Loss Control Management

ROLE OF SAFETY IN RISK

MANAGEMENT
Engr. Robin C. Rubina
Accredited OSH Consultant - DOLE
Terminology you will hear

l  Hazard – a situation or energy source with the

potential to hurt someone or have a negative
impact on the environment or the business

l  Risk – a combination of the likelihood of a

hazard causing a negative outcome and the
consequence if this hazard does occur.
Usually has a classification such as low,
medium, high, or a numerical ranking
Terminology you will hear

l  Likelihood – how likely it is that a hazard will

turn into something negative (i.e. the probability
of an accident resulting from the particular
hazard)

l  Consequence – the negative impact that could

result from a hazard (i.e. the injury that might
result)
Terminology you will hear

l  Risk Matrix – a table on which we look up the

likelihood and the consequence of a hazard to
find out what risk level the hazard has. Each
individual company will have a different matrix.
Terminology you will hear

l  Acceptable Risk – each company will define

the level of risk which they consider
acceptable. We can’t remove all risk, so we
need to define what we will accept. This
should be shown on the company’s risk matrix.
We are always trying to reduce the risk to
below this level, but this is the maximum we
can accept.
Terminology you will hear

l  ALARA / ALARP – As Low As Reasonably

Achievable or As Low As Reasonably Practical.
This is our aim, to get our risk levels down as
low as we reasonably can. We can’t reduce
the risks to zero, but we need to do as much as
we reasonably and practically can to reduce
them.
l  Controls – the things we do to lower a risk or
prevent a hazard becoming an injury (i.e. PPE,
guarding, procedures, training)
Terminology you will hear

l  Actions – The controls we decide are

important to manage risks are not worth
anything unless they are actually put into
action. An important step in the risk
assessment is to record exactly who will take
action on the controls, what they will do, and
when they will do it by.
Terminology you will hear

l  Residual Risk – Once we have done all we

can to reduce the risk on a particular hazard to
ALARA or ALARP, there will still be some risk
there (we can rarely get it down to no risk
without eliminating the job all together). The
amount of risk that remains after we’ve put our
controls in place is called the residual risk.
How to Contribute

l  just work through the following five

questions over and over:
–  What could go wrong?
–  What would happen if it did go wrong?
–  How likely is it to go wrong?
–  What can we do to reduce the chance of it going
wrong?
–  What can we do to reduce the impacts if something
does go wrong?
“A RISK not identified is a
RISK not managed”
Risk Assessment

“overall process of estimating the

magnitude of risk and deciding
whether or not the risk is tolerable”
Tolerable Risk

“risk that has been reduced to a level

that can be endured by the
organization having regard to its
legal obligations and its own OH & S
policy”
In simple terms, the risk from the hazard
should be determined by estimating

Ø  Severity of harm

Ø  Likelihood of harm occurring

Severity of Harm

Ø  Slightly Harmful - Superficial injuries,

Nuisance, Irritation, ill-health leading to
temporary discomfort
Ø  Harmful - Lacerations, Burns, fractures,
Deafness, dermatitis, ill-health leading to
permanent minor disability
Ø  Extremely Harmful - Amputations, Major
fractures, Fatal injuries, severely life
shortening diseases
Likelihood of Harm
Ø  Highly Unlikely – Occurs during accident,
breakdown or emergency
situation.
Ø  Unlikely - Occurs during regular
scheduled practice i.e.
monthly or yearly e.g.
during maintenance.
Ø Likely - Occurs during normal
everyday practice.
What is Risk?

