CHAPTER 1
1. INTRODUCTION TO SAFETY MANAGEMENT SYSTEMS
1.1 Introduction
In recent years, there have been a great deal of research attention to understand how industrial
workplace accidents happen, particularly within the high-risk industries including transportation, oil
and gas, power, construction, manufacturing and mining. It is now generally accepted that the causes
of industrial accident are multiple and interrelated and does not relate to only human error. Recent
studies have observed that the human is only the last link in the accident chain, and that changing
people might not contribute greatly to preventing accident. On the contrary, addressing the underlying
organisational accident causal factors could greatly improve organisational safety. These observations
are responsible for the emergence of the term “organisational accident” in the 1990, since most of the
links in an accident chain are under the control of the organisation. Since the greatest threats to
workplace safety originate in organisational issues, making the system even safer will require action by
the organisation. After conducting extensive research both national and international workplace safety
regulating bodies have concluded that the most efficient way to make the workplace even safer will
be adoption of a systems approach to safety management, through the implementation of a safety
management system (SMS).
Whereas safety management is managing business activities and applying principles, framework,
processes to help prevent accidents, injuries and to minimise other risk, a safety management system
is a business-like approach to safety. It is a systematic, explicit and comprehensive process for
managing safety risks. As with all management systems, a safety management system provides for goal
setting, planning, and measuring performance. A safety management system is woven into the fabric
of an organization. It becomes part of the culture, the way people do their jobs. A safety management
system will provide an organisation with the capacity to anticipate and address safety issues before
they lead to an incident or accident. A safety management system also provides management with the
ability to deal effectively with accidents and near misses so that valuable lessons are applied to improve
safety and efficiency. The safety management system approach reduces losses and improves
productivity.
Implementing safety management systems should not been seen as imposing an additional layer of
regulatory and safety oversight on an organisation/industry. Safety management systems incorporate
the basic safety process, into the management of an organisation. The traditional safety approach
depended on a safety officer (or department in a larger organization) independent from operations
management, but reporting to the Chief Executive Officer or Chief Operating Officer of the
company. The safety officer or department had, in effect, no authority to make changes that would
enhance safety. The safety officer or department’s effectiveness depended on the ability to persuade
management to act. A safety management system on the other hand holds managers accountable for
safety related action or inaction.
The safety management system philosophy requires that responsibility and accountability for safety
be retained within the management structure of the organisation. The directors and senior
management are ultimately responsible for safety, as they are for other aspects of the organisation.
This is the logic that underlies recent safety management system initiatives. This approach requires an
organisation to identify its ‘accountable executive’. This is the person who has financial and executive
control over an entity subject to regulations. The safety management system approach ensures that
authority and accountability co-exist.
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 1
1.2 Historical perspective to the development of SMS
This section provides a historical perspective of what the “world before SMS” looked like. It discusses
the safety principles that prevailed and the disciplines that nurtured the prevailing safety principles,
from which SMS would eventually evolve.
1.2.1 System Safety
On May 25 1961 President John F. Kennedy stood before the United States Congress, and proposed
that the nation should commit itself to achieving the goal of landing a man on the Moon and
returning him safely to Earth before the decade was out. This goal was ambitious, as the technology
necessary to support achievement of the goal was brittle.
From the point of view of technology design, early space exploration in 1950s had built on the
“fly-fix-fly” approach to aircraft design safety then prevalent in aviation: fly the aircraft, fix aircraft
design problems after a safety mishap occurred, and continue flying the “fixed” aircraft until the next
mishap, when the “fix-fly-fix” cycle would be reinitiated thus engaging in a vicious circle of sorts.
President Kennedy’s call allowed a grass roots movement, incipient among the engineering
community in the 1940s and which had gained momentum during the 1950s, to become established
in the aerospace industry in the early 1960’s. The movement, system safety, was effectively a shift
towards designing and manufacturing safer technology. By applying a formal and proactive approach
to design and manufacture, a major milestone and a turning point in aerospace technology were
achieved.
System safety is an engineering discipline, with the objective of making technical systems safe by
“designing” safety into the technical system during its development: safety is essentially built into the
system to cover the entire system life cycle, including manufacturing, testing, operations and
maintenance. System safety’s credo can be summarised in three words: safety by design.
The contribution of system safety to the aerospace industry development has been nothing short
of phenomenal. System safety was a major contributor to the realisation of President Kennedy’s dream
of landing humans in the Moon. More relevant to this historical perspective, system safety became
aviation’s safety textbook for the ensuing 30 years, and the significant progress in technology
accomplished by aviation between the 1960s and the 1980s was in no small degree due to the
contribution of system safety.
System safety did not remain within aviation, and travelled across transportation inter-modal and
inter-industry boundaries, becoming the safety framework for several industries to the present
day. A point of historical perspective relevant to upcoming discussions on the development of SMS
is that the notions of hazard, risk and mishap are a legacy (perhaps the legacy) of system safety.
System safety proposes a four-step architecture of intervention, based on hierarchical
precedence:
•
•
•
Design for minimum risk: eliminate the safety concern (the hazard) through design
If unable, incorporate safety devices: include design that automatically prevents the safety
concern from becoming a mishap.
If unable, provide warning devices: include devices that alert personnel to the safety concern
in time to take remedial action, and
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 2
•
If unable, develop procedures and training: provide instructions so that personnel will use
information available to control the safety concern
The first conclusion to draw from this historical perspective is two-fold. Firstly, as an
engineering discipline, system safety was conceived for application to, and improvement of, technical
systems (an aircraft, a ship, an engine, etc.) exclusively. Secondly, within the strong engineering notion
integral to the fabric of system safety, the human operator is considered a liability to safety, due to the
potential for human mishandling or mismanagement of technology (human error) during actual
operations. This is evident in the hierarchical precedence of the four steps of intervention outlined in
the previous paragraph.
1.2.2 Human Factors
Towards the end of the 1970s, a perception of diminishing returns regarding safety through
design, and system safety’s contribution to further safety improvement, had established within the
aviation industry, and concern about human error in aviation operations was gaining headlines.
Human Factors (with caps), a multi-disciplinary field of endeavour that had its origins – evolving from
ergonomics – after World War II, and that had so far experienced a lukewarm reception in aviation,
became a centrepiece of aviation safety during the 1980s, the 1990’s and well into the first years to the
21st Century. Like system safety, Human Factors also travelled across transportation inter-industry
boundaries, and was adopted by other transportation industries, albeit not so quickly, enthusiastically
and broadly as in aviation.
Human Factors is a field of endeavour concerned with optimising the relationship between people
and the operational environment by the systematic integration of human sciences and systems
engineering. It is a scientific approach that deals with what people do in operational contexts, and
aims at optimising operational human performance during transportation service delivery activities,
thus contributing to the safety and efficiency of transportation operations.
Four scientific disciplines converge into the core of Human Factors: ergonomics (human-centred
design of displays and controls), systems engineering (integration of system components, with
operators’ requirements as foremost consideration, to generate an homogeneous and functional
entity), physiology (fatigue, stress, noise, temperature, pressure, vibration and similar human
performance related considerations that may affect transportation operations), and psychology, which
branches out into social, organisational and cognitive psychology.
The second conclusion to draw from this historical perspective is also two-fold. First, as
multidisciplinary field of endeavour, Human Factors was conceived for application to, and
improvement of, socio-technical systems (systems encompassing people and technology, in which people
must actively interact with technology to achieve the system production goals). Second, within the
multi-disciplinary notion of Human Factors, and in particular under the auspices of organisational and
cognitive psychology, the human operator is considered an asset to safety, due to the ability of humans
to “think on their feet” and provide response to safety deficiencies and operational situations
unforeseen by design and planning. Closely linked to this consideration, human error, which had long been
maligned as “cause” of safety breakdowns and had therefore been the stop point of the safety investigation, is considered
a symptom of deficiencies deep in the architecture of the system rather than a cause, and is the starting point of the safety
investigation. Under Human Factors, operational error is considered much in the same way as the
medical science considers fever: an indication of problem(s), but never the problem(s) itself.
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 3
1.2 3 Business management
A federal law of the United States provides the third and last milestone in this historical
perspective: the Aviation Deregulation Act of 1978, signed by President Jimmy Carter, which
introduced the notion of free market into commercial aviation. Deregulation has been praised and
demonised in similar proportions and with equal fervour and conviction among different quarters.
Whatever the case may be, the historical fact remains that deregulation is the reason why business
management practices were introduced into aviation safety: organisations that throughout their history
had been subsidised by governments, directly or indirectly, had now “to earn their place under the
sun”.
