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Risk Management as a Safety Program Tool


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A review of a systematic decision-making process to manage risk. The objective is to enhance mission performance by minimizing the unnecessary risks (probable losses) while taking the mission supportive risks (probable gains).

Published in: Economy & Finance, Business

Risk Management as a Safety Program Tool

  2. 2. OVERVIEW <ul><li>What is RM? </li></ul><ul><li>RM & Safety – The Connection </li></ul><ul><li>RM - The Essentials </li></ul><ul><li>The Integration Imperative </li></ul><ul><li>Growing an RM Initiative </li></ul><ul><li>How Leaders Can Lead </li></ul>
  3. 3. What is Risk Management? <ul><li>Systematic decision-making process </li></ul><ul><li>Focused on opportunity </li></ul><ul><li>With the objective of optimizing organization performance </li></ul><ul><ul><li>Minimize unnecessary risks </li></ul></ul><ul><ul><li>Take mission supportive risks </li></ul></ul><ul><li>All dimensions of risk considered </li></ul>
  4. 4. THE OPPORTUNITY-RISK RELATIONSHIP <ul><li>A goal of agencies is to enhance mission performance </li></ul><ul><li>Involves finding opportunities to excel </li></ul><ul><li>Risk management is the process used to enable opportunities by managing risks </li></ul>
  5. 5. RISK – THE TWO EDGED SWORD <ul><li>Source of all progress </li></ul><ul><ul><li>Must change to improve </li></ul></ul><ul><ul><li>Change involves risk </li></ul></ul><ul><ul><li>Contingencies demand risk taking </li></ul></ul><ul><li>Source of all loss </li></ul><ul><ul><li>Risks can lead to losses </li></ul></ul><ul><ul><li>Many risks are unnecessary </li></ul></ul><ul><ul><li>Risks must be detected and managed </li></ul></ul>Take all the good risks, none of the bad
  6. 6. WHY RISK MANAGEMENT NOW? <ul><li>Scope of risks </li></ul><ul><li>Speed of risks </li></ul><ul><li>Scrutiny of risks </li></ul><ul><li>Costs of risks </li></ul><ul><li>Overall significance of risks </li></ul>
  7. 7. THE SAFETY-RISK MANAGEMENT CONNECTION <ul><li>Agencies need to dramatically improve RM </li></ul><ul><li>Agencies need a source of RM expertise </li></ul><ul><li>Agencies need an organization to coordinate and integrate diverse risk issues </li></ul><ul><li>WHY THE SAFETY FUNCTION? </li></ul>
  8. 8. WHY SAFETY TAKES THE LEAD <ul><li>The safety process is closely linked to the RM process </li></ul><ul><li>Safety managers are experienced as consultants </li></ul><ul><li>Safety has the scope & background </li></ul><ul><li>Safety can (and should) adopt the RM process as its own </li></ul>
  9. 9. WHAT SAFETY CAN DO <ul><li>Recommend a policy and management framework </li></ul><ul><li>Provide RM process expertise </li></ul><ul><li>Provide RM training </li></ul><ul><li>Assist top management in prioritization of risk issues </li></ul><ul><li>Advise on risk communication </li></ul>
  10. 10. TIME TO EMULATE THE CORPORATE WORLD ? VP RISK MANAGEMENT Safety * security * fire * health * liability * product *disaster planning/control * AGENCY RISK MANAGEMENT COORDINATOR Safety * security * fire * health * liability * product *disaster planning/control *
  11. 11. THE ARMY’S EVOLUTION <ul><li>1980 - The Army Safety Center explores RM as a means to enhance effectiveness </li></ul><ul><li>1985 - Chief of Staff, Army approves Army wide application of RM – Safety coordinates </li></ul><ul><li>1993 - Director of Army Safety adopts RM as the safety management process </li></ul><ul><li>2005 – Army Safety Center name changed to Combat Readiness Center. Charter is all sources of loss </li></ul>
  13. 13. VISION <ul><li>Macro: Every Leader & Employee Manages Risk in All They Do... On- & Off-Duty </li></ul><ul><li>Micro: </li></ul><ul><li>On-Duty - Every Organization Manages Normal Risk Profile to Enhance Mission Performance </li></ul><ul><li>- Unique Operations Identified & Assessed </li></ul><ul><li>Off-Duty - Every Individual Applies Risk Management Process to Activities </li></ul>