“The combination of the likelihood and the

consequences of a specified hazardous
event (accident or incident)”

Hazard Releasing the Harm

Likelihood / Frequency Criteria

Almost certain - The Event is to be expected to

occur in most circumstances - incident could happen
daily to weekly
Likely - The Event will probably occur in most
circumstances - Incident could happen weekly to
monthly
Moderate - The Event should occur at some time -
Incident could happen monthly to yearly
Unlikely - The Event may occur only in exceptional
circumstances
Consequences

Minor First Aid Treatment

Medium Off-site medical treatment required

Serious Serious injury/illness (LTA)

Major Permanent disability

> 2 people seriously injured
Fatality / Death
Potential /actual breach of legal
requirements
 Importance Criteria
Consequences
Likelihood Minor Medium Serious Major

Almost Certain M M H H

Likely L M H H

Moderate L L M H

Unlikely L L M M

Legend : H = High Risk, M = Medium Risk, L = Low Risk

 To establish the severity and likelihood of harm
the following must be considered when
analyzing the activities

Ø  number of personnel exposed to hazard

Ø frequency and duration of exposure to
hazard
To ensure the risk assessment is accurate with
regard to Likelihood and severity of harm the
organization and the auditor can make reference to:

Ø  Legal Requirements
Ø  Material safety datasheets(MSDS)
Ø  Accident and incident records
Ø  Published investigations and details e.g. Asbestos
Ø  Employee Records – Reasons for absence, company
medical examinations
Ø  Environment monitoring results
MANAGEMENT OF RISK

Based on the results of the risk assessment the

organization must now decide if:
Ø  No action required

Ø  No additional controls required

Ø  Efforts to be made to reduce the risks

Ø  Work should not be started or continue until the
risks have been reduced or urgent action required
What is Risk Management?

“the term used to describe the various

operational and financial activities
aimed at eliminating the impact or
unplanned loss”
 Focal Points of
Risk Management
à  Identifying and monitoring an organization’s
exposures to possible loss;

à  Assessing the possibility (the risk) that each

identified exposure will result in losses and
then quantifying the likely financial and
operational impacts;

à  Controlling or reducing these risks through

administrative, procedural, and engineering
methods.
Schematic of
Risk Management Process
Exposure Risk
Risk
Identification Assesssment
Control (3)
(1) (2)

Risk Claims
Funding Management
(4) (5)
 Exposure Identification 1

à  Property, equipment, and facilities

à  Use of hazardous/toxic materials

à  Restricted use of assets and resources

à  Adherence to contractual/legal obligations

à  Health, safety, and availability of employees

à  Geographical and business competitiveness

à  Errors and omissions

Risk Assessment 2

Continuation of exposure of identification and

represents the quantification of the identified
exposures
Focus Issues on
Risk Control 3

è  Employee safety and health

è  Hazardous materials management
è  Property protection
è  Security systems
è  Disaster planning
è  Contractual liability
Risk Funding 4

ä  Represents a reactive activity

ä  Sets up financing for losses

after they have already
occurred

è  Commercial
insurance

è  Self-insurance
 Claims Management 5
à  Assigning clear responsibility for various
aspects of the claims process.

à  Supporting a comprehensive accident

investigation process

à  providing risk management monitoring for all

activities relating to claims
Elements of Risk Assessment:

1. Frequency – how often?

2. Severity – how much?
3. Reliability – how reliable is the
control?
Calculated Risks

HAZARD – The potential to cause harm

- a possible source of danger
RISK – the consequences and likelihood of
an unwanted event happening.
CONTROL MEASURES – a device/system
that manages the level of risks.
a.  Hazard – heptane - - very high flammable liquid
b.  Incident/event – spillage
c.  Consequence – spill, environmental, fire
d.  What is the likelihood?
heptane
Open – vapor goes out, flammable, health
problem, fire

Control of Hazard – cover and seal

Reliability is acceptable
SEVERITY OF EVENT – if no control in-place
1 – minor (small spill)
2 – serious (small contained fire)
3 – significant (fire with injury)
4 – major (injury, property loss, etc.)
SEVERITY OF INJURY - if no control in-place
1 – first aid
2 – medical treatment
3 – illness
4 – recordable
PROBABILITY that an unwanted event may occur

1 – possible (low)
2 – probable (medium)
3 – very probable (high)