The integration of business management practices into aviation safety forced the safety community
into soul-searching and re-evaluation of long-established safety dogma. So far, the paradigmatic safety
goalpost in aviation (and in all transportation industries) had been the absence of low frequency, highseverity events: safety was viewed as freedom from accidents (or freedom from harm). Under the
influx of business management thinking, the safety community began prospecting higher frequency,
lower severity events in search of alternative safety goalposts. Most important, business management
led the safety community to explore ways to give sense to the safety dollar: was safety truly the first
priority of the organisation, or must the safety return be worth the safety investment?
The third and last conclusion to draw from this historical perspective is also two-fold. First, the
notion that “you cannot manage what you cannot measure” led to the development of multiple
sources of organisation-specific data acquisition during operations. So far, the limited data points
provided by accident investigation (and eventually serious incident investigation) as sole sources of
safety data had generated valuable information for accident prevention, but did not generate data in
volume enough for safety management. This forced, in the early days of business management, data
aggregation (in many cases at regional and even worldwide level) to obtain data volume, thus removing
specificity and therefore relevance of the data to a single organisation. Second, the fact that data
acquisition must not be random, and that safety data collection must be performed by reference to
defined parameters, which led to the development safety performance indicators and safety
performance targets.
In summary and conclusion, “before SMS”, the safety world of most industries had progressed along
parallel tracks, under the piecemeal guidance provided by three defined but unmerged interventions:
system safety, Human Factors, and business management. At the dawn of the 21st Century, the three
parallel tracks began converging towards an intersection or point of confluence, and the challenge
ahead for industries became the coordinated integration of the three interventions into a coherent,
intact whole. The result of this integration would be a new discipline named safety management, and the
vehicle for the operationalisation of safety management would be SMS.
1.3 Truth and Misconceptions – What an SMS is and is not
Managing safety is really about managing safety risk, which means trying to prevent bad things from
happening, or if something does go wrong, or slips through the cracks, trying to minimise the
consequences of the event. Safety management is about accepting that things will go wrong and about
reactively, proactively and predictively controlling risks to a level that is acceptable. It can help you
predict potential risks, take appropriate action and measure how well risk controls are working. It can
give you the business information you would want to manage risks in other areas such as finance or
productivity.
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 4
SMS implementation will change the way an organisation operates. That is, the main game will still
be operating the business; but SMS provides an underpinning structure which enables organisations
to manage risks in their operation and, when implemented effectively, improve the effectiveness of
the operations. Safety management systems are not Quality Management Systems (QMS), although
they do share many of the same features and capabilities such as performance targets, reporting,
governance and performance monitoring. The objective of a QMS is the control of processes to
achieve predictable and desirable results that meet with the customer’s and organisation’s
requirements. Whereas the objective of an SMS is to monitor and control operational risks to improve
safety performance.
If an organisation has a functioning QMS, then its staff will already be familiar with reporting and
feedback and, most importantly, they’ll already be on their way to an effective reporting and safety
culture - which is vital to the implementation and sustainability of your SMS. Finally, SMS is not a
manual, a database, or a reporting process; these are all tools. It is how safety is managed day to day
and becomes part the organisation’s culture. It penetrates into the organisation’s processes and
activities and it shapes critical management thinking. It is a vital management tool where the staff are
the eyes and ears, the safety group is the heart and management is the decision-making ‘brain’ of the
system.
1.4 Why a Safety Management System
For all workers and organisations, safety should be an expressed value. Recent research indicates that
organisations committed to safety excellence achieve success through a strong SMS. Many benefits
are associated with the development and implementation of an SMS. One of the most important
benefit is that, an effective SMS can help prevent injuries and property loss, reduce costs, and support
due diligence. Developing a proactive approach to safety through an SMS and its essential elements
results in long-term financial and cultural benefits. Generally, organisations adopt an SMS due to three
main imperatives, that is, ethical, legal and financial.
There is an implied moral obligation placed on organisations/employers to ensure that work activities
and the place of work to be safe, there are legislative requirements defined in just about every
jurisdiction on how this is to be achieved and there is a extensive body of research which demonstrates
that effective safety management (which is often determined through lagging indicators such as the
reduction of risk in the workplace) can reduce the financial exposure of an organisation by reducing
direct and indirect costs associated with accident and incidents.
1.4.1 Moral Obligation
Employers have a moral obligation to keep their employees safe from harm, for the sake of the
employees and their families, as well as for the sake of the continued success of the organization. After
all, organisations rely on people to keep their operations going. Therefore, organisaions have a moral
duty to keep the workplace safe for the employees. If the workplace is safe and the workers are feeling
safe they will love to come to work and it will be a safer and happy place to work. This will in turn
not only create an environment where everyone wants to come but will also increase the productivity
of the workers.
1.4.2 Legal/Regulatory Compliance
National and international occupational health and safety laws require organisations and employers to
provide safe workplaces for their employees and other workers.7 Additionally, implementing and
executing an effective SMS assists with meeting this obligation as well as standards of “due diligence” a legal phrase referring to a person’s duty to take reasonably practicable actions to protect the wellUniversity of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 5
being of others.8 Not being aware of one’s legal responsibilities and duties is not a defence for noncompliance.9 For an employer, having an effective, functioning SMS can form the basis for a due
diligence defence when an incident results in loss or harm. A company and its workers can
demonstrate their commitment to health and safety through an effective SMS.
1.4.3 Cost Reduction
An effective SMS can prevent loss and costs from incidents that lead to injuries, illnesses, or death.
Workers’ compensation costs can be significant, along with the other costs directly and indirectly
related to and incurred when an injury or illness occurs. These costs add directly to operation costs
and, in turn, profits.10 As well, a successfully implemented SMS can prevent loss to property and
production, losses from violations of legislation or regulations, lawsuits and fines. In addition to the
monies saved from fewer incidents, an efficient SMS leads to additional savings from increased
productivity by improving workers’ skills, work practices, and consistency in carrying out critical tasks.
1.4.4 Employee Relations
Commitment to an SMS demonstrates management concern for ensuring safe operations and thus
helps build better employee relations, retain the best employees, and increase the contributions of
these workers in achieving business goals. Ensuring that all workers return home in the condition in
which they came to work, if not better, justifies the commitment and dedication of resources to an
SMS.
Primarily, an organisation’s SMS gives it control over its safety risks. In high risk industries, including
aviation, oil and gas and mining, management of safety risk is a core activity. Like financial
management, senior managers need to control how safety risks are managed. Many countries have
regulations which put senior management in charge of the safety of their organisation and hold them
directly accountable for poor safety performance. The best organisations however have SMS in place
without any requirement from their authority - because it makes sense and it works.
Profits are made by taking risks. Senior managers are responsible to the shareholders and other
stakeholders to ensure the business is profitable. Senior managers are always risk managers, but some
managers don’t realise that risk management is what they do. Risks should only be taken if the assessed
level of the risk is acceptable and defensible. SMS provides a framework which supports organisations
with their management of risk. Without a framework, how can an organisation assures itself, and its
stakeholders, that the risks taken are acceptable? How do they know – objectively -when to ‘go’ or
‘not go’? And how would they defend their operational risk decisions without such a framework?
An effective safety management system provides many other potential benefits, including:
•
•
•
•
•
•
•
•
The ability to control the potential risky operations faced by the organisation
A clear and documented approach to achieving safe operations that can be explained to others
Active involvement of staff in safety
Demonstrable control for the authority, customers and other stakeholders that an
organisation’s risks are under control
Building a positive safety culture
Reduction or removal of operational inefficiencies
Decreased insurance costs and improved reputation
A common language to establish safety objectives and targets and implement and monitor
safety risk controls
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 6
1.5 Building a Safety Management System
Management initiatives are not always successful and each time a new idea is introduced people must
ask whether this is a worthwhile initiative, or a fad that will pass soon enough. Having a good idea
does not guarantee success. Many good ideas have failed in practice because one or more of the three
critical elements was missing: commitment, cognisance, and competence. This by extension means,
implementing an SMS in an organisation will not by itself ensure improvement in organisational safety,
unless there is demonstrated commitment, cognisance and competence to actualizing what has been
stipulated in the SMS. The 3 “C’s” of leadership will determine, in large part, whether safety
management achieves its goals and leads to a pervasive safety culture in an organisation:
•
•
•
Commitment: In the face of operational and commercial pressures do company leaders have the
will to make safety management tools work effectively?
Cognisance: Do the leaders understand the nature and principles of managing for safety?
Competence: Are safety management policy and procedures appropriate, understood, and
properly applied at all levels in the organisation?