  14. 14. TRANSITION FROM COMPLIANCE TO PERFORMANCE MINDSET <ul><li>Compliance mindset </li></ul><ul><li>Follow the rules </li></ul><ul><li>Performance mindset </li></ul><ul><ul><li>Follow the rules </li></ul></ul><ul><ul><li>Add new rules as needed </li></ul></ul><ul><ul><li>Deviate from rules when the mission dictates </li></ul></ul>
  15. 15. 4 KEY RM PRINCIPLES <ul><li>1. Accept no unnecessary risks. </li></ul><ul><li>2. Make risk decisions at the appropriate level. </li></ul><ul><li>3. Accept risks when benefits outweigh costs. </li></ul><ul><li>4. Integrate RM into doctrine and planning at all levels. </li></ul>
  16. 16. BUT.... NOBODY TAKES “UNNECESSARY” RISKS? <ul><li>If all the hazards that could have been detected have not been detected then unnecessary risks are being accepted. </li></ul>The single greatest advantage of RM over traditional risk management is the consistent detection of 50%+ more hazards. 1. Accept No Unnecessary Risks
  17. 17. 2. Make Risk Decisions at the Appropriate Level <ul><li>Factors below become basis of a decision- making system to guide leaders </li></ul><ul><li>Who will answer in the event of a mishap? </li></ul><ul><li>Who is the senior person at the scene? </li></ul><ul><li>Who possesses best insight into the full benefits and costs of a risk? </li></ul><ul><li>Who has the resources to mitigate the risk? </li></ul><ul><li>What level makes the most operational sense? </li></ul><ul><li>What level makes these types of decisions in other activities? </li></ul><ul><li>Who will have to make this decision in combat operations? </li></ul>
  18. 18. WHAT HAPPENS WHEN AN ORGANIZATION STOPS TAKING RISKS? WEBSTER: “ BUREAUCRACY : A system of administration characterized by lack of initiative and flexibility, by indifference to human needs or public opinion, and by a tendency to defer decisions to superiors or to impede action with red tape.” MAINTAINING A BOLD, RISK-TAKING ORGANIZATION IS ALWAYS A CHALLENGE IN NORMAL TIMES. RM HELPS. 3. Accept Risks When Benefits Outweigh Costs.
  19. 19. 4. Integrate RM Into Processes and Planning At All Levels. Operational Process Operational Process Operational Process Loss Control Staff Injects Operational Leaders Add-On Loss Control Occurs Within The Process This is the one we want!!
  20. 20. THE RM 6-STEP PROCESS 1. Identify the Hazards 2. Assess the Risks 3. Analyze Risk Control Measures 4. Make Control Decisions 5. Implement Risk Controls 6. Supervise and Review
  21. 21. Step 1 - Identify the Hazards Process: Emphasizes hazard analysis tools. Adds rigor and early detection. Output : Significant improvement in the detection of hazards (50%+) . Preventive, not reactive 1. Identify the Hazards 2. Assess the Risks 3. Analyze Risk Control Measures 4. Make Control Decisions 5. Implement Risk Controls 6. Supervise and Review
  22. 22. Step 2 - Assess the Risks Process: All hazards evaluated for mission or activity impact. Root causes determined and risk levels assigned. Output: Personnel know the priority risk issues of the organization and of their function. 1. Identify the Hazards 4. Make Control Decisions 3. Analyze Risk Control Measures 5. Implement Risk Controls 6. Supervise and Review 2. Assess the Risks
  23. 23. Step 3 - Analyze Risk Control Measures <ul><li>Process: Comprehensive risk control options developed on a worst-first basis. </li></ul><ul><li>Output: A full range of cost effective, mission supportive, risk controls for the decision-maker. </li></ul>1. Identify the Hazards 2. Assess the Risks 3. Analyze Risk Control Measures 4. Make Control Decisions 5. Implement Risk Controls 6. Supervise and Review
  24. 24. Step 4 - Make Control Decisions <ul><li>Process: Gets risk decisions to the right person, at the right time, with the right support. </li></ul><ul><li>Output: Personnel know their decision-making authority and limitations. Accountability is established </li></ul>1. Identify the Hazards 2. Assess the Risks 3. Analyze Risk Control Measures 4. Make Control Decisions 5. Implement Risk Controls 6. Supervise and Review