PROBABILITY that control measure will fail

1 – remote, multiple control
2 – possible, single control
3 – probable, inadequate, no control
 SF – Severity Factor
FF – Frequency Factor
RF – Reliability Factor
Ex. Heptane (open tank)
RISK = 2 x 2 x 3 = 12 (open tank)
= 2 x 2 x 2 = 8 (cover)
= 2 x 2 x 1 = 4 (seal with tape)
Putting more control reduces the risks
 The Risk Assessment Process
Step 1- Establish and maintain a procedure

Step 2- Identify“all”OH&S hazards in the organisation,

over which the organisation has control and/or
influence over both on-site and off-site

Step3-Evaluate each risk in terms of frequency/probability

& severity using accepted risk assessment
techniques & criteria leading to establishment of
“significant”OH&S risk classification

Step 4- Establish“control”measures for the“significant”

OH&S risks
RISK RANKING
To determine the level of risk you must combine the likelihood of a
hazard occurring with its severity.
RISK = Likelihood x Severity

There are many different methods used to determine severity and

likelihood. The system adopted for this course is patterned after
the Lickert Scale which has five levels.
LIKELIHOOD SEVERITY
• Rare Insignificant
• Unlikely Minor
• Possible Moderate
• Likely Major
• Almost certain Catastrophic
 MEASURES OF LIKELIHOOD - 1

Level Descriptor Example Detailed Description

May only occur in exceptional
1 Rare circumstances (e.g. once in 20 years)
Could occur some time (e.g. once in 10
2 Unlikely years)
Might occur some time (e.g. once in 5
3 Possible years)
Will probably occur at some time
4 Likely (e.g. every year)
Almost Is expected to occur in many circumstances
5 (e.g. many times per year)
Certain
 MEASURES OF LIKELIHOOD - 2

Level Descriptor Example Detailed Description

Once in every 40 years / a 2.5% probability
1 Rare of occurrence in any 1 year
Once in every 10 years / a 10% probability
2 Unlikely of occurrence in any 1 year
Once in every 5 years / a 20% probability
3 Possible of occurrence in any 1 year
Once every 2 years / a 50% probability of
4 Likely occurrence in any 1 year
Almost At least once a year (impact should reflect
5 full year's effect of such a risk)
Certain
 MEASURES OF SEVERITY - 1
Level Descriptor Example Detailed Description
No injuries, no environmental damage, no operational/
1 Insignificant
financial or reputation loss
First aid treatment, on site releases of pollutant is
2 Minor immediately contained, minor operational/financial and
reputation loss
Medical treatment required , off-site pollutant release
3 Moderate causing moderate environmental damage, moderate
operational/financial and reputation loss
Extensive injuries (e.g.) permanent disability, loss of
production capability, off-site pollutant release causing
4 Major
major environmental damage, major operational/
financial and reputation loss
Fatality, off-site pollutant release causing severe
5 Catastrophic environmental damage, huge operational/financial and
reputation loss
 MEASURES OF SEVERITY - 2

Level Descriptor Example Detailed Description

1 Insignificant Equivalent to less than 1% of annual EBIT

2 Minor Between 1% and 5% of annual EBIT

3 Moderate Between 5% and 10% of annual EBIT

4 Major Between 10% and 25% of annual EBIT

5 Catastrophic Greater than 25% of annual EBIT

 Risk Assessment Matrix

SEVERITY FREQUENCY
1 2 3 4 5
INEVITABLE
(S) People Environment Operation
IMPROBABLE HIGHLY or ALMOST
or RARE UNLIKELY LIKELY LIKELY CERTAIN
Brief distruption in
first aid, negligible
5 operation but no
nuisance, damage, 5 10 15 20 25
SLIGHT stoppage of
discomfort reversible
operation
medical
10 treatment or on-site release of
Up to 15% users
MINOR more than 3 pollutant is
impacted 10 20 30 40 50
persons immediately
Up to US$ 1,000.00
involved but contained
no LTA
Extend outside
temporary Up to 50% users
15 the company
total impacted
MODERAT premises but not 15 30 45 60 75
disability, US$ 1,001.00 to
E interfere with
1 LTA US# 10,000.00
there activities
Permanent Extend outside Up to 85% users
20 Partial but partial impacted
MAJOR 20 40 60 80 100
Disability or stoppage of US$ 10,001.00 to
> 3 LTA normal activities US@ 100,000.00
Irreversible/
Total shutdown
25 Fatality Severe
Up to 100% users
CATASTR Permanent widespread 25 50 75 100 125
impacted
OPHIC Disability environmental
US$ 100,001 above
damage

