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Home > Operations Management Best Practice > Managing Operational Risks Using an All-Hazards Approach

Operations Management Best Practice

Managing Operational Risks Using an All-Hazards Approach

by Mark Abkowitz

Risk Factors

Within a recipe for disaster, each ingredient can be thought of as an underlying risk factor that erodes our margin of safety. Once this margin of safety is exceeded, the situation is liable to spiral out of control. Therefore, management control of risk factors is at the crux of an effective ORM program. In attempting to manage these risk factors within an organization, it is helpful to group them into the following categories:

Design and construction flaws: If there is a flaw in the design process and it is not discovered in time, the system is prone to failure. Even when the design is valid, problems can still arise if the materials used to fabricate the system components are faulty or the components are not assembled properly.

Deferred maintenance: It is human nature to choose to deal with problems at a later time, especially if the system is not actually malfunctioning. Unfortunately, decisions to defer maintenance often lead to the failure of a key system component before the repair can be made, causing a serious accident to occur.

Economic pressures: Organizations typically manage a limited budget. When these resources are too scarce or spending is not controlled adequately, pressure intensifies to implement strict cost-cutting measures. This can lead to shoddy workmanship, the purchase of inferior quality materials, elimination of the use of backup operating and safety equipment, or management ignoring problems that arise.

Schedule constraints: When a deadline has been imposed, and the activity has fallen behind schedule, pressure to make up ground can cause the responsible party to turn a blind eye to important details. This situation often leads to the elimination of critical tasks, personnel trying to accomplish tasks in parallel that should be done in sequence, or not pursuing certain considerations in sufficient depth to fully understand their impact on safety.

Inadequate training: Because of a lack of adequate training, individuals who are prone to make mistakes may be placed in positions of responsibility. This in turn can either initiate or intensify a crisis situation. When there are personnel shortages, individuals may be thrown into an important decision-making role while covering for others, performing a function for which they were not properly trained. Because individuals tend to forget what they were originally taught and since processes change over time and require new learning, lack of retraining can also be a problem.

Not following procedures: When engaged in a repetitive activity, complacency can set in, and individuals tend to drift away from following formal protocols. Consequently, they either neglect to perform certain steps or invent other ways to accomplish the same task, often not considering the possible safety hazards caused by their actions. Failing to follow procedures can create a hazardous situation, one that is exacerbated by coworkers whose actions are based on assuming that those procedures are being followed.

Lack of planning and preparedness: Because of the luxury of time and the fact that a disastrous event may not have been experienced in recent memory, people tend to place a low priority on being adequately prepared for a crisis situation. All too often, little forethought is given to the variety of disaster scenarios that could reasonably occur and how to deal with them effectively. Even in circumstances where significant effort has been devoted to planning and preparedness, the product of this effort can be a written plan that is not practiced or updated, rendering it of little value when a calamity arises. Lack of planning and preparedness is one of the most common risk factors at play when something goes wrong.

Communication failure: Communication failures can occur at various stages, altering an outcome in different ways. When communication fails between members of the same organization, critical information is not shared, such as when one group decides to shut down a critical protection system for maintenance while another group is carrying out a dangerous experiment. Poor communication between organizations is also problematic. Finally, lack of communication with the public or the provision of inaccurate information can place people at risk either because they do not know the hazards they are facing, or because they are not properly advised on how to protect themselves. Along with lack of planning and preparedness, communication failure is the most common risk factor at play when something goes wrong.

Arrogance: Arrogance can rear its head in many forms, but usually appears as either the person in charge being driven to succeed for individual gain without sufficient regard for the safety of others, or an experienced individual who has become overconfident in his or her ability to deal with any problem that might present itself. In either form, arrogance can have serious repercussions.

Stifling political agendas: Government policies can have a powerful effect on the propensity for disasters. If these political agendas are hard-nosed, with little room for dialog and compromise, affected parties can feel that they have little recourse other than to resort to extreme and often hostile measures.

It is important to note that we, as humans, are involved in each and every one of these factors. While this implies that we contribute to the cause or impact of every disaster, it also means that we have an opportunity to control these factors more effectively to achieve a better future outcome.

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Further reading

Books:

  • Abkowitz, Mark D. Operational Risk Management: A Case Study Approach to Effective Planning and Response. Hoboken, NJ: Wiley, 2008.
  • Garrick, B. John. Quantifying and Controlling Catastrophic Risks. San Diego, CA: Elsevier, 2008.

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