Operational Risk Management System

Risk is the correlation between the likelihood that an incident will occur and the severity of that incident. Hazard Identification helps us identify hazardous situations. Risk quantifies this information into a formula determining the probability of occurrence and the severity of the consequences.

An Operational Risk Management message from our President and CEO Wayne LeBlanc

Elemements of a Risk Management System

Identify Hazardous Situations

First of all, Identify the Hazards present in the current activity. Next, review the Hazards and take corrective action to mitigate or eliminate the Hazards. Finally, we must determine the resulting incidents which may occur for those Hazards that cannot be mitigated or eliminated .

Determine Probability

We must identify the incidents that may occur, and then the likelihood that they may actually happen. Furthermore, take into consideration all relevant factors such as personnel, equipment, wind, weather, day or dusk, temperature, etc. It is noteworthy that an operation may be perfectly acceptable on a clear day with little wind, but may not be acceptable at night with windy conditions. As a result, we must always consider the possibility of failure.

Determine Severity

If the activity does result in an incident, how severe would the consequence be? As an example, there may be a better than average chance that an incident may occur, but as a result, the severity of the incident may be so low that management would decide that the activity could proceed. Conversely, if the resulting severity is great enough, the activity should be halted.

Reduce the Outcomes

The activity must be halted if there is sufficient probability of occurrence and the severity rate is great enough. Therefore, we must lower the possibility, the severity, or both in order to proceed.

  1. Change the manner in which the activity will be performed. Look for a different way to perform the task.
  2. Engineer the equipment to mitigate a possible Hazard.
  3. Apply different controls. There may be a better method of mitigating the Hazardous situation to reduce the likelihood or severity.

Reassess

Finally, reassess whether it is acceptable to continue once changes have been made to the activity.

Example

You are crossing the street. The speed limit is 35 mph. The traffic signal for the cross traffic has turned red and your walk sign says to proceed. The probability of getting hurt is low and the severity is also low because the traffic is stopping. In this instance, you may proceed.

In this next example you are crossing the street with a different set of circumstances . The speed limit is still 35mph. You are crossing in the middle of the block and traffic is heavy. The probability of getting hurt is likely, and the possible severity is great. You should not proceed in this instance.  It may be acceptable to proceed by reducing the probability and/or the severity. One mitigation factor may be to cross at the corner with the light. This reduces both the probability and severity.  Therefore, the risk is lowered and it becomes acceptable to proceed.

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