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Loss Contingencies - Environmental

The company I work for has a site that manufactures chemicals in Latin America. To my knowledge there has never been a major spill, major accident, or regulatory violation. Currently the site does not have an accrual for loss contingency (environmental / remediation).

Based on the fact that this site is manufacturing and mixing chemicals I believe that there is an inherent risk of ground contamination due to small spills, slow drips, and the day to day operations. However, I am having a hard time justifying a loss contingency under the FAS5 requirements of 1.) a liability has been incurred and 2.) the amount of loss can be reasonably estimated.

I have no idea how to determine when this liability has been incurred or what would even be a reasonable estimate. The only thing I can think of would be for the company to hire a consultant to perform testing of the site and then provide an estimate if necessary. However, I don't foresee management wanting to open a can worms if they don't have too. If anyone has any experience in this industry and or topic I would greatly appreciate any feedback on how you and or your company managed this issue.

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

First question....what does your insurance policy say or cover?
Second....How ethical or "doing the right thing" is your company?

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |
Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Why not get quotes for companies about mitigation and/or response. Given that you've never had an accident, law of averages say you will. How many? All you need is one.

Find the mean of the quotes and use that as the basis for the cost of contingency.

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