Risk Min.= 5 Exceptional Everyday or

Once a Once a Once a
Risk Max. = 125 or Once in 3 Once a
Year Quarter Month
Years Week
Low Risk (5 to 20) = acceptable
Medium Risk (25 to 60) = Reduce to Reasonable practicable
High Risk (75 to 125) = Unacceptable

Risk (R) = Frequency (F) x Severity (S)

46
 RISK ASSESMENT MATRIX
Severity
Likelihood Insignificant Minor Moderate Major Catastrophic
1 2 3 4 5
Almost M H E E E
5 (5) (10) (15) (20) (25)
Likely M M H E E
4 (4) (8) (12) (16) (20)
Possible L M M H E
3 (3) (6) (9) (12) (15)
Unlikely L L M M H
2 (2) (4) (6) (8) (10)
Rare L L L M M
1 (1) (2) (3) (4) (5)
Legend:

L Low Risk – considered acceptable. No further action of RCMs are necessary

M Moderate Risk – relatively acceptable. However, further RCMs should be considered and existing RCMs should be monitored
H High Risk – unacceptable level of risk. RCMs must be developed and implemented in short to medium term
E Extreme Risk – unacceptable level of risk. RCMs must be immediately implemented or the risk eliminated (i.e case activity)
RISK MANAGEMENT STRATEGIES

RISK PREVENTION RISK CONTROL RISK AVOIDANCE

• Reduce Frequency • Response to • Non-investment

• Engineering Design Emergency • Change Process
• Reduce Severity • Change Product

RISK MITIGATION RISK ACCEPTANCE

• Transfer • Funding
• Immediate Recovery • Self-Financing
• Proper Reaction to
Unsafe Acts and
Conditions
 Risk Assessment Form
-
Task :

Rating (H/M/L)

Residual Risk
Initial Risk

Rating
Hazard Hazard Control Measures
Effect
 CONSEQUENCE INCREASING PROBABILITY
S
E 1 2 3 4 5
V
E Incident Happens Happens
People Assets Environment Reputation Never Heard of
R has Several Several
Heard Incident
I occurred Time Per Time Per
of in in
T in our Year in Year in
Y Industry Industry
Industry Industry Location
No
No No No
0 Damage
Injury Impact Impact
Slight
1 Slight Damage Slight Slight
Injury Impact Impact

Minor Minor
2 Minor Limited
Damage Impact
Injury Impact

Major Local Localized Considerable

3 Injury Damage Impact Impact

Single Major Major Major

4 Damage
Fatality Impact National

Extensive
5 Multiple Massive Major
Damage
Fatalities Impact International
MANAGE FOR CONTINUOUS IMPROVEMENT – is an
area where the risk is low and the existing H & S
arrangements is adequate

INCORPORATE RISK REDUCTION MEASURES –

where the frequency and severity is fairly high and
warrant specific risk reduction measures, such as the
use of procedures for controlling the risk or making
hardware improvement

INTOLERABLE – where the number of incidents and

the severity are clearly intolerable and warrant a H & S
Case
 Risk = Probability x Severity
0-4 Low (Manage for
improvement whereby
risk reduction is not
normally undertaken)
5 - 12 Medium (Incorporate risk
reduction measure to
demonstrate ALARP)
13 - 25 High (Intolerable and
needs changes to designs
and procedures)