Getting serious about risk management?
Posted on | July 9, 2010 | No Comments
The Gulf of Mexico postmortems are landing with explosive force, even if the well has not yet been sealed. At what Churchill liked to call the root of the matter, there wasan inability to appreciate and apply a safety or risk management system to the drilling and operation of at least some exploratory and production wells on the U. S. outer continental shelf.
The consequences, of course, have been disastrous, historic, and as one observer pointed out last week, global.
The U. S. Congress is in the process of drawing up new legislation designed to meet, once more, the public demand that there be no more oil spills. It does this every twenty years or so.
It is clear that a more enforceable system of assessment and management of risk factors is needed. Nothing is more convincing than the fawn-in-the-headlights expression in Tony Hayward’s eyes, over the last several months, telling us that the terrible risks that his company was running before April 20 came as a bolt from the blue, at least to him.
There is no understandable reason — except cost cutting – to have incurred $20 billion or more in liabilities; or for there to have been loss of life; or serious damage to several major industries, from petroleum to shellfish;
or vast environmental harm; or the possible destruction of a company with hundreds of thousands of investors and eighty thousand employees; — except for its failure to embed an effective safety management system when and where it mattered.
But bean-counters seldom have remorse; quality, safety and risk management will often have no place in a corporate budget unless the law compels otherwise!
Section 3203 of title 46 of the United States Code (the Oil Pollution Act of 1990) already provides for safety management systems, and it is proposed in certain draft legislation that the Act’s existing provisions be extended to cover Mobile Ofshore Drilling Units.
However, it is doubtful that OPA ’90, even as amended, will contain what is needed to eliminate the “starvation of safe management” syndrome.
As it happens, an effective antidote is available. The well-known ISO system of quality management, which began as military procurement principles many years ago, has a risk assessment and management component, widely used in many companies.
So widely, in fact, that its core elements are now part of an International Maritime Organisation (IMO) convention, cumbersomely labelled the International Management Code for the Safe Operation of Ships and for Pollution Prevention (the ISM Code).
It is all spelled out in ISO Standard 31000:2009, entitled “Risk Management – Principles and Guidelines on Implementation”.
I will spare gentle readers, at least in this blog post, the exquisite agony of the provisions of IMO Resolution MSC.273 (85), adopted in December, 2008, which introduced risk assessment concepts into the ISM Code.
For the benefit of House and Senate committee staff who may want to check it out, the muscle is in the new parts of Chapter IX of SOLAS, which ironically went into force on 1 July, 2010. So, the paint is still sort of wet, although the ISO Risk Management Standard has been around a bit longer.
IACS, the International Association of Classification Societies, provides guidance relevant to ISM and risk assessment in its publication “Guide to Risk Assessment In Ship Operations.”
What SOLAS Chapter IX, the ISM Code, provides is an assessment and risk management matrix that, if it is incorporated in the U. S. Oil Pollution Act, will impose severe penalties for failure to implant a top-to-bottom system of safety culture: fines, unlimited liability, civil and criminal penalties, and other goodies. That is, “if”.
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