1.6 Components of a Safety Management System
Although several frameworks/models for SMS exist (such as the ILO SMS model), the universally
accepted framework for SMS includes four main components and twelve elements, as the minimum
requirements for an SMS. These minimal requirements of an SMS have been listed below:
1. Safety policy and objectives
a. Management commitment and responsibility
b. Safety accountabilities
c. Appointment of key safety personnel
d. Coordination of emergency response planning
e. SMS documentation
2. Safety risk management
a. Hazard identification
b. Risk assessment and mitigation
3. Safety assurance
a. Safety performance monitoring and measurement
b. The management of change
c. Continuous improvement of the SMS
4. Safety promotion
a. Training and education
b. Safety communication
The four main component of an SMS are interrelated and their interrelationships have been
exemplified in Figure 1.1 below and discussed in details in the ensuing subsections.
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 7
Figure 1.1 Interrelationships among the four major components of an SMS
1.6.1 Safety Policy and Objectives
The Safety Management Policy is the written foundation of an organisation’s safety management
system. It formally and explicitly commits an organisation to the development and implementation of
the organisational structures and resources necessary to sustain the safety management processes and
activities of an SMS. An effective Safety Management Policy establishes that an organisation’s top
executive is ultimately accountable for safety management.
The Safety Management Policy component encompasses an agency’s safety objectives and safety
performance targets, and the necessary organizational structures to accomplish them. It establishes
senior leadership and employee accountabilities and responsibilities for safety management
throughout an agency. It also commits senior leadership to the oversight of an agency’s safety
performance through meetings and regular reviews of activity outputs and discussions of resource
allocation with key agency stakeholders. The Safety Management Policy is implemented in practice
though the Safety Management Policy Statement, which the Accountable Executive formally endorses.
1.6.2 Safety Risk Management
The Safety Risk Management component is comprised of the processes, activities, and tools an
organisation needs to identify and analyse hazards and evaluate safety risks in operations and
supporting activities. It allows an organisation to carefully examine what could cause harm, and
determine whether sufficient measures have been taken to prevent the harm, or to mitigate it effects
to the barest minimum should the harm occur. Under an SMS, risk management activities and
practices include the use of both proactive (i.e. employee safety reporting) and reactive (i.e.
investigations) sources that are as comprehensive as necessary for the size and complexity of the
organisation. The scope of the course focuses on the proactive approach, whereas the accident
investigation course deals with the reactive approach to risk management. Through ongoing Safety
Risk Management activities, safety hazards and concerns in organisations are identified, evaluated, and
mitigations are put in place to manage their safety risk.
1.6.3 Safety Assurance
The Safety Assurance component ensures that mitigations are implemented, adhered to, appropriate,
effective and sufficient in addressing the potential consequences of identified hazards. Mitigations
developed under the Safety Risk Management process are “handed-off” to Safety Assurance analysts
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 8
reviewing the data to determine if (1) the mitigations are effective, and (2) that no new risks have been
introduced through implementation of the mitigations. Safety Assurance also ensures that the SMS is
effective in meeting an organisation’s safety objectives and safety performance targets. An
organisation assures its safety objectives are met through the collection and analysis of safety data,
including the tracking of safety risk mitigations. An organisation implements its Safety Assurance
process through the active monitoring of operations, safety reporting systems, routine workplace
observations, inspections, audits, and other activities, designed to support safety oversight and
performance monitoring. An effective employee safety reporting program is essential to the Safety
Assurance function. Safety Assurance also helps an organisation evaluate whether an anticipated
change may affect the safety of operations. If an anticipated change is determined to introduce safety
risk, the organisation would have to conduct Safety Risk Management activities to minimise the safety
risk associated with the change.
1.6.4 Safety Promotion
Safety Promotion provides visibility of executive management’s commitment to safety, and fosters
improved safety performance by increasing safety awareness through safety communication and
training. Through communication of lessons learned and broader safety information, employees are
made aware of safety priorities and safety concerns at both the organisational level and as they relate
to their own duties and responsibilities. The appropriate training for all staff, regardless of their level
in the agency, provides visibility for, and knowledge of, the SMS. It ensures employees receive the
training they need to do their job safely, and gives them shared ownership of organisation’s safety
mission. This training commitment demonstrates management’s commitment to establishing an
effective SMS.
1.7 Practical Implementation of SMS
The Airports Council International (ACI) Safety Management System Handbook is highly
recommended to understand the practical implementation of an SMS. This handbook has been
uploaded on Google Classroom.
University of Mine and Technology, Tarkwa, Ghana
Chapter 1 – An Introduction to Safety Management Systems
Eric Stemn (PhD)
Page | 9
CHAPTER 2
2. HAZARD CONTROL MANAGEMENT
1.1 Introduction
The International Board for Certification of Safety Managers (IBFCSM) defines a hazard as
“any solid, gas, or liquid with the potential to cause harm when interacting with an array
of initiating stimuli including human-related factors.” The scope of a hazard can include any
activity, behaviour, error, event, incident, occurrence, operation, process, situation, substance,
or task with potential to cause human harm, property damage, risk to the environment, or a
combination of all three. The board defines hazard closing as the process of two or more hazards
or causal factors attempting to occupy the same space at the same time. Some hazard control
professionals refer to this interaction of causal factors as the accident generation cycle. This chapter focuses
on some common workplace hazards and how they can managed.
2.1 Classification of Hazards
Hazards can be classified in different types in several ways. However, one of the widely known means
of identifying and classifying hazards is based on the concept of stored energy, when release can result
in damage. This stored energy can be in several forms, such as, electrical, chemical, mechanical,
thermal and so on. In some instances, a hazard may not involve the release of stored energy, but rather
may involve the presence of hazardous situations, such as confine space, an oxygen-deficient
environment, a repetitive action/motion, and awkward postures, among others. A hazard can also be
classified based on the origin of the hazard, such as natural or man-made. Furthermore, hazards can
be classified based on their effect on the affected object. Thus, hazards can generally be classified
based on (1) the origin of the hazards, (2) the presence of stored energy, when released can lead to damage, and (3)
the effect of the hazard.
2.1.1 Based on origin
2.1.1.1 Natural hazard
These are hazards due to natural occurrence, directly under the forces of nature, such as earthquakes,
floods, tsunamis and volcanoes. These hazards have devastating effect, affecting human life, the
natural and built environment. Natural hazards particularly affect humans the most, as countless
vulnerable people, throughout history and on daily basis have been affected. For instance, the Red
Cross estimated that each year, 130, 000 people are killed, 90, 000 are injured and 140 million are
affected by natural disasters.
2.1.1.2 Anthropogenic hazard
These hazards are due to the activities and behaviours of humans. The actions and inactions of
humans contribute to societal hazards; such as terrorism, war, civil disorder, criminality; and some
industrial accidents, such as the Bhopal disaster, which involved the release of methyl isocyanate into
the neighbouring environment seriously affecting large numbers of people.
2.1.2 Based on energy source
2.1.2.1 Physical hazard
These are physical conditions, which by their intrinsic properties can cause harm humans, property or
the environment with or without contact. The physical occupational hazards have been well known
for many years, and recent emphasis has been on the development of lower risk workplace
environments. Physical hazards include but are not limited to hearing and noise, visual, humidity and
heat, dust and particulate matter exposure, vehicle interaction, confined space, vibration and radiation.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 10
2.1.2.2 Chemical hazard
A chemical can be considered a hazard if by virtue of its intrinsic properties can cause harm or danger
to humans, property, or the environment. Health hazards associated with chemicals are dependent on
the dose or amount of the chemical. For example, iodine in the form of potassium iodate is used to
produce iodised salt. When applied at a rate of 20 mg of potassium iodate per 1000 mg of table salt,
the chemical is beneficial in preventing goitre, while iodine intakes of 1200-9500 mg in one dose have
been known to cause death. Some chemicals have a cumulative biological effect, while others are
metabolically eliminated over time. Other chemical hazards may depend on concentration or total
quantity for their effects. Exposure to hazardous chemicals in the workplace can cause acute or longterm detrimental health effects, depending on the nature of the chemical, the dose or concentration
and the exposure level.
2.1.2.3 Biological hazard
Biological hazards, also known as biohazards, originate in biological processes of living organisms,
and refer to agents that pose a threat to the health of living organisms, the security of property, or the
health of the environment. Biological hazards include viruses, parasites, bacteria, food, fungi, and
foreign toxins.
