The annual report of the Health and Safety Executive (HSE) covering 2000/01 predicted that the overall number of fatalities in the work place would be 295, a rise of 34% over the previous year. It reported that the numbers and rates of fatal injuries were higher in all main industrial sectors. The total number of non fatal injuries was more than 28,000, and the number of injuries that resulted in at least three days absence from work stood at over 100,000.
These bald statistics should be enough to ensure businesses take a close look at their health and safety (H&S) risks in sheer human terms. But the damage an accident causes does not stop there. H&S incidents at work can also lead to loss of confidence in the work force, loss of production time and damage to equipment. It can also have an impact on client or customer relationships. The financial implications of replacing equipment, covering down time and, of course, facing legal action are only the tip of the iceberg. Such events have serious implications for the bottom line.
High on the agenda
So, when it comes to discussing risk management, it would seem that H&S should be high on the agenda. In reality, however, this is not always the case. Risk assessment starts with the basic question of 'How can the assets or earning capacity of the enterprise be threatened?' The process involves reviewing the entire business, and quantifying potential risks by asking how big, how bad and how likely? The trouble with H&S considerations is that they are difficult to quantify and can be relatively costly on resources. At some stage the question of cost versus practicality will enter the risk management equation.
It is at this point where H&S questions should be given proper emphasis. If H&S is factored into a business from the top down, given proper support and emphasis, then it becomes part of the business culture.
Delegating H&S downwards is not good risk management. It is also important to remember that, for some aspects of H&S law, practicability and cost are not part of the equation - the requirements are absolute.
In standard risk management procedures, risks are identified, controlled, and then financial mechanisms are used to mitigate the remaining risk. But close consideration should be given to the middle stage of controlling the risk. It may be relatively easy for companies to skate over this area, because of the ease with which financial risk can be managed, either via risk transfer or risk retention. Businesses and brokers are both likely to feel more comfortable when dealing with the financial side of risk management, rather than with the more specialised area of risk control. After all, the Health and Safety At Work Act is there to make sure the right steps are taken, in complying with regulations such as the Provision and Use of Work Equipment Regulations 1998 (PUWER 98) and the Lifting Operations and Lifting Equipment Regulations 1998 (LOLER). But sticking to the letter of the law provides only the baseline. The regulations themselves do not necessarily suggest the optimum method of successful risk control.
Going the extra mile
The trouble with accidents is the general reluctance of people to believe they could happen, combined with an inclination to assume they won't. H&S often only becomes a priority after the event. Brokers and risk managers are familiar with all the wonderful acronyms of H&S - PUWER, LOLER, ALARP, HAZOP, - but it is a technical area and really tends to be the domain of the specialists such as the HSE and the specialist inspection companies. As long as the regulations are complied with, and the inspections take place, that should tick the box. This it will, so long as it is truly integrated into the whole process. Although the phrases are rather hackneyed now, a good holistic approach demonstrating properly joined up thinking provide the ideal solution to risk management of H&S issues.
Joined up thinking really means addressing the various definitions of risk which are in play when it comes to the interface between the typical parties involved in a business's risk management: insurers, brokers, H&S specialists and the company itself. When a specialist insurer is involved in providing H&S support, it addresses risk as a H&S term. This means identifying potential hazards to people and the likelihood of hazardous events arising. Ideally, it will also provide engineering insurance, thereby satisfying one of the other criteria.
Brokers tend to view risk in the context of financial risk and how to protect clients from unseen events. This involves the measurement of risk, working out which events are most likely and what the potential costs are in relation to each.
What the data and statistics do not necessarily quantify are the 'hidden' risks. The ideal risk management solution combines the statistical with the actual, integrating H&S philosophy within the heart of the risk solution. The occurrence of an accident is often a symptom of underlying shortcomings in many areas of risk and H&S management.
What, where, when, how much, how likely?
