Failure in Risk Management: The Turbulent Times of Boeing Airlines

Last Updated: March 14, 2024

Just yesterday a Boeing 777 jet blew a tire during takeoff from Dallas Fort Worth International Airport, and on March 11 at least 50 people were injured when a Boeing 787 Dreamliner experienced an equipment failure causing it to plunge suddenly mid-flight. These are only two of at least seven incidents involving Boeing airplanes in March alone. 

Boeing Airlines finds itself amidst a storm of legal challenges, grappling with a series of incidents highlighting systemic issues in its risk management practices. March has been particularly turbulent, with an open investigation by the National Transportation Safety Board (NTSB) of an incident in January when an emergency exit door flew off mid-flight. The NTSB investigators found Boeing had not documented critical assembly line steps, including the reinstallation of bolts essential for holding the plug in place. Boeing has admitted there are no records. 

The records in question are documentation of steps on the assembly line last fall when National Transportation Safety Board investigators believe Boeing employees removed critical bolts that hold the plug in place but did not reinstall the bolts before the plane left the Boeing factory in October 2023. The plane flew about 150 commercial flights before the door plug flew off the plane mid-flight on January 5, just over two months ago. This revelation comes on the heels of the Federal Aviation Administration’s (FAA) findings from a six-week audit that pointed out non-compliance issues in Boeing’s manufacturing process control, parts handling and storage, and product control.

Why is the glaring lack of records a risk management problem for Boeing?
Because it is negligence.

The implications of these oversights are severe. Airline negligence is a legal term for the failure to do (or not do) something that a reasonable person would or would not have done to protect others from foreseeable risks of harm. Negligence carries significant legal liability, as it can lead to legal liability for accidents resulting from failure to maintain aircraft, train crew, or manage emergencies effectively. The lack of records is a textbook example of such negligence, exposing Boeing to liability claims.

What are the consequences of Boeing’s failure in risk management?

The fallout from Boeing’s risk management failures is extensive, denting its reputation and leading to costly fines, stock value loss, and lawsuits. The March 11th incident resulted in a temporary nationwide grounding of 737 Max jets followed by congressional hearings, and multiple federal investigations, including a criminal probe, erasing over $40 billion in market valuation. Boeing could stand to lose billions more through fines and lost business. 

Public trust in Boeing has waned, with travelers actively avoiding Boeing flights, opting for alternatives, or abstaining from air travel altogether. This shift underscores the pivotal role of brand reputation, a significant component of a company’s value.

How could Boeing have prevented this situation?

We could trace the root causes of Boeing’s predicament to staffing challenges. The aviation industry is facing a shortage of skilled pilots and mechanics, a gap that is widening as older, more experienced professionals retire. This shortage is not limited to the cockpit; it extends to aviation mechanics as well. The Bureau of Labor Statistics has indicated a need to fill approximately 1,200 jobs to bridge this gap. However, there is a much more systemic problem. 

Boeing is struggling with poor internal management practices. Reports from whistleblowers suggest staff were pressured not to document defects and others who highlighted problems were labeled as “trouble-makers,” whereas previously the company had rewarded those who discovered defects. These are not failures in writing proper policy. They’re failures in corporate governance. Effective risk management is not optional; it is a fundamental responsibility that affects employees, customers, stakeholders, and the broader community.

In today’s See-Through Economy, corporate actions are highly visible and scrutinized. Negligence, a leading cause of scandals, can have severe legal and financial repercussions. Preventing negligence is paramount. While it is impossible to eliminate all risks, companies can demonstrate compliance with regulations and avoid the expensive consequences of negligence by implementing risk management best practices. These practices provide insight into critical information within the governance framework, enabling organizations to identify and address emerging threats proactively.

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 the industry are clear: prioritize risk management, ensure transparency, and maintain a culture that values and rewards the identification and resolution of safety concerns. As Boeing navigates these turbulent times, the lessons learned will shape not only its future but also the aviation industry as a whole.