Answer
As a Chief or Second Engineer, your response here must demonstrate zero tolerance for environmental non-compliance.
Stop Immediately: Halt the OWS operation instantly. Close and physically lock or tag out the overboard discharge valve.
Notify & Log: Inform the Master. Make an immediate entry in the Engine Room Log Book. Crucially, make an entry in the Oil Record Book (Part I) under Code F (Condition of oil discharge monitoring and control system and oily water separating equipment), noting the time of failure.
Troubleshoot: Systematically check the equipment. Common faults include a fouled 15-ppm sample cell, a stuck 3-way pneumatic divert valve, saturated coalescer filters, or a loss of sample water flow.
Assess Holding Capacity: Sound the bilge holding tanks. Calculate exactly how many days of holding capacity you have left based on the vessel's daily bilge generation rate.
Company & Flag Notification: If the OWS cannot be fixed with onboard spares, you must inform the DPA. If the vessel needs to sail with a defective OWS, formal dispensation/notification must be sent to the Flag State and the Port State Control of the next port of call.
Arrange Shore Discharge: If holding capacity is insufficient for the intended voyage, arrange for a shore reception facility truck/barge to offload the bilges and obtain the shore receipt before departure.