  25. 25. Step 5 - Implement Risk Controls <ul><li>Process: Leaders lead, operators involved, accountability known. </li></ul><ul><li>Output: Controls approved by decision-maker are implemented. </li></ul>1. Identify the Hazards 2. Assess the Risks 3. Analyze Risk Control Measures 4. Make Control Decisions 6. Supervise and Review 5. Implement Risk Controls
  26. 26. Step 6 - Supervise and Review <ul><li>Process: Measures mission effectiveness and direct indicators of risk. </li></ul><ul><li>Output: Near real time status established. Proactive, not reactive. </li></ul>1. Identify the Hazards 2. Assess the Risks 3. Analyze Risk Control Measures 4. Make Control Decisions 5. Implement Risk Controls 6. Supervise and Review
  27. 27. USING THE 6-STEP PROCESS THE RISK MANAGEMENT CONTINUUM PLANNING OPERATIONS AFTER-ACTION -Deliberate RM -Detailed Hazard ID -Integrated -Largely Time-Critical -Inspections -Interviews -Highly Decentralized -Assess Indicators -After action reviews -Failure reports -Feedback to Planning We try to get most RM done here But continue the process here and here
  28. 28. USING THE 6-STEP PROCESS LEVELS OF EFFORT Little: - Time - Complexity - Risk Lot of: - Time - Complexity - Risk “ TIME CRITICAL” “DELIBERATE” “STRATEGIC” RM is applied proportionate to operational complexity, criticality, and risk!
  29. 29. <ul><li>Why integration is critical? </li></ul><ul><li>12 Strategies for RM integration. </li></ul><ul><li>The importance of pace. </li></ul>Integrating the RM Process Overview
  30. 30. WHY INTEGRATION IS CRITICAL? <ul><li>Integration: </li></ul><ul><ul><li>Forces balancing of loss control and other mission needs </li></ul></ul><ul><ul><li>Captures more of the knowledge and experience of large numbers of operators </li></ul></ul><ul><ul><li>Reduces the number and diversity of references needed to do the job right </li></ul></ul><ul><ul><li>Eliminates redundancy and gaps between loss control functions </li></ul></ul><ul><ul><li>Strengthens accountability </li></ul></ul><ul><ul><li>Reduces costs and workloads (in plans, materiel development cycles, etc.) </li></ul></ul>
  31. 31. THE TWELVE STRATEGIES FOR PROGRAM INTEGRATION <ul><li>Accountability </li></ul><ul><li>Teaming </li></ul><ul><li>Partnership </li></ul><ul><li>Integrate in Training </li></ul><ul><li>Risk Decision Points </li></ul><ul><li>Organization & Policy Structure </li></ul><ul><li>Employee Activities </li></ul><ul><li>Process Integration </li></ul><ul><li>Direct Change </li></ul><ul><li>Gain a Champion </li></ul><ul><li>Integrate in Strategic Planning </li></ul><ul><li>Integrate into Measurement </li></ul>
  32. 32. THE IMPORTANCE OF PACE <ul><li>Don’t use the shotgun </li></ul><ul><li>Don’t get out in front of the organization - too far </li></ul><ul><li>Don’t “inspect-in” RM </li></ul><ul><li>Do focus on “targets” </li></ul><ul><li>Do expect crawl, walk, run </li></ul><ul><li>Patience, patience, patience </li></ul>
  33. 33. RM MATURATION <ul><li>Approach </li></ul><ul><li>Strategy </li></ul><ul><li>Available Tools </li></ul>Overview
  34. 34. APPROACH <ul><li>Top-Down </li></ul><ul><li>Strong Senior Leader Backing </li></ul><ul><li>Decentralized Implementation </li></ul><ul><li>Moderate Implementation Tempo </li></ul><ul><li>Safety Lead Role for Cross-Functional Implementation </li></ul>
  35. 35. RM Strategy Elements <ul><li>Education and Training </li></ul><ul><li>Tools and Information </li></ul><ul><li>Continuously improve RM support </li></ul><ul><li>Integrate into loss control functions </li></ul><ul><li>Integrate into all operations - - </li></ul><ul><li>on- and off-duty </li></ul><ul><li>Provide Oversight and Sustainment </li></ul>