2.1.2.4 Psychosocial hazard
Psychosocial hazards have been defined as characteristics of work management and design as well as
its organisational and social settings that could possibly result in physical or psychological harm to the
workforce. This suggests that psychosocial hazards are exhibited by workplace conditions, job
content, work demand, work schedule, organisational factors among others. Psychological or
psychosocial hazards are hazards that affect the psychological well-being of people, including their
ability to participate in a work environment among other people. Psychosocial hazards are related to
the way work is designed, organized and managed, as well as the economic and social contexts of work
and are associated with psychiatric, psychological and/or physical injury or illness. Linked to
psychosocial risks are issues such as occupational stress and workplace violence which are recognized
internationally as major challenges to occupational health and safety.
2.1.2.5 Electric hazard
Electricity is a widely used, efficient and convenient but potentially hazardous method of transmitting
and using energy. It is in use in every factory, workshop, laboratory and office in the country. Any use
of electricity has the potential to be very hazardous with possibly fatal results. Electrical hazards are
hazards associated with the use of energy source/electricity
2.1.2.5 Mechanical hazard
These are hazards associated with moving machinery. According to OSHA, mechanical hazards can
occur; (1) At the point where work is performed - work points include areas where cutting, boring,
shaping and forming take place, (2) in power transmission apparatus -power transmission areas are
flywheels, belt, pulleys, couplings, connecting rods, chains and gears, (3) in other moving parts - other
moving parts of machinery consist of rotating, reciprocating, traversing and feeding mechanisms
2.1.3 Based on effect
2.1.3.1 Safety hazards
Safety hazards are the most common workplace hazards, affecting the safety of individuals. Safety
hazards generally are unsafe working conditions that that can cause injury and death. They include,
but not limited to:
• Anything that can cause spills or trips such as cords running across the floor or ice
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 11
•
•
•
•
•
Anything that can cause falls such as working from heights, including ladders, scaffolds, roofs,
or any raised work area
Unguarded machinery and moving machinery parts that a worker can accidentally touch
Electrical hazards like frayed cords, missing ground pins, improper wiring
Confined spaces, poor housekeeping
Human-vehicle interaction or vehicular traffic
2.1.3.2 Health hazards
A health hazard is a condition of a premises, a substance, thing, plant or animal other than man, or
a solid, liquid, gas or combination of any of them, that has or that is likely to have an adverse effect
on the health of any person. A health hazard can be chemical, physical or biological factors in our
environment that can have negative impacts on our short- or long-term health. Exposure can occur
through touch, inhalation, and ingestion. Understanding the risks of these hazards can help us to take
action to avoid or mitigate these risks.
2.1.3.3 Economic hazards
These are hazards affecting property, wealth and the economy.
2.1.3.4 Environmental hazards
These are hazards affecting the environment, particularly the natural environment and ecosystems
2.3 Hazard Management
2.3.1 Physical Hazards
2.3.1.1 Heat
The direct effects of heat exposure are
•
•
•
Heat exhaustion and heat stroke (civil works)
Burns (boiler area, electrical flash over)
Heat cramp (civil works, boiler area)
Heat Syncope:
It is a fainting episode or dizziness that usually occurs with prolonged standing or sudden rising
from a sitting or lying position. Factors that may contribute to heat syncope include dehydration and
lack of acclimatization.
Symptoms: Light-headedness, dizziness, fainting
Heat Cramps
It usually affects workers who sweat a lot during strenuous activity. This sweating depletes that
body’s salt and moisture level. Low salt levels in muscles cause painful cramps
Symptoms: Muscle pain or spasm usually in the abdomen, arms, or legs
Heat Rash:
It is a skin irritation caused by excessive sweating during hot, humid weather.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 12
Symptoms: Red cluster of pimples or small blisters, more likely to occur on the neck and upper
chest.
Heat exhaustion:
It is the body’s response to an excessive loss of water and salt, usually through excessive sweating.
Workers most prone to heat exhaustion are those that are elderly, have high blood pressure, and
those working in a hot environment
Signs/Symptoms: Profuse sweating, weakness, rapid pulse, dizziness, nausea & headache.
Heat Stroke:
It is the most serious heat-related disorder which can cause death. It occurs when the body becomes
unable to control its temperature; the body’s temperature rises rapidly, the sweating mechanism fails
and the body is unable to cool down.
Symptoms: Hallucinations, Chills, Confusion/dizziness, hot/dry or profuse sweating.
Control of Heat Hazard
•
•
•
•
•
•
•
Wear loose-fitting, lightweight, light-coloured clothing.
Avoid sunburn
Seek a cooler place
Drink plenty of fluids.
Take extra precautions with certain medications
Avoid hot spots
Let your body acclimate to the heat
2.3.1.2 Cold
Working in cold environments can be not only hazardous to your health but also life threatening. It
is critical that the body be able to preserve core body temperature steady at + 37°C (+ 98.6°F). This
thermal balance must be maintained to preserve normal body functioning as well as provide energy
for activity (or work!). The body's mechanisms for generating heat (its metabolism) has to meet the
challenge presented by low temperature, wind and wetness - the three major challenges of cold
environments.
The human body loses heat to the environment through the following means:
•
•
Radiation is the loss of heat to the environment due to the temperature gradient. In this
case, it is the difference between the temperature of the air and the temperature of the body
(your body's core temperature is +37°C). Another factor important in radiant heat loss is the
size of the surface area exposed to cold
Conduction is the loss of heat through direct contact with a cooler object. Heat loss is
greatest if the body is in direct contact with cold water. The body can lose 25 to 30 times
more heat when in contact with cold wet objects than in dry conditions or with dry clothing.
Generally, conductive heat loss accounts for only about 2% of overall loss. However, with
wet clothes the loss is increased 5 times.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 13
•
•
Convection is the loss of heat from the body to the surrounding air as the air moves across
the surface of the body. The rate of heat loss from the skin by contact with cold air depends
on the air speed and the temperature difference between the skin and the surrounding air. At
a given air temperature, heat loss increases with wind speed.
Evaporation is the loss of heat due to the conversion of water from a liquid to a gas. In
terms of human physiology, it is:
o Perspiration/Sweating – evaporation of water to remove excess heat
o "Insensible" Perspiration – body sweats to maintain humidity level of 70% next to
skin. Particularly in a cold, dry environment, you can lose a great deal of moisture
this way and not notice that you have been sweating.
o Respiration – air is heated as it enters the lungs and is exhaled with an extremely high
moisture content.
It is important to recognize the strong connection between fluid levels, fluid loss, and heat loss. As
body moisture is lost through the various processes, the overall circulating volume is reduced which
can lead to dehydration. This decrease in fluid level makes the body more susceptible to
hypothermia and other cold injuries.
In order to survive and stay active in the cold, the constant heat loss has to be counterbalanced by
the production of an equal amount of heat. Heat is both required and produced at the cellular level
as a result of complex metabolic processes that convert food – a primary source of energy – into
glycogen. Glycogen is a substance (biochemical compound) that is the "fuel" for biochemical
processes underlying all life functions, heat production included.
Important hazards associated with cold work
•
•
•
•
Frost bite (freezing to the skin or other tissues)
Chilblains (painful inflammation of small blood vessels in your skin)
Immersion foot
Hypothermia (low body temperature)
Control of Cold Hazard
•
•
•
•
•
•
Limit your time outdoors in cold, wet or windy weather
Dress in several layers of loose, warm clothing
Wear a hat or headband that fully covers your ears
Wear mittens rather than gloves
Wear socks and sock liners that fit well, wick moisture and provide insulation. ...
Watch for signs of frostbite
2.3.1.3 Light
Exposure to light (high or low intensity) has potential to affect the working condition or health of a
person Some of the most common lighting problems includes
•
•
•
Insufficient light-not enough (too little) light for the need
Glare-too much light for the need
Improper contrast
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 14
•
Poorly distributed light
Effects of Poor Illuminations
• Headache
• Eye pain
• Lachrymation
• Congestion around the cornea
• Eye strain
• Eye fatigue
Exposure to excessive brightness is associated with
•
•
•
Discomfort,
Visual fatigue,
Blurring of vision and may lead to accidents.
Using the Right Amount of Light for Work
The amount of light needed for various situations or activities varies and depends on
•
Individual’s vision
•
General work area
•
Type of surfaces (does it reflect or absorb light)
•
Type of task being done (e.g., demands for speed and accuracy)
2.3.1.4 Vibration
Hazards associated with the use or exposure to vibration. Exposure to vibration causes motions and
forces within the human body that may cause discomfort, adversely affect performance, cause health
effect. The transmission of vibration to the body is dependent on body posture. Vibration especially
in the frequency of 10 to 500 Hz, can affect hand and arm after month or years of exposure. Handheld vibrating machinery (such as pneumatic drills, sanders and grinders, powered lawn mowers and
strimmers and chainsaws) can produce health risks from hand–arm or whole-body vibration (WBV).
