Critical risk and control frameworks - James Ritchie

Critical Risk and Control
Frameworks
Where do I stand in
increasing effective
implementation ?
MESS August 2019
Focused Solutions.

Company Overview
Risk Research and Advisory,
Specialists in non-financial risk
James Ritchie FGIA
Director & Principal Consultant
m: 0455 089 704
w: www.mindfulrisk.com.au
e: james.ritchie@mindfulrisk.com.au
Mindful Risk. Focused Solutions.

Presenter Bio
Experience
• More than a decade of experience in OC and UG Coal
operations in NSW and QLD
• Various senior WHS roles.
• NSW Government , whole of government Executive WHS
role, reporting directly to Minister.
• TAFE teacher , Advanced Diploma WHS.
• Co- Author Work Health and Safety.
• ( McGraw Hill Publishers)
• Non Executive Director ( NFP and Mining Services)
• Director , Mindful Risk since 2015
Qualifications
• Bachelor of Resource and Environmental Management
• Graduate Certificate in Applied Risk Management
• Diploma OHS
• TAE
• Chartered Risk and Governance Professional, The
Governance Institute of Australia

Learning
Objectives
To provide participants with the skills and
knowledge to:
• Identify and address Complexity Risk in CCM
Frameworks.
• Recognise and respond to Bias in CCM Frameworks.
• Evaluate and apply appropriate Key Risk Indicators
and Risk Tolerances to effectively assess performance
of CCM Frameworks.

Risk: The effect of uncertainty on objectives.
Risk Management: Activities, systems and processes
used to direct and control an organization in relation
risk.
Critical Control: A control that is crucial to
preventing the event or mitigating the consequences
of a Material Unwanted Event (MUE).
Key Risk Indicator (KRI): A metric which provides an
early warning signal of elevating risk exposure.
Risk Tolerance: The degree of variability that an
organization is willing to accept in relation to a specific
risk or category of risk.
Source: ICMM Guide 2015 & ISO3100:2018
Definitions

Introduction
This presentation is designed to deliver:
• Practical guidance on 3 focus areas that I believe will improve
management of critical controls and reduce blind spots for you as a
manager.
• Honest advice from my journey of success and failure in developing
CCM Frameworks as an employee and an external advisor.
What it won’t deliver:
• A detailed list of steps to implementing a CCM Framework.
• An analysis, deconstruction or critique of the benefits or limitations of
CCM.

Critical Control
Frameworks
A Brief History
Known controls for known risks not effectively
implemented.
Absence of systems to assure effectiveness of known
controls.

MSAC Fatality Review
Resource Regulator Compliance Priorities
Maintenance of Competence Scheme
Giving Rise to
Initiatives in
Australia
2
1988-90 Cullen
Inquiry (UK)
3
2015 ICMM Guide Developed
1
1988 Piper Alpha (UK)

Bow Tie Analysis
Adopted by Royal Dutch Shell 1990

Why Adopt
CCM Frameworks?
To identify and monitor specific risk controls designed to
prevent High Consequence , Low Probability events.
Improve management of Principle Mining Hazards.
Provide a system for controls assurance which aligns to
legislative “Due Diligence” obligations in WHS Act.
TO PREVENT MINE DISASTERS

Focus Areas That
Can Result In
Effective
Implementation 1. Managing Complexity Risk
2. Addressing Bias
3. Developing KRI
& Tolerances

Modern mines are complex
systems involving
interacting parts and
relationships. Many of
these relationships are not
obvious or well
understood.
4
.
Reductionism
or Holism?
3
.
“Chronic Unease”
This complexity is a
category of risk itself.
2
.
Risk Management is a
best estimate of
future matters.
1
.
“Unexpectedness”
Complexity Risk arises
from the effect of this
“Unexpectedness” on
CCM Frameworks.
Risk is the effect of
uncertainty on
Objectives
Complexity
Risk
Understanding and
addressing complexity is
vital to ensuring that a CCM
Framework is successful.
Failing to address
complexity will result in an
ineffective CCM Framework
that elevates risk exposure.

