3 April 2024

The aviation industry has certainly not had easy years. Hardly any other industry was hit as hard by Covid19 as aviation. But while Airbus shares are currently just below their all-time high and have more than tripled in value since the start of the pandemic in March 2020, Boeing has not even reached half of its pre-pandemic share value. The question that arises is, did Airbus do everything right? Or are the different assessments based on gross errors on the part of Boeing. Even if we don’t want to downplay the success of Airbus, there are massive problems on Boeing’s side, which led to 7 safety-related incidents involving Boeing aircraft in March of this year alone.

Boeing Airlines is in the midst of a barrage of legal challenges and is grappling with a series of incidents that highlight systemic problems in its risk management practices. March was particularly turbulent as the NTSB conducted an investigation into a mid-flight emergency exit door. Investigators found that Boeing failed to document key steps during production, something Boeing has already admitted. This revelation follows an FAA audit that highlighted Boeing’s failure to comply with manufacturing processes and product controls.

But what do the problems described have to do with risk management?

The operative word here is negligence.

The implications of these failures are serious. Negligence is the failure to do (or not do) something to protect others from foreseeable risks of harm. Additionally, negligence carries significant legal liability. The lack of records here is a prime example of such negligence and exposes Boeing to significant liability.

What are the consequences of Boeing’s failure to manage risk?

The consequences of Boeing’s risk management errors are far-reaching. They damage the company’s reputation and lead to costly fines, loss of stock value and lawsuits. The March 11 incident led to a temporary nationwide grounding of 737 Max jets, followed by further investigations, including a criminal probe, resulting in the loss of over $40 billion in market value. Boeing could lose billions more in fines and lost business.

How could Boeing have prevented this situation?

But Boeing is struggling not only with production problems, but also with poor internal management practices. According to reports from whistleblowers, employees were pressured not to document defects and others who highlighted problems were labeled “troublemakers,” while the company had previously rewarded those who discovered defects. This is not just a failure to formulate proper policies. It is also a matter of failures in corporate management. Effective risk management is not optional; It is a fundamental responsibility that affects employees, customers, stakeholders and the wider community.

At a time when everything can be scrutinized by the public, negligence is a leading cause of scandal and can have serious legal and financial consequences. Preventing negligence is therefore of utmost importance. Although it is impossible to eliminate all risks, by implementing and adhering to risk management and compliance regulations, companies can avoid the costly consequences of negligence. These practices provide visibility into critical information within the governance framework and enable organizations to proactively identify and combat emerging threats.

Boeing’s challenges underscore the importance of robust risk management and governance practices. As the company works to address these issues, the broader lessons for other organizations are clear: prioritize risk management, ensure transparency, and cultivate a culture that values and rewards the identification and resolution of security concerns.