Hand-arm Vibration Syndrome (HAVS)
Hand–arm vibration syndrome (HAVS) describes a group of diseases caused by the exposure of the
hand and arm to external vibration. Such disorders include as carpal tunnel syndrome, bursitis etc.
However, the best known disease is vibration white finger (VWF) in which the circulation of the
blood, particularly in the hands, is adversely affected by the vibration. The early symptoms are tingling
and numbness felt in the fingers, usually sometime after the end of the working shift. As exposure
continues, the tips of the fingers go white and then the whole hand may become affected. This results
in a loss of grip strength and manual dexterity. Attacks can be triggered by damp and/or cold
conditions and, on warming, ‘pins and needles’ are experienced. If the condition is allowed to persist,
more serious symptoms become apparent including discoloration and enlargement of the fingers. In
very advanced cases, gangrene can develop leading to the amputation of the affected hand or finger.
VWF was first detailed as an industrial disease in 1911.The risk of developing HAVS depends on the
frequency of vibration, the length of exposure and the tightness of the grip on the machine or tool.
Equipment that can produce HAVS include drilling machines, chain saw and grinders.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 15
Whole-body vibration (WBV)
Whole-body vibration (WBV) is caused by vibration from machinery passing into the body either
through the feet of standing workers or the buttocks of sitting workers. It is the shaking or jolting of
the human body through a supporting surface (usually a seat or the floor), for example when driving
or riding on a vehicle along an unmade road, operating earth-moving machines or standing on a
structure attached to a large, powerful, fixed machine, which is impacting or vibrating. The most
common ill-health effect is severe back pain which, in severe cases, may result in permanent injury.
Equipment that can produce WBV include Dumper truck, tractor and bulldozer
Effects of Vibration
•
•
•
The fine blood vessel of finger becomes increasingly sensitive to spasm (white fingers).
Injuries of the joints, of the hands elbow and shoulders may take place
Exposure causes or exacerbate other health effects such as cardiovascular, respiratory,
endocrine and metabolic changes
Control of Vibration
Continuous working should be avoided and rest pauses after some time of work must be allowed to
workers.
•
•
•
•
•
The driving force of vibrating surfaces may be reduced by;
o Reducing the forces
o Minimizing rotational speed
o Isolating
The response of vibrating surfaces may be reduced by
Damping
Increasing mass of vibrating surfaces
Changing size to change resonance frequency
2.3.1.5 Noise
Any unwanted sound or sound that is loud or unpleasant or causes disturbance. Threshold Limit
Value for noisy working conditions: (An 8-hour shift in all following cases) is shown below
•
•
•
•
•
•
8 hours’ work – 8 5/90dBA
4 hours working – 95 dBA
2 hours working – 100 dBA
1 hour working – 105 dBA
Half hour work – 110 dBA
Threshold of hearing – 125 dBA
Sudden deafness/rupture of ear drum can occur at 140 Dba
Effects of Noise
•
•
•
Industrial noise can give rise to deafness
Non auditory effects are irritation, nervousness, annoyance, fatigue, inefficiency etc.
Hearing loss in most cases is not sudden but increases with the length of the work time in the
noisy zone.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 16
NB: Hearing impairment due to Noise is, as per the schedule of the Factories act, is reportable as
well as compensable.
Noise Control
•
•
•
•
•
Eliminate the source of the noise where possible
Insulate working areas from noise producing equipment
Reduce the amount of time spent in a noisy environment
Find alternative, quieter equipment to use
The use of hearing protection/PPE
2.3.1.6 Radiation
Ionising Radiation
Ionising radiation is emitted from radioactive materials, either in the form of directly ionising alpha
and beta particles or indirectly ionising X-rays and gamma rays or neutrons. It has a high energy
potential and an ability to penetrate, ionise and damage body tissue and organs.
Sources of ionising radiation
The principal workplaces which could have ionising radiation present are the nuclear industry, medical
centres (hospitals and research centres) and educational centres. Radioactive processes are used for
the treatment of cancers, and radioactive isotopes are used for many different types of scientific
research. X-rays are used extensively in hospitals, but they are also used in industry for non-destructive
testing (e.g. crack detection in welds). Smoke detectors, used in most workplaces, also use ionising
radiations. Ionising radiations can also occur naturally – the best example being radon, which is a
radioactive gas that occurs mainly at or near granite outcrops where there is a presence of uranium. It
is particularly prevalent in Devon and Cornwall. The gas enters buildings normally from the
substructure through cracks in flooring or around service inlets.
Non-ionising radiation
Non-ionising radiation includes ultraviolet, visible light (this includes lasers which focus or
concentrate visible light), infrared and microwave radiations. As the wavelength is relatively long, the
energy present is too low to ionise atoms which make up matter. The action of non-ionising radiation
is to heat cells rather than change their chemical composition. Ultraviolet radiation (UV) occurs with
sunlight and with electric arc welding. In both cases, the skin and the eyes are at risk from the effect
of burning. The skin will burn (as in sunburn) and repeated exposure can lead to skin cancer.
Effects of Radiation
•
•
•
•
•
•
•
Anaemia
Leukaemia
Cancer
Sterility
Ulceration
Foetal Malformation in case of pregnancy
In extreme cases, death can occur
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 17
Control of Radiation Hazard
•
•
•
•
Increase distance from the radiation source: The intensity of radiation falls sharply with greater
distance, as per inverse square law.
Decrease duration of exposure
Reducing Incorporation into the human body: Potassium iodine can be given orally
immediately after exposure to radiation. This can reduce the risk of thyroid cancer
development.
Shielding: The use of absorbent material to cover reactor or other source of radiation, so that
less radiation is emitted. It is the best method because it is an ‘engineered’ solution. The thicker
the shield the more effective it is.
2.3.2 Psychosocial Hazard
Hazards that affect the mental well-being/health of the worker. These may have physical effects by
overwhelming the individual coping mechanisms and impacting the workers’ ability to work in a
healthy and safe manner. The hazards are generally not from physical things one can see but rather as
a result of interactions with others. There are often no obvious outward signs of the effects of
exposure. The methods to control these hazards are somewhat different than methods used to control
other traditional workplace hazards. It is only really in the last 20 years that psychological hazards
have been included among the occupational health hazards faced by many workers. This is now the
most rapidly expanding area of occupational health, and includes topics such as mental health and
workplace stress (as well as violence to staff and substance abuse).
Contributing factors
• Maladjustment with work environment.
• Lack of job satisfaction
• Insecurity
• Emotional tension
• Poor human relationships
Signs and symptoms of Psychosocial Hazard
• Anxiety/Depression
• Sickness absentees
• Irritability
• Tiredness
• Giddiness
Effects of Psychosocial Hazard
• Reduced decision-making ability
• Reduced ability to do complex planning
• Increased incident rates
• Health problems which include fatigue, headache, hypertension, heart disease, peptic ulcer.
Control of Psychosocial Hazards
• Good induction program
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 18
•
•
•
•
•
Management by participation
Establishment of Proper communication channel
Establishment of Healthy personnel policies
Establishment of healthy HR relationship
Regular stress management programme
2.3.3 Biological Hazards
They are organic substances that pose a threat to the heath of humans and other living organisms.
These include pathogenic micro-organisms, virus, toxins (from biological sources, spores, fungi and
bio-active substances). Exposure to infective and parasitic agents can be through Insect bite, dog bite,
snake bite.
Effects of Biological Hazards
The effects on health of hazardous substances may be either acute or chronic.
Acute effects are of short duration and appear fairly rapidly, usually during or after a single or shortterm exposure to a hazardous substance. Such effects may be severe and require hospital treatment
but are usually reversible. Examples include asthma-type attacks, nausea and fainting.
Chronic effects develop over a period of time which may extend to many years. The word ‘chronic’
means with time’ and should not be confused with ‘severe’ as its use in everyday speech often implies.
Chronic health effects are produced from prolonged or repeated exposures to hazardous substances
resulting in a gradual, latent and often irreversible illness, which may remain undiagnosed for many
years. Many cancers and mental diseases fall into the chronic category. During the development stage
of a chronic disease, the individual may experience no symptoms.
Biological Hazards Control
• Practice good personal hygiene (e.g., regular hand washing)
• Clean and disinfect work surfaces often
• Handle and dispose of all bio-hazardous waste materials safety
• Ensure that any equipment that might harbour bio-hazards (e.g., fans, ventilation system) is
regularly maintained, cleaned and sterilized
• Use of personal protective equipment
2.3.4 Electrical Hazards
Electricity is a widely used, efficient and convenient but potentially hazardous method of transmitting
and using energy. It is in use in every factory, workshop, laboratory and office in the country. Any use
of electricity has the potential to be very hazardous with possibly fatal results. Electrical hazards are
hazards associated with the use of energy source/electricity.
