On the Transfer of Risk from Corporations to the Publlic

The 3rd April 2012 running over (and dragging) of a 66 year old woman, crossing the road with traffic signals in her favor, by a SBS bus calls into question the training given to bus drivers. The bus driver was reportedly a national of China, where SBS actively recruits and where buses are culturally regarded to have right of way over pedestrians.

From this perspective, the accident is simultaneously unsurprising and shocking, the former because it would have been a matter of time and the latter because this obvious risk has not been comprehensively mitigated by training. This accident would not have happened if appropriate training was provided. This failure constitutes an unconscionable transfer of risk from SBS to the public. An investigation should be conducted and a stern regulatory response should follow if SBS is shown to be negligent.

Risk costs money to mitigate. It is not surprising that corporations are keen to find ways to transfer the burden of risk from each other. I myself have been taught to be careful with what risks I accept. It is up to the party bearing the risk to take mitigating measures. But what is the risk has been transferred without being accepted? Can the party now bearing the risk be blamed for not mitigating the risk?

This matter can easily be reframed into the standard picture of negative externalities imposed on the public. So I am not saying anything new. However, the risk and risk mitigation perspective I'd far more relevant to this setting and generally more concrete. Pollution leads to a risk of disease that can be mitigated with the discomfort of masks and/or the expense of good air purification systems. Yet the risk remains, albeit slightly diminished. What is the appropriate transfer back to society then? I think the answer lies in the cost of mitigation measures scaled up by an appropriate factor for time expended.

Where there is no transfer back to society, law and regulation should incentivize the corporation to do risk mitigation on its own. Financial penalties for negative outcomes should be capable of wiping out all or most cost savings for not handing risk, otherwise simple arithmetic tells us that nothing will be done.

Without commenting on the state of regulation in Singapore, let me say that this is important. The next grandma run over and dragged to death could be yours.