Q42. Why is the risk assessment process so important?

The risk assessment process is important because:

• Occupational safety and health (OSH) legislation requires an effective risk assessment process.

• There is an ethical imperative.

• There is a financial cost to a poor risk assessment methodology.

Most OSH legislation is based upon the risk assessment process, where it is the duty of the employer to ensure that workplace hazards are identified and managed. In many jurisdictions, corporations, company directors and senior management can be held personally and / or collectively liable for serious breaches or failures in implementing the requirements of OSH law.[1]

In addition to legal requirements, there is also an ethical (or moral) imperative to managing risk. Employers create risk in the workplace, such as on the shop-floor with machinery, perhaps requiring employees to drive vehicles on the public roads or working with hazardous substances. A business that does the 'right thing' when dealing with all of its stakeholders enhances its reputation in business and within the community; conversely, in the event of a significant accident or incident, the potential loss of reputation can have a significant impact on an organisation's bottom line.

If employers do not understand how to manage workplace hazards or their obligations under OSH legislation, then almost certainly there will be a financial price to be paid in the event of an accident or incident. Extensive research carried out throughout the industrialised world shows time and again that accidents can be a significant cost to a business, often resulting in fines for breaches in health and safety law, costs due to lost production, compensation payments, court fees, replacement of staff and increased insurance costs. It is interesting to note that, where accidents or incidents occur and companies are fined, money is always available to correct the fault, in addition to paying fines and compensation after a court case. Surely it makes more financial sense to spend a usually much lesser sum to ensure that workplace hazards are identified and managed effectively as part of the normal business processes?

To illustrate this point, the following comments are taken directly from the Fatal Accident Investigation Report[2] for the BP Texas City refinery explosion, which occurred on 25 March 2005, killing 15 people and injuring over 170 people, as a result of a fire and explosion on the Isomerization plant (ISOM) at the refinery:

"... process safety knowledge and skills within management and the workforce were generally poor. This was most evident in the area of risk awareness, where hazard / risk identification skills appeared to be generally poor throughout the supervision and crew of the ISOM unit".

'The poor understanding of risk is also reflected in some of the Process Hazard Analyses

'There were no plans to systematically reduce safety risks in the refinery. No individual or group seems to have the accountability for driving process risk reduction across the site".

"Site management did not appear to be focused on understanding and reducing the highest risks".

'"When risks were identified, management and the workforce appeared to tolerate a high level of risk. The investigation team observed many examples of a high level of risk being accepted within the site".

So what was the cost? In October 2009, the US Department of Labor's Occupational Safety and Health Administration (OSHA) issued a record fine of $87.43M to BP Products North America Inc. for the company's failure to correct potential hazards faced by employees.

Obviously, this is an extreme example of a major accident with multiple fatalities, but the lessons for all organisations are clear. Understanding the process of hazard identification and the implementation of controls is fundamental to manage risks effectively is fundamental to ensuring the safety, health and welfare of employees, to meeting legal obligations and to avoiding unexpected and sometimes significant costs.

  • [1] For example, the UK Corporate Manslaughter and Corporate Homicide Act, 2007.
  • [2] BP's Fatal Accident Investigation Report, Isomerization Unit Explosion, Texas City, Texas, USA, available at bp.com/liveassets/bp_internet/us/ bp_us_english/STAGING/local_assets/downloads/t/final_report.pdf. Extracts are from Section 5.19.1 Risk Awareness and Section 5.19.2 Risk Acceptance.
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