Bushido and British chivalry saving the EarthZ
Established in 1998 as a joint-venture between Kajima Corporation and Oyo Corporation, Engineering and Risk Management Services (ERS) came from the dramatic changes that occurred at the end of the Japanese real-estate bubble, and today specialises in risks associated with real estate — both land and property-related.
With increasing securitization of the industry, asset owners recently have began to require the independent third-party risk assessment that ERS provides.
The firm’s consulting services also involve seismic and other natural-risk analyses and solutions for environmental liabilities in land, property, machinery and equipment. With evolving environmental policy, as well as rising awareness of environmental liabilities, ERS is a unique player in the market.
As one of the largest providers of engineering expertise to Japanese Real Estate Investment Trusts — estimated total value ¥3 trillion — ERS has a natural affinity with British partners and products, such as Risk Link, a seismic risk-analysis system developed by Risk Management Solutions, a subsidiary of the UK’s Daily Mail and General Trust, plc.
Indeed, ERS President Hiromichi Sakata, a kyudo (archery) expert, sees a strong cultural similarity between Japan and the UK in the ideals of bushido and chivalry. He believes mutual respect and trust shared by both cultures are essential elements to manage the delicate matters related to some risks and environmental issues.
From its inception, ERS was focused on collaboration, which is still a vital concept to the firm. “The COP15 talks show us that, in order to solve the environmental challenges we face, we have to work together”, said Sakata.
Organisations in China and the Philippines have asked for help from ERS, which has also been working with leading UK professionals.
Environmental liabilities usually involve asbestos, polychlorinated biphenyls (PCB), and soil and groundwater contamination. If ignored, these problems can return in a very unpleasant way — usually with a hefty price tag. In a recent case, for example, a firm which sold land with fluorine contamination was fined ¥449 million, although the case is under appeal. The land had been brought by the firm in 2001 but the Soil Contamination Countermeasures Act, which clarifies the landlord’s responsibility for soil contamination, became law in 2003.
Many environmental hazards are silent or invisible. Legislation and policy involve several levels and risk grades that warrant different solutions. The multidisciplinary expertise at ERS helps target these liabilities.
From April 2010, several environ-mental regulations were revised and tightened, such as those obliging:
- Asset owners and certain tenants in Tokyo to be responsible for their CO2 emissions, with a global warming prevention plan
- Large-scale operations to control and manage CO2 emmissions of their entire organisation, not just of its major facilities
- Landlords, occupiers and managers to report changes in land character and to be directly responsible for disposal of contaminated soil
Naturally, these regulatory changes mean an additional investment in time and resources to understand what is expected by respective agencies and to anticipate issues that may occur.
Further, accounting standards for the Asset Retirement Obligations (quantifying and reporting the future cost of removing hazardous substances in tangible fixed assets), set to be adopted in April 2010, would add another level of expertise and expense.
Along with industrial, government and academic representatives, senior management at ERS are active members of working groups that are instrumental in shaping issues and solutions, putting the firm on the leading edge of policy, legislative, research and market trends.
Finding resonance is the key to partnership and to ERS’s success.