HEALTH & SAFETY How should risk be managed? 5 SIMPLE STEPS OF AN EFFECTIVE RISK MANAGEMENT PROCESS
In the last issue, Risktec Solutions Ltd kicked-off a series of articles on Risk Management by going back to basics to explain the often confused terminology used to describe risk. Based on this understanding, this issue describes a simple and effective process for managing risk. This process is equally relevant to a project, operation, business, facility etc.
Figure 1 illustrates the 5 simple steps of an effective Risk Management Process, whilst illustrating how these steps link with the basic elements of Risk Management in a Safety, Health and Environment [SHE] context.
STEP 1:
Identify Unwanted Event
STEP 2: Assess Likelihood STEP 3:
Assess Consequences STEP 4:
Evaluate Risk STEP 5:
Manage/Control Risk
Hazard Identification Frequency Analysis
Consequence Analysis Risk Evaluation
Assessment of acceptability
Identification of risk reduction measures
Implementation of risk reduction measures
SHE Management System
Hazard Identification Risk Analysis
Risk-based Decision Making
Risk Assessment Risk Reduction
Risk Management Tolerate. Accept the risk, it is tolerable. Figure 1: Elements of an Effective Risk Management Process
STEP 1 IDENTIFY UNWANTED EVENT
The identification of potential threats [or hazards in a SHE context] which could compromise business objectives [e.g. impact on health, safety, the environment, property, operations, costs and/or reputation], should they be realised through an unwanted event, is critical to the success of subsequent risk management activities. You can only manage risks that you know about. Also, you can only be expected to identify unwanted events that are reasonably foreseeable. An appropriate balance must therefore be found in terms of the resource, time and effort committed to performing this initial step.
STEP 2 ASSESS LIKELIHOOD
The Likelihood [or Frequency] is the probability of the unwanted event occurring and will range from the inevitable through to the impossible. This can be assessed using either qualitative or quantitative techniques. We will explore the pros and cons of each in a future issue.
STEP 3 ASSESS CONSEQUENCES
Before assessing the consequences of an unwanted event, you must be clear as to what effects you are assessing. An unwanted event could cause harm to people and the environment, programme delays, cost overruns, plant/asset damage and/ or loss of reputation. The consequences of an unwanted event should be assessed separately for each relevant effect category, with the greatest consequence being used to evaluate the associated risk in Step 4.
Figure 2: HSEs ‘Hierarchy of Risk Reduction’
The concept of ‘tolerability of risk’ is fundamental to this step and, within that, the principle of ‘ALARP’ is key. Unless it can be demonstrated that a risk is insignificant, the risk must be reduced ‘As Low As Reasonably Practicable’. Compliance with the ALARP principle demands that all reasonably practicable steps are taken to reduce risk until the point where the resources [costs, time, effort etc.] required to achieve further risk reduction can be demonstrated to be grossly disproportionate to the benefit gained.
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Transfer legal responsibility or financial impact via contract or insurance, noting that many risks are uninsurable and contractual arrangements will not protect corporate reputation.
The ‘Hierarchy of Risk Reduction’ presented in Figure 2 [Ref.1] should be applied at the ‘Terminate’ and ‘Treat’ level [i.e. Terminate = Eliminate and Treat = Substitute, Engineer, Separate, etc.] to ensure that risk controls are as effective and robust as possible and are aimed at preventing an unwanted event occurring. After all, prevention is definitely better than cure!
STEP 4 EVALUATE RISK
As described in the previous issue, risk is the product of the likelihood of the unwanted event occurring and the severity of its consequences. You must use an appropriate approach to combine the information generated from Steps 2 and 3 to evaluate the associated risk. Future issues will explore this in detail.
STEP 5 MANAGE/CONTROL RISK
There are 4 ways in which risk can be managed/controlled, often referred to as the 4 T’s;
Terminate the activity, operation, project etc. as it is just too ‘risky’.
Treat. The risk can be reduced cost-effectively via the implementation of preventative controls and/or mitigation/ recovery measures.
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