Common Electrical hazards
• Improper grounding
• Exposed electrical parts
• Inadequate wiring
• Damaged Insulations
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 19
•
•
•
•
•
Damaged Insulations
Overloaded Circuits
Overhead Power lines
Wet Conditions
Damaged Tools and Equipment
Effects of Electrical Hazards
• Injury from direct contact
o Injury by shock
o Injury from internal burns
• Injury without current flow through body
• Direct burns from electrical arcs
• Radiation burns from very heavy arcs
• Injury from fire & explosion from electrical arc
• Physical injury from false starting of machinery, failure of controls
• Eye injury from electrical arc welding
Electrical Hazards Control
• Inspect tools and cords completely before using
• OSHA requires the use of GFCIs (a fast-acting circuit breaker) on all construction sites.
Notably, GFCI senses small imbalances in the circuit caused by current leakage to ground
• Workers must ensure electricity is off and “locked-out” before work is performed.
• The use of suitable personal protective equipment
2.3.5
Mechanical Hazard
These are hazards associated with moving machinery. According to OSHA, mechanical hazards can
occur in three basic areas;
• At the point where work is performed: work points include areas where cutting, boring,
shaping and forming take place
• In power transmission apparatus: power transmission areas are flywheels, belt, pulleys,
couplings, connecting rods, chains and gears.
• In other moving parts: other moving parts of machinery consist of rotating, reciprocating,
transversing and feeding mechanisms
Mechanical hazards control /prevention
• Installation of physical barriers and guards such as fences, screens or fixed panels of various
materials
• Protection using minimum gap between the moving components
• Protection by reducing the force and energy levels of moving components
• Preventive maintenance
• Adequate job training
• Ensuring safe working environment
• Establishment of safety department with qualified safety engineer
• Periodic survey for finding out hazards
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 20
•
Application of ergonomics
2.3.6 Chemical Hazards
A chemical hazard is a type of occupational hazard caused by exposure to chemicals in the
workplace. Exposure to chemicals in the workplace can cause acute or long-term detrimental health
effects. There are many types of hazardous chemicals, including
•
•
•
•
•
•
•
Neurotoxins (e.g., Lead, Ethanol)
Immune agents
Dermatologic agents,
Carcinogens (e.g., alcoholic beverages, asbestos)
Reproductive toxins
Systemic toxins (e.g., mercury)
Asthmagens, pneumoconiosis agents, and sensitizers.
These hazards can cause physical and/or health risks. Depending on the chemical, the hazards
involved may be varied, thus it is important to know and apply the PPE especially during the lab.
Exposure to chemicals in the workplace can cause acute or long-term detrimental health effects.
Long term exposure to chemicals such as silica dust, engine exhausts, tobacco smoke, and/or lead
have been shown to increase risk of heart disease, stroke, and high blood pressure.
Types of chemical hazards
• Liquids like cleaning products, paints, acids, solvents – especially if chemicals are in an
unlabelled container
• Vapours and fumes that come from welding or exposure to solvents
• Gases like acetylene, propane, carbon monoxide and helium
• Flammable materials like gasoline, solvents, and explosive chemicals.
• Pesticides
Effects of Chemical Hazards
• Asphyxiation
• Systematic intoxication
• Pneumoconiosis
• Carcinogens
• Irritation
• Mutagenicity
Routes of Entry into the Body
There are four main routes by which hazardous chemicals enter the body.
• Inhalation (through the nose)
• Skin absorption (on the skin)
• Ingestion (through the mouth)
• Injection (into the skin and the blood)
Chemical Hazard Control
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 21
There are thousands of chemical compounds, which presents some form of hazards either major or
minor incidents usually termed as chemical accidents. Ways to control chemical accidents and
chemical hazard include:
•
•
•
•
•
•
•
•
Read carefully the instructions and warnings on the packaging before using a chemical
product.
Knowledge of operator of chemicals.
Only buy and stock the quantities required in the near future.
Dust control- this can be achieved through proper ventilation, exhaust, enclosed apparatus,
good housekeeping.
Personnel protection: Mask, clothing, cloves, apron, boots barrier cream etc.
Personal hygiene.
Health education about respiratory evolvement and personal protection.
Medical control: Periodic medical check-up for early detection.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Hazard Control Management
Eric Stemn (PhD)
Page | 22
CHAPTER 3
3
FUNDAMENTALS OF RISK MANAGEMENT
3.1 Introduction
Just like individuals, organisations have always faced risks. In fact, identifying the risks faced by an
organization and then responding to them is not a new idea. However, the business environment for
most organizations is becoming more risky; accordingly, organisations have to decide how to respond
to this increased riskiness. Although the business environment has become more risky in recent times,
there are many chief executive officers (CEOs) who are not yet convinced that a formalized approach
to risk and risk management provides benefits that the well-established informal approach does not
deliver. Contemporary organisations operate in a risky context. Unexpected events can lead to major
losses in terms of market share, money, or reputation. Planning for those contingencies and creating
mitigation tactics is one of the key processes a modern business needs to undertake. A course on Risk
Management focuses on formally defining what risk is, and presenting different approaches to
modelling it.
The field of Risk Management (RM) is broad and growing, with a large diversity of positions and roles.
The unifying theme happens to be trying to predict the (almost) unpredictable and to minimize losses
or maximize benefits. Such an ambitious goal calls for an effective blend between theoretical
knowledge and practical skill. This need is also reflected in the structure of the Risk Management
course - it combines key theoretical insights with hands-on tasks and problems to solve using stateof-the-art software applications.
When an organization decides that it is going to set objectives and/or seek to deliver stakeholder
expectations, there will be risks that can have a negative impact on the ability of the organization to
achieve its aims. The achievement of objectives and/or the delivery of stakeholder expectations
represent the rewards that the organization is seeking, but it inevitably faces risks that can have a
negative impact on the fulfilment of those rewards. To keep the approach to risk simple and
straightforward, risks can be viewed as events that could occur that would undermine the delivery of
the desired rewards. For example, people participate out of choice in motor sports and other
potentially dangerous leisure activities. In these circumstances, the return may not be financial, but
can be measured in terms of pride, self-esteem or peer group respect. Undertaking activities involving
risks of this type, where a positive return is expected, can be referred to as taking opportunity risks.
3.2 Basic Terminologies
3.2.1 Definition of Risk
Most risk management publications refer to the benefits of having a common language of risk within
an organisation. Many organisations manage to achieve this common language and common
understanding of risk management processes and protocols at least internally. However, it is usually
the case that within a business sector, and sometimes even within individual organisations, the
development of a common language of risk can be very challenging.
Reference and supporting materials use a great range of terminologies. The different approaches to
risk management, the different risk management standards that exist and the wide range of guidance
material that is available often use different terms for the same feature or concept. This is regrettable
and can be very confusing, but it is inescapable.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 23
Attempts are being made to develop a standardised language of risk, and ISO Guide 73 has been
developed as the common terminology that should be used in all ISO standards. The terminology set
out in ISO Guide 73 will be adopted in this course as the default set of definitions wherever possible.
However, the use of a standard terminology is not always possible and alternative definitions may be
required. Indeed, ISO itself also publish a terminology guide, ISO/IEC Guide 51:1999, entitled Safety
Aspects: – Guidelines for their inclusion in standards, and the definitions in Guide 51 are not fully aligned
with those in Guide 73.
Casual conversations of risk underpin our everyday understanding of the concept. In this sense, risk
is often associated with unfavourable developments (expected or unexpected) that lead to a loss. Risk
is therefore associated with downside effects. This is not the case in some field, such as economics
and finance. Here risk is defined as the deviation from an expected outcome which can either be
positive, leading to profit (risk on the upside) or negative, leading to loss (risk on the downside). In
fact, we can have an even more nuanced view on risk and uncertainty by resorting to Frank Knight’s
(1921) distinction - he delineates four different cases, as follows:
3.2.1.1 Certainty
This is where no possibility of deviation is present, and therefore all events happen with a probability
of p = 1. This is often the case with natural laws - if an object on Earth is dropped it is supposed to
fall to the ground, accelerating at a rate of g.
3.2.1.2 Risk
This is a situation where deviations from the expectations are possible and those are well-defined. The
agent knows all the possible outcomes and can attach probabilities to them. It is therefore a situation
where the mathematical expectation E[x] can be defined and its respective probabilities pi are clear.
For example, when a fair coin is thrown, the outcomes can be either heads or tails, and each of them
occurs with the probability of 0.5.