Complexity Risk
Reductionism

Complexity Risk
Holism
Howard Gardner, Harvard Business School
• Complex systems as networks of interconnected
relationships featuring multiple “actors”. The relationships
between these actors may not be direct or obvious.
• The focus of Holism is on understanding relationships
between “actors” rather than separating systems down into
component parts. Viewing a complex system Holistically.
• Complexity science is the application of iterative, scientific
based approaches to complex business and process and
systems.
HOLISM VS REDUCTIONISM

Navigating
Complexity Risk
• Approach the CCM process with critical thinking and a sense of pathological unease
• Effectively deploy Bow Tie Analysis to “Tell the Risk Story” and to display relationships
between controls.
• Focus on understanding relationships and interdependencies between processes and
systems, rather than reducing only reducing a system to component parts.
• As a Statutory Official, strive to identify and influence the appropriate interdependencies and
relationships instead of attempting to control the whole system.
SAVE YOUR SANITY!
• Broaden engagement with your commercial function and supply chain, including your
suppliers of parts and consumables.

Addressing
Bias
In a complex environment, humans have a propensity to look towards
the ease of simplicity. This bias is known in psychological terms as
anchoring bias. This can be defined as the human tendency to rely on
the first piece of information offered, that is, ‘the anchor’ when making
decisions.
Tversky and Kahneman, 1974
Israeli/American psychologists

“Mary Smith is an excellent reviewer of children’s literature.
There are also others who do literature reviews generally, such as Tom Black, Joe
White and Joan Green”.

2
Broaden the engagement
group for developing CCM
3
Develop a CCM Skills
Matrix
1
Acknowledge it and
identify impact
Steps to Address
Bias In CCM

Steps to
Address Bias in
CCM
1. Acknowledge its existence and identify its impact (in every aspect of decision making and
risk management, particularly in relation to CCM).
2. Engage a more diverse audience in the process of CCM framework development – Don’t
think purely wages staff, consider supply chain, commercial, stores.
3. Develop a CCM skills matrix ( the same approach as used by Boards of Directors) to
identify, engage and invest in a more diverse pool of participants for CCM risk
management activities.

Measure Key Performance
Indicator (KPI)
Key Risk Indicator
(KRI)
Action to be taken Risk
Tolerance
Percentage of
CCSA reviews
completed against
annual target
( Minimum should
be 25% completion
each quarter)
25% of annual
target completed
each FY quarter
<15% of annual
target completed
each quarter
If <15% completion
reported , PON
EMT to create
remedial action
plan.
>25% per quarter
15-25% per quarter
<15% per quarter
Percentage of CCSA
reviews completed
without any serious
non-compliances
identified
>90% of CCSA
reviews completed
successfully
confirming all
critical controls
sustainable
>10% of CCSA
reviews identify
serious non-
compliances
If >10%
noncompliance
reported, at risk
work to
immediately cease
until remedial
action completed
>90% CCSA success
0-5% CCSA non-
compliance
5-10% CCSA non
compliance
Serious Injury and
Fatality (SIF) rate :
Rate of Serious
Injury and Fatality
incidents or near
misses reported for
each million hours
worked
<1 per million man
hours worked
An increase in this
rate of 5% or more
would trigger
immediate action.
This is linked to the
accounting STD
where 10%
deviation =A
Material Change
Immediate action
required to
investigate and
create remedial
action plan to
prevent recurrence
0-0.5 reported rate
0.5-1 Immediate
action
>1 Activity ceases
immediately
Developing
Effective
Indicators
Key Risk Indicator (KRI): A metric which
provides an early warning signal of elevating
risk exposure.
Risk Tolerance: The degree of variability that an
organization is willing to accept in relation to
a specific risk or category of risk.

KRI & Risk
Tolerance for CCM
• Adopt the techniques associated with addressing
Complexity Risk and minimising the effect of Bias to
elevate the quality and accuracy of data gathered by
CCM Frameworks.
• Transparent, fearless (and documented) discussions at
an Executive and Board level to establish KRI and risk
tolerance for CCM.
• Consider the establishment of a risk and compliance
steering committee (Large Operation) or at least ensure
effective ownership of critical risks and critical
controls(Small Operation).

In
Summary
1. Identifying and managing complexity risk allows CCM Frameworks to yield higher quality
data.
2. Recognizing and addressing bias provides improved foresight over the range of uncertainty
and variability in data gathering and decision making in relation to CCM.
3. Developing effective KRI and Risk Tolerances provides the opportunity to establish early
warning signs of elevated risk exposure in CCM Frameworks.

“A hazard is a matter of fact while risk is a conclusion drawn"
Bernard Rohmann 2002

Questions?
James Ritchie FGIA
Director & Principal Consultant
• m: 0455 089 704
• w: www.mindfulrisk.com.au
• e: james.ritchie@mindfulrisk.com.au

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