

Related terms and definition

Risk : A risk is a random event that may possibly occur and if it did occur, would have a negative impact on the organization goals. ( David Vose, 2008). Risk is based on three factors:

Hazard -A source of potential harm or a situation with a potential to cause a loss, Exposure -Exposure refers to the elements that are

subject to the impact of a specific hazard Vulnerability - Vulnerability is the human

dimension of disasters

Risk management- Risk management is any set of actions taken by individual corporations in an effort to alter the risk arising from their business. (Merna & Smith, 1996, 33)  

Establish the Context - Organization and its environment that covers financial, operational, social, political and legal aspects

Identify Risks -Identifying risks and description by determining the possible causes. Many techniques can use for identification i.e. records, experience, brainstorming, system analysis and scenario analysis.

Risk management- continued…Analyze Risks - Past records, experiences,

industrial practice, market research, experiments and judgment that techniques used in the risk analysis stage.

Evaluate Risks - At this stage, person with an appropriate authority make a decision about the acceptable or unacceptable risks. Acceptable risks should be monitored and reviewed periodically to ensure it remains acceptable.

Treat the risks - It is the process in which selected and implemented measures modify the risk.

Monitor and Review - It contains about monitoring all steps involved in the process and any new risk and changing the current assessment strategies.

Social compliancesSocial compliance is defined as the result of adjusting to the rules of social accountability by the extended organization's own policies and practices and also those of its supply and distribution chains.

The compliance indicators have been developed by the ILO Conventions, the UN Universal Human Rights Declaration, laws of the land and Constitution.

Social compliances- continued…As dependent variable , Social compliance depends on both internal and external independent variables.

External Independent Variables - codes of conduct like child labour, working hours, discrimination, disciplinary practices, remuneration, forced labour, personal and product security, management systems, freedom of association and right of collective bargaining, health and safety, compensation, government policy, supply of utilities, minimization of corruption and maximization of services etc..

Internal Independent Variables - Management commitment, shared values, interdepartmental coordination, skill manpower etc..

Social compliance

External Variables

Internal Variables

RMG In Bangladesh (Summary Timeline and Contribution)

• The 1970s marked the beginning of the apparel industry in Bangladesh• In the late 70’s RMG factories started operation• Most of the factories were small two to four line unitson rented apartment style buildings.• In late 70’s and early 80’s all materials were imported.• In mid 80’s backward linkage industry like cartons,polybag, hanger, paper items began to flourish.• In late 80’s early knitting and Dyeing factories wereset up for knit fabric backward linkages.

RMG In Bangladesh (Summary Timeline and Contribution) – continued…• By 1985, Bangladesh emerged as a strong apparelsupplier• In late 90’s some woven weaving and dyeingfactories were set up for woven fabric backwardLinkagesIn 2009, Ranked as the fourth (4th) largest clothingexporting country in the world after China, EU andTurkey• 2012-13 apparel exports amounted to US$ 21.5 billion• The apparel sector accounts for more than 80% offoreign export earnings of the country• 4 million workers directly employed and anestimated 23 million people indirectly supported

Risks and Impediment in Bangladeshi RMG sector

Poor Working conditionInfrastructural Impediments Forced labour Sexual harassmentLow paymentLate or irregular wage paymentsNo job securityInadequate leave : Hardly workers get

annual leave, casual leave, sick and medical leave, festival leave and maternity leave.

Risks and Impediment in Bangladeshi RMG sector- Continued…

Health hazardDo not have standard working hoursChild labourSafety ProblemsWorkplace relations and verbal harassmentNo residential facilities or transportation

facilities

Recent RMG Sector Elegies

In 2005 and 2006, for example, two building collapses and four fires took the lives of more than 200 workers. The Spectrum Factory building collapse of April 2005 killed 54 workers, injured over 70 and left hundreds jobless.

In the KTS Textile Industries tragedy on February 23, 2006 in Chittagong, 61 workers lost their lives and more than 100 workers were wounded, as a fire originated from an electrical short-circuit.

Recent RMG Sector Elegies- continued…On 25 February 2006, a 5-storied building of

the Phoenix Garments at Tejgaon, the oldest industrial zone of the capital city, collapsed leaving 22 killed and 50 workers injured.

On December 14, 2010, workers smashed and burned a factory of Hameem Group at Ashulia. It killed 22 of their colleagues and left more than 400 injured.

By fire accident in the Tazreen Fashion factory in the Ashulia on 24 November 2012, 117 people were confirmed dead in the fire, and at least 200 were injured.

Recent RMG Sector Elegies- continued…

On 24 April 2013, Rana Plaza, an eight-story commercial building, collapsed in Savar, Deaths 1,129 & Injuries 2,500.

Furthermore places of employment in the garments sector are notorious for fire, which are said to have claimed over 350 lives in the past two years, though exact figures are difficult to find (The Prothom Alo Newspaper, November 2012).

Who are working to mitigate risks and ensure compliances ?

At International Level

ILO The UnicefWTO

Who are working to mitigate risks and ensure compliances ?- continued…At National Level

Public Organizationsa) Ministry of Labour and Employmentb) Compliance Monitoring Cell (CMC) under

Ministry of Commerce : It established 2 taskforces

Taskforce on Occupational Safety in RMGTaskforce on Labour Welfare in RMG

Private Organizationsa. BGMEA and BKMEA (Crash Programme

On fire Safety)b. Trade Unionc. NGOs

Who are working to mitigate risks and ensure compliances ?- continued…Signing of a tripartite memorandum of understanding among the BGMEA, the ILO and the Unicef on July 04, 1996 was the first step towards compliance.

The Bangladesh government and the International Labour Organization (ILO) have launched a US$24.21 million initiative aimed at improving working conditions in the country’s ready-made garment industry

Legal guideline for Safety measures, Risk management and Compliances

Factories Act 1965 (Act XXV of 1934)- adopted with the objective of regulating the appointment of workers, their wages and the working conditions in factories, including health and hygiene, safety, welfare, working hours, leave and holidays, and punishments and penalties for both the owners and workers for non-compliance of the requirements.Factory Rules 1979 that prescribe minimum standards and health and safety regulations

Legal guideline for Safety measures, Risk management and Compliances – continued…Bangladesh National Building Code 1993The Bangladesh Labour Act 2006 (Bangladesh Shromo Ain 2006) and fixation of minimum wages for the Ready Made Garment (RMG) workers.The ILO Declaration on Fundamental Principles and Rights at Work, 1998The Agreement on Textile and Clothing (ATC) -introduced in 1994, aimed at  bringing  textiles  and clothing within the domain of WTOLabour code 1994

Yardsticks to Manage risks and ensure Social compliances

Prevention is better than cure – Following building code, fire safety measures and emergency exit etc.. Better work environment should be ensured Make them informed and skilled to survive Monitoring system should be revised and make more effective HRM practice should introduce in RMG sector

Yardsticks to Manage risks and ensure Social compliances –continued…

Let them be united – Give them right to establish unified labour union and raise their voice to protect their right.Take Long-Term Competitive StrategyLaw should be formulated and strictly enforcedAdequate safety measures need to be takenThey deserve human life – minimum standard of salary, leave and compensations.