3.2.1.3 Uncertainty
In this case the agents know the possible outcomes of a given situation but they cannot easily attach
probabilities to them. For example, when building a nuclear power plant, one can assume that it either
operates safely, there are minor accidents, or there is a large accident. While these outcomes are easy
to spell, it is unclear as to what their exact probabilities are. In such cases the agents tend to attach
approximate probabilities or formally model the system in order to obtain estimates of
its behaviour.
3.2.1.4 Ambiguity
Under ambiguity agents can defined neither the outcomes of a given situation, nor the probabilities
associated with them. This is by far the most difficult situation of decision making and hardly lends
itself to formal modelling. Some scholars compare situations of low-level tactical warfare to this case.
It is important to note that the sustainability of various industries is being threatened by the inability
to address current and future risks that can impact operational competitiveness. The management of
these risk is priority issue for industry. Based on the above discussions, “risk is the effect of
uncertainty on objectives” (ISO Guide 73:2009) caused by variability, known and unknown threats and
incomplete knowledge. Objectives can have different aspects (such as financial, health and safety, and
environmental goals) and can apply at different levels (such as strategic, organization-wide, project,
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 24
product and process). Risk is often characterised by reference to potential events and consequences
or a combination of these. Risk is often expressed in terms of a combination of the consequences of
an event (including changes in circumstances) and the associated likelihood of occurrence. The
significance of a risk is often determined by assessing its likelihood and consequence. The consequences of
a risk can be positive (results in a beneficial outcome) or negative (results in an adverse outcome). Risk
therefore is an uncertainty that matter because it can affect the attainment of objectives.
3.2.2 Terminologies Related to Risk Management
3.2.2.1 Risk Management
Coordinated activities to direct and control an organisation with regard to risk. Risk management
terminologies include, but not limited to the following
Risk identification: identifying sources of uncertainty that matter
•
•
Hazard: a potential source of harm (e.g. electricity)
Threat: something that can release a hazard (e.g. corrosion)
Risk analysis: likelihood x consequences of something happening
•
•
Consequence: results of something happening (e.g. nothing, injury, death)
Likelihood: how often something might happen (e.g. 1/day, 1/mth, 1/year)
Risk evaluation: process for determining if risk is acceptable or tolerable
Risk treatment: process for determining how to deal with risk
Control: device and/or human action which in itself modifies risk
•
•
Prevention controls (Barriers): stop an event = protects against threats
Mitigation controls: reduce the consequences of an event or outcome
Event: occurrence or a change of a particular set of circumstances
•
Unwanted event: an unplanned release of a hazard
3.2.2.2 Risk Management Framework
Set of components that provide the foundations and organisational arrangements for designing,
implementing, monitoring, reviewing and continually improving risk management throughout the
organisation.
•
•
•
The foundations include the policy, objectives, mandate and commitment to manage risk
The organisational arrangements include plans, relationships, accountabilities, resources,
processes and activities.
The risk management framework is embedded within the organisation's overall strategic and
operational policies and practices.
3.2.2.3 Risk Management Policy
Statement of the overall intentions and direction of an organisation related to risk management.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 25
3.2.2.4 Risk Management Plan
Scheme within the risk management framework specifying the approach, the management
components and resources to be applied to the management of risk.
• Management components typically include procedures, practices, assignment of
responsibilities, sequence and timing of activities
• The risk management plan can be applied to a particular product, process and project, and
part or whole of the organisation.
3.2.2.5 Risk Management Process
Systematic application of management policies, procedures and practices to the activities of
communicating, consulting, establishing the context, and identifying, analysing, evaluating, treating,
monitoring and reviewing risk.
3.3 Benefits of Risk Management
There are a range of benefits arising from successful implementation of risk management. These
benefits can be summarised as compliance, assurance, decision making and efficient
operations/effective processes/efficacious strategy (CADE3).
Compliance refers to risk management activities designed to ensure that an organisation complies with
legal and regulatory obligations. The board of an organisation will require assurance that significant
risks have been identified and appropriate controls put in place. In order to ensure that correct
business decisions are taken, the organisation should undertake risk management activities that
provide additional structured information to assist with business decision making.
Finally, a key benefit from risk management is to enhance the efficiency of operations within the
organisation. Additionally, it should help ensure that business processes (including process
enhancements by way of tactics, projects and other change initiatives) are effective and that the
selected strategy is efficacious, in that it is capable of delivering exactly what is required. Risk
management inputs are required in relation to strategic decision making, but also in relation to the
effective delivery of projects and programmes of work, as well as in relation to the routine operations
of the organisation. The benefits of risk management can also be identified in relation to these three
timescales of activities within the organisation. The outputs from risk management activities can
benefit organisations in three timescales and ensure that the organization achieves:
•
•
•
efficacious strategy;
effective processes;
efficient operations
In order to achieve a successful risk management contribution, the intended benefits of any risk
management initiative have to be identified. If those benefits have not been identified, then there will
be no means of evaluating whether the risk management initiative has been successful. Therefore,
good risk management must have a clear set of desired outcomes/benefits. Appropriate attention
should be paid to each stage of the risk management process, as well as to details of the design,
implementation and monitoring of the framework that supports these risk management activities.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 26
3.4 Impact of Risk on Organisations
3.4.1 Risk Importance
Following the events in the global financial crisis in 2008, organisations are taking a greater interest in
risk and risk management than ever before. It is increasingly understood that the explicit
management of risks brings benefits. By taking a proactive approach to risk and risk management,
organisations will be able to achieve the following three areas of improvement:
• Operations will become more efficient because events that can cause disruption will be
identified in advance and actions taken to reduce the likelihood of these events occurring,
reducing the damage caused by these events and containing the cost of the events that can
cause disruption to normal efficient production operations.
• Processes will be more effective, because consideration will have been given to selection
of the processes and the risks involved in the alternatives that may be available. Also,
process changes that are delivered by way of projects will be more effectively and reliably
delivered.
• Strategy will be more efficacious in that the risks associated with different strategic
options will be fully analysed and better strategic decisions will be reached. Efficacious
refers to the fact that the strategy that will be developed will be fully capable of delivering the
required outcomes.
It is no longer acceptable for organisations to find themselves in a position whereby unexpected events
cause financial loss, disruption to normal operations, damage to reputation and loss of market
presence. Stakeholders now expect that organizations will take full account of the risks that may cause
disruption within operations, late delivery of projects or failure to deliver strategy. The exposure
presented by an individual risk can be defined in terms of the likelihood of the risk materialising and
the impact of the risk when it does materialise. As risk exposure increases, then likely impact will also
increase. Throughout this course, the term impact will be used in preference to the alternative word,
consequences.
3.4.2 Impact of Hazard Risks
Hazard risks undermine objectives, and the level of impact of such risks is a measure of their
significance. Risk management has its longest history and earliest origins in the management of hazard
risks. Hazard risk management is closely related to the management of insurable risks. Remember that
a hazard (or pure) risk can only have a negative outcome.
Hazard risk management is concerned with issues such as health and safety at work, fire prevention,
damage to property and the consequences of defective products. Hazard risks can cause disruption to
normal operations, as well as resulting in increased costs and poor publicity associated with disruptive
events.
Hazard risks are related to business dependencies, including IT and other supporting services.
There is increasing dependence on the IT infrastructure of most organizations and IT systems can be
disrupted by computer breakdown or fi re in server rooms, as well as virus infection and
deliberate hacking or computer attacks.
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 27
Theft and fraud can also be significant hazard risks for many organizations. This is especially true for
organizations handling cash or managing a significant number of financial transactions. Techniques
relevant to the avoidance of theft and fraud include adequate security procedures, segregation of
financial duties, and authorization and delegation procedures, as well as the vetting of staff prior to
employment.
3.4.3 Risk and reward
Another feature of risk and risk management is that many risks are taken by an organization
in order to achieve a reward. Figure 3.1 illustrates the relationship between the level of risk and he
anticipated size of reward. A business will launch a new product because it believes that greater profit
is available from the successful marketing of the new product. In launching a new product, the
organization will put resources at risk because it has decided that a certain amount of risk taking is
appropriate. The value put at risk represents the risk appetite of the organization with respect to the
activity that it is undertaking.
When an organization puts value at risk in this way, it should do so with the full knowledge of the risk
exposure and it should be satisfied that the risk exposure is within the appetite of the
organisation. Even more important, it should ensure that it has sufficient resources to cover the risk
exposure. In other words, the risk exposure should be quantified, the appetite to take that level of risk
should be confirmed and the capacity of the organization to withstand any foreseeable adverse
consequences should be clearly established.