For example, the average risk management process will involve identifying all the elements involved in the business that might pose a threat. In a typical manufacturing business, this involves dividing the business into assessable parts, then listing the activities within each part of the business. Each activity is then reviewed to see what might be potentially dangerous, both as a stand alone function, and in relation to the functions up and downstream of it. How each activity interacts is reviewed for issues such as bottlenecks or dependencies. In addition, consideration is given to the surrounding environment, investigating whether threats exist from the inside to the outside and vice versa. Clearly, in these latter stages, a great deal of 'drilling down' into the detail at plant level is required.
Once the analysis is complete, a simple formula can be applied. Can the risk be removed, or can it be mitigated? If the risk is reduced as low as is reasonably possible (ALARP), then consideration can be given to the financial management of the risk (insurance etc). This process works, as long as the risk identification is recognised as important to the enterprise, and it becomes the distinct responsibility of someone within the organisation. History shows that where managing risk is a daily part of normal management activities, it is not always effective.
The classic case is Flixborough. The chemical works had four reactors in a row, each joined (in simple terms) by a pipe. When one of the reactors developed a fault, it was closed down and a dog-leg pipe installed to by-pass the non-functioning plant. A fault then developed with the interim piping. The subsequent explosion was one of the most serious workplace incidents of modern times, resulting in both fatalities and considerable damage to property. Although there were plenty of people on site who were qualified to recognise the inherent dangers represented by the temporary piping, no-one felt it was their responsibility. The accident had such an impact that it triggered the introduction of modern H&S regulations. It pays to get it right
H&S considerations can therefore be seen as a key part of good risk management strategies. This may sometimes mean adding extra processes and systems to the businesses, but there are excellent reasons for doing this. If good H&S regimes exist, then the risk of accidents is far lower. The benefit to the business is considerable. Specialist insurers, working with risk managers and brokers, can positively influence risk management plans, resulting in fewer accidents and less staff absence. Beyond this, improved levels of plant reliability and availability can also be achieved. Staff morale is boosted when there is confidence that the company is placing employees' safety and welfare high on the agenda.
Experience has shown that equipment usually fails either because it is being used incorrectly, is inadequately maintained, or is being abused. With this knowledge, it is possible to plan to address these failings.
The first step is to ensure equipment has been designed properly and is being used within the context for which it is designed. The next step is to ensure it is maintained properly and a classic inspection programme will help achieve this. Finally, it is vital to ensure personnel are properly trained and motivated to use equipment properly and safely.
Carrot and stick
One final argument remains in favour of emphasising the importance of H&S within risk management. In the light of the rail accidents of recent years (Clapham, Kings Cross, Paddington and Potters Bar), the issue of corporate manslaughter has come to the forefront of both public and government's attention. New laws are being seriously considered as a tool to encourage businesses to take their H&S responsibilities more seriously. Following a Law Commission report, the Government published proposals on how best to address corporate culpability. Public opinion is hardening against companies that allow death or injury to occur through lax safety.
At present, prosecutions are achieved under current H&S regulations. The problem lies in that it is only required to show a company has been careless. Where a company has been more seriously negligent, it may plead guilty, effectively masking the seriousness of the lapse from the court. The public considers the resultant fines not to be an appropriate penalty. As a result, the Government is looking at changing the law so that the courts can hold senior individuals within companies personally responsible for negligence. This will focus the minds of company directors considerably, especially if they personally may face a prison sentence as result of H&S lapses.
Good practice gets the best results
However, responsible businesses are probably ahead of the Government. No responsible company wants to experience the damage to its corporate brand and reputation that is the result of a serious incident involving employees or the public. Such businesses are happy to invest in positive H&S practices as part of a responsible risk management programme. For the director's peace of mind and as good business practice, it makes sense to start H&S awareness within company at boardroom level, so that a culture of safety is inherent in all the workings of the business.
Alan Harris is engineering executive, Allianz Cornhill Engineering, E-mail:
marketing@allianzcornhillengineering.co.uk
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