RISK ANALYSIS
Risk Analysis - Involves examining identified risks; Deciding on risk treatment options; and Evaluating the effectiveness of existing risk control measures. |
Quantitative Analysis - Uses numerical data and calculations.
Assigns values to consequences & their probabilities to calculate a numeric indication of the level of risk. |
Qualitative Analysis - Measures risk based on the significance of its consequences.
Subjective and uses ratings such as high, medium, low.
Should include a clear explanation of the bases for each rating. |
Traditional Accident Analysis - Help risk mgrs identify the causes of accidents and choose the best risk control techniques.
Basic causes of most accidents incl. Poor Management, Safety Policy, and Personal or Environment factors. |
Qualitative Risk Analysis
MONTE CARLO SIMULATION
Used to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables; It is a technique used to understand the impact of risk and uncertainty in prediction & forecasting models. |
A computerized statistical model that simulates the effects of various types of uncertainty. |
Model focuses on specific variables in a project, such as revenues, interest rates, gross margins, and costs |
Results are compiled into probability distributions representing possible outcomes |
RISK IDENTIFICATION: Team Approaches:
Facilitated Workshops: Group discussions facilitated by risk mgmt professionals who meet with the firm's leaders, key employees, and other stakeholders.
Facilitator encourages brainstorming and follow up discussions.
A neutral party administers a risk workshop & propels group to achieve its goal. |
Delphi Technique: Group of experts make independent projections through anonymous questionnaires that should move towards consensus - group members do not meet face-to-face.
adv (+): cheaper, anonymous responses avoid group bias and encourage honest answers
disadv (-): experts' opinion are limited to their own thinking and may not produce forward thinking. |
Scenario Analysis: Identifies risks & predicts the potential consequences of those specific risks.
adv (+): identifies a range of potential consequences and helps risks mangers prioritize risk
disadv (-): analysis could miss key risks, results are limited by members' imaginations |
HAZOP (Hazard & Operability Study): Comprehensive review of a system or process.
Team of experts and stakeholders meets in a facilitated workshop to identify the risks associated with a process and to recommend possible solutions.
Ideal for when all risks need to be eliminated |
SWOT Analysis: Assesses the firm's internal strengths & weaknesses and the firm's external opportunities & threats.
Team approach used for analyzing specific new projects/products; Should conclude with a go or no go recommendation. |
ACCIDENT ANALYSIS TECHNIQUES
Change Analysis - Projects the effects of a proposed change or combination of changes on the safety and reliability of an existing system.
Appropriate for EXISTING systems, not proposed systems.
ex) Before changing a trucking fleet from gas to diesel engines, project new safety hazards for drivers, mechanics, service suppliers, and general public. |
Job Safety Analysis (JSA) - Dissects a repetitive task into steps & identifies potential hazards for each step, focusing on human error.
Appropriate for repetitive human tasks performed in a stable environment or where a person must act safely to avoid accidents, not appropriate for to entirely mechanical tasks. |
Sequence of Events (Domino Theory) - Holds that accidents result from human failings.
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Domino Accident: Chain of Events
1. Ancestry & Social environment - Person's genetic background &/or environment cause undesirable character traits (recklessness, stubbornness).
2. Fault of Person - Person's undesirable character traits cause him to commit unsafe acts or to create physical or mechanical hazards.
3. Unsafe act or physical/mechanical hazard - The unsafe act (horseplay, ignoring safety requirements) or hazard (open flames near flammable substances, lack of proper lighting) causes an accident.
4. Accident - The accidental event (falling persons, uncontrolled fire) causes injury.
5. Injury - The undesirable final event (fractures, lacerations, burns). |
Technique & Operations Review approach (TOR) - An approach to accident causation that views the cause of accidents to be a result of mgmt's shortcomings.
Holds that accidents result from management failures. |
TOR approach: (7) categories of Management faults:
1. Inadequate coaching;
2. Failure to take responsibility;
3. Unclear authority;
4. Inadequate supervision;
5. Workplace disorder;
6. Inadequate planning/organization;
7. Personal deficiencies. |
Energy Transfer Theory - An approach to accident causation that views accidents as energy that is released and that affects objects, including living things, in amounts or at rates that the objects cannot tolerate. |
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RISK CONTROL
Risk Control: A conscious act or decision not to act that reduces the frequency and/or severity of losses or makes losses more predictable. |
(5) Basic Principles:
- Accidents & unsafe acts/conditions reveal management system failures;
- Certain controllable circumstances produce severe injuries;
- Mgmt should manage safety like any other function, by setting and achieving goals;
- Mgmt procedures for accountability produce effective line safety;
- Safety's function is to locate and define accident causing operational errors by tracing accidents to their root causes & controlling them. |
RISK CONTROL GOALS
Pre-Loss Goals: Aims to reduce the amount or extent of damages or injuries incurred in a single event. Applied before a loss occurs.
