JUNE 2019 RISK MANAGEMENT
35
weeks because unauthorised
components had somehow
entered the supply chain. Also
last year, a major fire at an
automotive industry supplier
substantially affected production
at General Motors, Fiat Chrysler
and Mercedes-Benz. It also
led to the temporary layoff of
3,600 employees at the Ford
Motor Co. and a suspension
of production. Neither the fire
nor the unsanctioned iPhone
components could have been
predicted from the LTI rates.
Employee safety is without
doubt the most important
focus of risk management, yet
tracking of incident rates and
other lagging indicators alone
fails to take into account and
help organisations to prepare
for longer-term risks that may
threaten their future and their
staff. The DSS survey findings
nonetheless show that many
of the executives questioned,
particularly those at board
level, are not looking at leading
indicators of future risks but
instead rely on lagging indicators
to assess how they did in the
last quarter.
According to the survey,
at boardroom level, leading
indicators such as asset
reliability, supply chain integrity
and process safety are still the
least-discussed topics. This lack
of a forward-looking, long term
risk management strategy means
the majority of executives are
neglecting potentially looming
major incidents.
If the Dreamworld theme
park in Australia, for example,
had paid closer attention to near
misses and interpreted them
as early warning signs, could
it perhaps have prevented the
devastating accident on the
Thunder River Rapids ride in
October 2016? A more holistic
risk assessment and management
approach that looks further than
the next quarter would give
senior managers, shareholders
and investors a more realistic
idea of long-term risk.
A plethora of processes
So how are executives actually
attempting to avert threats to
their operations? Based on the
survey findings, they appear to
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Nicholas Bahr of
DuPont argues
for a holistic
approach to risk
management
employees equally do not understand the overall
risks to the entire organisation. Clearly, business
leaders must do more to promote two-way
communication and engagement between senior
management and front-line staff.
Looking at the bigger picture
The executives who took part in the 2018 DSS
global operations risk management survey
undoubtedly want to reduce the risks facing
their organisations, but they also admit to not
managing those risks entirely effectively. A more
holistic approach across the entire value chain that
identifies, addresses and tracks risks and integrates
risk management into key functions would serve
them better and should allow them to:
● Identify potential threats and vulnerabilities;
● Prioritise the organisation’s risk focus in line
with its business profile;
● Develop strategies to mitigate risks and
build capabilities;
● Eliminate silos and ensure risk management
is part of key functions in the organisation;
● Ensure the continued effectiveness of risk
management elements through regular reviews.
An integrated risk management that
addresses processes & technology, capabilities
& competencies, mindsets & behaviours, as well
as governance & management, has proven its
effectiveness for many of the companies with
whom we work. By increasing their awareness
of long-term risks and implementing a holistic
operational risk management programme,
company executives should be able to mitigate
the many risks that threaten business continuity
and performance, enhance the resilience
of their organisation and improve
decision-making processes to ensure
they keep their organisations both
safe and profitable.
rely on adding more processes:
almost half (44%) of survey
participants admit to gaps
in existing risk management
systems, saying that this poses a
challenge for their organisation.
In an attempt to address this and
achieve better performance, they
expand existing or introduce
new processes. This approach
contradicts another outcome
of the survey, in which 82%
acknowledge that processes and
systems alone are not enough
to manage risk and safeguard
operational and business
performance. In fact, adding new
procedures often just increases
operational complexity, which
not only brings additional risks,
but is unsustainable in the
long term. CEOs around the
world have said that their main
concern are operations that are
too complex. If they are adding
rather than simplifying processes
this could be interpreted as a
lack of ideas on how to improve
risk management.
The great divide
The 2018 study points to a
significant disconnect between
the boardroom and the shopfloor
when it comes to managing risk.
They are not alone. Last year, BT
was fined for putting the public at
risk during roadworks in London,
with the judge highlighting the
“clear disconnect between BT
and its contractors”, consistently
leading to safety breaches.
Although the vast majority
(83%) of the executives
interviewed for the survey realise
they need to influence the hearts
and minds of workers if they
want to achieve and sustain good
operational performance – in
other words maximise efficiency
and minimise losses – only
11% feel they are doing so. No
surprise then that a quarter of
the survey respondents believe
front-line staff are not aligned
with leadership on the top
risks facing the organisation.
In fact, 55% admit that even
senior leadership is out of sync
on risk management. While
executives do not
fully appreciate
the risks that
exist on the
shopfloor,
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