Not all business activities will offer the same return for risk taken. Start-up operations are usually high
risk and the initial expected return may be low. Figure 3.1 demonstrates the probable risk–return
development for a new organization or a new product. The activity will commence in the bottom
right-hand corner as a start-up operation, which is high risk and low return.
As the business develops, it is likely to move to a higher return for the same level of risk. This
is the growth phase for the business or product. As the investment matures, the reward may
remain high, but the risks should reduce. Eventually, an organization will become fully mature
and move towards the low-risk and low-return quadrant. The normal expectation in very mature
markets is that the organization or product will be in decline.
Figure 3.1 Risk and reward
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 28
3.2.4 Attitudes to Risk
Different organizations will have different attitudes to risk. Some organizations may be considered to
be risk averse, whilst other organizations will be risk aggressive. To some extent, the attitude of the
organization to risk will depend on the sector and the nature and maturity of the marketplace within
which it operates, as well as the attitude of the individual board members.
Risks cannot be considered outside the context that gave rise to the risks. It may appear that an
organization is being risk aggressive, when in fact, the board has decided that there is an opportunity
that should not be missed. However, the fact that the opportunity is high risk may not have been fully
considered.
One of the major contributions from successful risk management is to ensure that strategic decisions
that appear to be high risk are actually taken with all of the information available. Improvement in the
robustness of decision-making processes is one of the key benefits of risk management.
Other key factors that will determine the attitude of the organization to risk include the stage in the
maturity cycle, as shown in Figure 3.1. For an organization that is in the start-up phase, a more
aggressive attitude to risk is required than for an organization that is enjoying growth or one that is a
mature organization in a mature marketplace. Where an organization is operating in a mature
marketplace and is suffering from decline, the attitude to risk will be much more risk averse.
3.5 Types of Risk
Risk may have positive or negative outcomes or may simply result in uncertainty. Therefore, risks may
be considered to be related to an opportunity or a loss or the presence of uncertainty for an
organization. Every risk has its own characteristics that require particular management or analysis. In
this course, as in the Guide 73 definition, risks are divided into three categories:
• hazard (or pure) risks;
• control (or uncertainty) risks;
• opportunity (or speculative) risks
It is important to note that there is no ‘right’ or ‘wrong’ subdivision of risks. You may
encounter other subdivisions in elsewhere and these may be equally appropriate. It is, perhaps, more
common to find risks described as two types, pure or speculative. Indeed, there are many
debates about risk management terminology. Whatever the theoretical discussions, the most
important issue is that an organization adopts the risk classification system that is most suitable for its
own circumstances.
There are certain risk events that can only result in negative outcomes. These risks are hazard
risks or pure risks, and these may be thought of as operational or insurable risks. In general,
organizations will have a tolerance of hazard risks and these need to be managed within the levels of
tolerance of the organization. A good example of a hazard risk faced by many organizations is that of
safety accidents.
There are certain risks that give rise to uncertainty about the outcome of a situation. These can be
described as control risks and are frequently associated with project management. In general,
organizations will have an aversion to control risks. Uncertainties can be associated with the benefits
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 29
that the project produces, as well as uncertainty about the delivery of the project on time, within
budget and to specification. The management of control risks will often be undertaken in order to
ensure that the outcome from the business activities falls within the desired range.
At the same time, organizations deliberately take risks, especially marketplace or commercial risks, in
order to achieve a positive return. These can be considered as opportunity or speculative risks, and an
organization will have a specific appetite for investment in such risks.
The application of risk management tools and techniques to the management of hazard risks
is the best and longest-established branch of risk management, and course will concentrate on hazard
risks related to people (workers). Hazard risks are associated with a source of potential harm or
a situation with the potential to undermine objectives in a negative way. Hazard risks are the
most common risks associated with organizational risk management, including occupational
health and safety programmes, which is the main focus on this course.
3.6 The Risk Management Process
Once a risk is identified, the next stage would be to enter a risk management process in order to ensure
that upsides can be captured by the organization, and downsides can be avoided. The process of risk
management is therefore an exercise into maximizing gains and minimizing losses. From a behavioural
standpoint, however, the human brain is rigged in such a way to feel losses more painfully than rejoice
at similar gains (asymmetric utility curve). This has also permeated the cultures of many organizations
and therefore they tend to view risk management as an exercise predominantly in minimizing
downside risks. The process of risk management can be given in the following steps: identification,
measurement, finding tools for mitigation, devising strategy, and evaluation and learning.
Risk Identification: refers to the important phase of defining pertinent risks (hazards) for the
organization, again given the objective environmental constraints.
Risk measurement: refers to the formal process of estimating the impact of the defined risks
on current and future operations. This can be done either formally using some model or informally
using experience and expert evaluation (like the Risk Matrix), or a combination of the two. Even if no
data is available for statistical inference, one should not shy away from using expert knowledge to
formalize risk - even a meticulous management of opinion can be beneficial to organizations. This is
so since oftentimes managers and employees tend to be oblivious of downsides and reminders help.
Apart from measurement or risks, one should define their probabilities of happening and thus their
impact on the organization. Thus, large risks with large probabilities will tend to be top priority, while
small risks with small probabilities - not.
Finding mitigation tools: is connected to defining a set of strategies or actions that the company
can use in case the identified risk occurs. Those mitigation tools also need to be evaluated in terms of
effectiveness and impact and the best ones - selected, retained, and used if needed.
Devising Risk Mitigation Strategy refers to the conscious decision on what risks to undertake, to
manage and what mitigation tools to use. It may be perfectly sensible for a company to choose to
ignore a risk or give it low priority. In a world of conflicting priorities and scarce resources, smallimpact events should hardly be considered. There are four distinct strategies for managing risk:
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 30
•
•
•
•
Avoid - include the attempts of organizations to avoid risk by changing their operations. This
is deemed appropriate if the risk’s expected impact is relatively large with respect to the size
of organization and it is not worth taking.
Transfer - if the risk has to be undertaken for regulatory, business, or strategic reasons, risk
managers may attempt to transfer it to another party that can bear it better. For example, a
building or a transaction can be insured, and an operation or activity can be contracted.
Mitigate - the company may choose not to transfer the risk but to undertake action to mitigate
it, and decrease its downside.
Keep - a last option is to just keep the risk and undertake no action. If the risk has low potential
downside, it’s unimportant, or there are no sensible options to avoid, transfer, or mitigate, the
organization will have to live with it.
It is important to note that the key task of the risk management exercise is not to avoid risk - it is to
take the optimal amount of risk. A basic observation is that higher risk is connected to a higher
expected return, thus avoiding risk jeopardizes profit. The balance between the two is crucial in order
to ensure organizational effectiveness, efficiency, and excellence.
3.7 Approaches to Risk Management
There are two schools of thought regarding risk. There are
Loss reduction – Historical approaches that view risk as the chance or probability of loss or adverse
outcome. Focus is on prevention of negative impacts.
Risk optimisation – considering both the upside and downside associated with uncertainty across a
range of key performance areas (e.g. cost, safety, environment, employee satisfaction, community
relations etc).
The difference between these school of thought have been tabulated in Table 3.1 for your attention.
The interested reader can read more about the two main approaches to risk in Hillson D (2010).
Exploiting Future Uncertainty.
Table 3.1 Comparison of Loss Prevention and Risk Optimisation Approach to Risk Management
(Based on Hillson D (2010). Exploiting Future Uncertainty)
SN Loss Prevention
1
2
What can go wrong? What hazards and
threats exist?
What are the consequences if things go
wrong?
3
What is the likelihood that things might
go wrong?
4
Is the risk low enough to be acceptable,
or is action required to lower the risk?
Have enough controls been implemented
to prevent the unwanted events from
5
Risk Optimisation
What are we trying to achieve? What are our key
objectives?
What is the ‘uncertainty that matters’?
Acknowledge that risk management is affected by
perception and “zero risk” is unachievable and
undesirable, so what is the appropriate level of risk
to aim for?
What actions are required to manage risks?
How are we going? What has changed? What have
we learned?
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 31
occurring, or to mitigate the
consequences if it does occur?
6
7
It matters because it can adversely affect
our ability to achieve our objectives both
now and in the future.
It is caused by known and unknown
threats
It matters because it can affect our ability to
achieve our objectives both now and in the
future
It is caused by known and unknown threats and
opportunities
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 32
CHAPTER 4
4
RISK MANAGEMENT PROCESS AND PRINCIPLES
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 1
CHAPTER 5
5
UNDERSTANDING PROCESS AND SOCIAL RISK
University of Mine and Technology, Tarkwa, Ghana
Chapter 3 – Fundamentals of Risk Management
Eric Stemn (PhD)
Page | 1