- Economy of Operations
- Tolerable Uncertainty
- Legality
- Social Responsibility |
Post-Loss Goals: Focuses on emergency procedures, salvage ops, rehabilitation, public relations, and legal defenses. Applied after a loss occurs.
- Survival
- Continuity of Operations
- Profitability
- Earnings Stability
- Social Responsibility
- Growth |
Techniques used to support these goals:
- Ensure Business Continuity
- Implement Effective & Efficient risk control measures
- Comply with Legal Requirements
- Promote Life Safety |
Root Cause Analysis (RCA)
Root Cause: Basic Characteristics: Specify; Identify; Control; and Recommend.
1. Specify - Root cause is expressed as a specific underlying cause, not as a generalization.
ex) operator removed safety guard, NOT operator error.
2. Identify - Root cause can be reasonably identified by understanding the reason why it happened.
3. Control - Root cause must be expressed as something that can be modified.
ex) Failure to maintain a backup generator, NOT lightning that caused power failure.
4. Recommend - Root cause must produce at least 1 effective recommendation for preventing future reoccurrence of the event. |
(RCA) Weaknesses (-):
- Only looks backwards (doesn't consider future causal factors)
- Can fail to identify all root causes
- Can only be done or reviewed periodically (not continuous) |
Root Cause Analysis (RCA) - Used in proactive management to identify predominant cause of loss.
Uses a step by step evaluation to identify the underlying cause of an unwanted outcome.
A 'factor' is considered the root cause of a problem if removing it prevents the problem from recurring.
A 'causal factor', conversely, is one that affects an event's outcome, but is not the root cause.
*Typically used after an event has occurred, but it can be used to predict events and to solve problems proactively, rather than only retroactively. |
Root Cause Analysis Process - (4) steps:
1. Collect Data - Risk Mgr must obtain complete info about the circumstances, the facts, and causes of the event.
2. Chart Casual Factors - The agent that directly results in one event causing another event.
3. Identify root cause/causes - Once all the casual factors are identified, the risk Mgr uses mapping or flow charting to determine the underlying reasons for each casual factor.
4. Implement recommendations - Risk Mgr identifies & implements achievable recommendations for preventing recurrence of the event.
Final product is a root cause summary table that incl. recommendations for each root cause identified for each casual factor. |
Root Cause Analysis: (5) Approaches:
1. Safety-based RCA: Arose from accident analysis & occupational safety and health.
2. Production-based RCA: Arose from quality control procedures for industrial manufacturing.
3. Process-based RCA: Similar to production based RCA, but also includes business processes.
4. Failure-based RCA: Arose from failure analysis and is used mainly in engineering and maintenace.
5. Systems-based RCA: Combines the other 4 approaches w/ concepts from change mgmt, risk mgmt, and systems analysis concepts. |
LOSS CAUSE: Physical, Human, and Organizational
Physical Cause - The failure of a tangible or material item, such as a defective part. |
Human Cause - Occurs when human error or inaction is the root cause of an accident, such as operator error or improper maintenance. |
Organizational Cause - Results from faulty systems, processes, or policies. |
CH.3 VOCAB
Energy Transfer Control: approach to accident causation that views accidents as energy that is released and that affects objects, including living things, in amounts or at rates that objects cannot tolerate. |
Technique of Operations Review (TOR): approach to accident causation that views cause of accidents to be a result of management’s short-comings |
Change Analysis: analysis that projects the effects of a given system change is likely to have on an existing system |
Job Safety Analysis (JSA): analysis that dissects a repetitive task, whether performed by a person or a machine, to determine the potential hazards if each action is not performed |
Monte Carlo Simulation: model that stimulates the effects of various types of uncertainty may have on a process. Another approach to solving complex problems and predicting outcomes. |
Delphi Technique: decision-making technique in which group members do not meet face to face but respond in writing to questions posed by the group leader |
Scenario Analysis: identifies risks and predicts the potential consequences of those specific risks |
Causal Factors: agents that directly result in 1 event causing another |
Facilitated Workshops: a risk workshop administered by a neutral party and propels group to achieve its goals |
HAZOP (Hazards and Operability Study): team of subject matter experts and stakeholders identifies the risks associated with a given process and recommends a solution (ideal for when all risks need to be eliminated) |
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