  36. 36. <ul><ul><li>Short Term </li></ul></ul><ul><ul><ul><li>Executive Level - Senior Leaders </li></ul></ul></ul><ul><ul><ul><li>Applications & Integration - Focal Points/Planners </li></ul></ul></ul><ul><ul><ul><li>Essentials - Mid-level Managers/Supervisors </li></ul></ul></ul><ul><ul><ul><li>Fundamentals - “Working” Level </li></ul></ul></ul><ul><ul><ul><li>Introduction - All </li></ul></ul></ul><ul><ul><li>Long Term - Institutionalized into all Training & Education </li></ul></ul>RM Strategy Education and Training Options
  37. 37. <ul><ul><li>Intended to serve as single source for RM and related information </li></ul></ul><ul><ul><li>Linked to other agency RMIS/RM sites </li></ul></ul><ul><ul><li>Provides crosstell capability </li></ul></ul><ul><ul><li>If you have something to share—Share it! </li></ul></ul>RM STRATEGY A RISK MANAGEMENT INFORMATION SYSTEM (RMIS)
  38. 38. <ul><li>What is it? </li></ul><ul><ul><li>Automated risk assessment tool </li></ul></ul><ul><ul><li>Walks user through six-step RM assessment </li></ul></ul><ul><ul><li>Particularly useful for assessing new initiatives </li></ul></ul><ul><ul><li>Can do static/situational assessments too </li></ul></ul>RM STRATEGY TOTAL RISK ASSESSMENT & CONTROL SYSTEM (TRACS)
  39. 39. <ul><li>The leader’s role will be a decisive factor in the success or failure of RM </li></ul>
  40. 40. RM Leadership Opportunities <ul><li>1. Commit to Breakthrough Improvement </li></ul><ul><li>Objectives: Put improvement of risk performance (control-opportunity) on a competitive level with other important mission concerns. </li></ul><ul><li>2. Set Goals & Objectives </li></ul><ul><li>Objectives: Establish periodic RM performance and programmatic goals. </li></ul>
  41. 41. RM Leadership Opportunities <ul><li>3. Set a Personal Example </li></ul><ul><li>Objectives: To assure credibility of the RM process through personal behavior. </li></ul><ul><li>4. Build an Aggressive Opportunity Mindset in the Organization </li></ul><ul><li>Objectives: Create an organization as conscious of the opportunity aspects of RM as it is the risk reduction. </li></ul>
  42. 42. RM Leadership Opportunities <ul><li>5. Induce Loss Control Community Functional Integration </li></ul><ul><li>Objectives: Build increasing cooperation and integration of the loss control community. </li></ul><ul><li>6. Establish an RM Management Structure </li></ul><ul><li>Objectives: Provide the necessary leadership and staff resources to adequately guide the RM process. </li></ul>
  43. 43. RM Leadership Opportunities <ul><li>7. Resource RM Activities </li></ul><ul><li>Objectives: Allocate resources to RM (control-opportunity) at a level it can competitively justify. </li></ul><ul><li>8. Heat Shield Subordinates </li></ul><ul><li>Objectives: Protect subordinates who have taken prudent, mission supportive risks, but experienced severe losses, from negative consequences. </li></ul>
  44. 44. RM Leadership Opportunities <ul><li>9. Detect & Correct Gambling </li></ul><ul><li>Objectives: Develop an organization in which risk “gambling” is deterred even when the gambler “wins”. </li></ul><ul><li>10. Use the Power of Question </li></ul><ul><li>Objectives: Use pointed RM questions to induce RM activity and culture change. </li></ul>
  45. 45. RM Leadership Opportunities <ul><li>11. Regularly Monitor RM Progress </li></ul><ul><li>Objectives: Periodically assess a set of data that effectively monitors organization RM status. </li></ul><ul><li>12. Exploit the RM Value of Major Mishap Reviews </li></ul><ul><li>Objectives: Consistently induce consideration of the RM implications of mishaps. </li></ul>
  46. 46. HOW TSI CAN HELP <ul><li>Consult on agency RM integration </li></ul><ul><li>Recommend and draft RM policy guidance </li></ul><ul><li>Conduct large scale training programs </li></ul><ul><li>Conduct train-the-trainer programs </li></ul><ul><li>Develop and/or recommend sources of RM job aids and tools </li></ul><ul><li>Facilitate RM applications </li></ul>A PROVEN RM TRACK RECORD