WHS legislation across Australia imposes clear duties and obligations on business owners, managers and workers in relation to maintaining a safe workplace. Most managers with direct responsibility for staff, contractors or others have a sense of their role to ensure the workplace is safe, as well as an understanding that there could be personal consequences if they fail to do so. But what about the officers high up in the organisation, sometimes completely disconnected from the ‘point of risk’ workforce, but making decisions about budgetary allocations?
The positive duty of care requirement embedded within the model WHS legislation imposes a specific duty on ‘Officers’ and details the minimum due diligence requirements for compliance. Under the Australian Corporations Act an ‘Officer’ is defined based on their role and accountabilities, while the duty of care required by the ‘Officer’ under the WHS Legislation is to exercise due diligence to ensure the PCBU complies with its duties and obligations.
The discussion of resourcing as part of the due diligence requirements (Sec 27 of the WHS Act) draws the connection to those executive and management ‘Officers’ that determine or influence the budget allocated for WHS – and this would normally include the organisation’s CFO and Senior Managers.
A review of some of the most prominent WHS incident investigations internationally points to financial factors – such as ‘cost cutting’ in the form of reduced personnel, restrictive training budgets, an inferior standard of supplies / services, or operational pressures for increased productivity – contributing to catastrophic events such as Deepwater Horizon, Bhopal, Piper Alpha, and locally Esso Longford.
Some of the financial pressure points include:
- Budget allocation for routine and preventative maintenance is often stretched, with the resulting quality of the service delivery being impacted. The failure of routine or preventative maintenance is regularly highlighted as a one of the first contributing factors identified in the majority of workplace incidents – be they of a catastrophic scale or a single fatality. Given this, it could be asserted failure to maintain key plant or equipment is also failure to exercise due diligence in ensuring WHS;
- Restrictive training budgets, or the operational inability to make staff available for training, has a significant impact on staff awareness or reinforcement of safe operating procedures, and more importantly what to do to maintain safety when there is a deviation from these SOPs;
- Procurement practices primarily based on cost efficiencies may have impacts downstream with inferior-products requiring more maintenance, having a shorter life-span and an increased likelihood of failure. The same principle could be applied in terms of service provision;
- Operational strategies to enhance productivity (such as restructuring, work intensification and outsourcing) often expose gaps in due diligence considerations in relation to ensuring safe staffing levels for ‘point of risk’ personnel, and conducting effective consultation and cooperation processes, resulting in an emergence of workplace stress. These are typical causal or contributory factors for workplace incidents; and
- The failure to effectively consider Safety in Design impacts at the start of a project often results in the need for additional capital expenditure, however as the cost of modification and after-market retro-fits exponentially grows, there is pressure to justify the expenditure and quantify the ‘return’. This leads to the inevitable risk of compromise between safety outcomes and funding allocation.
There is no doubt that current budgetary accounting practices directly and indirectly contribute to workplace incidents, and have the potential to undermine the management of WHS risks. The requirements of the WHS Act provide guidance for ‘Officers’ to ensure the organisation’s due diligence requirements are met, and to prevent incident, injury or illness. An organisation’s CFO along with its Senior Management team, share a ‘duty’ to ensure that the resourcing provided for WHS is ‘adequate’ to enable the PCBU to comply with its duty of care requirements.
Please contact QRMC if you would like to have your corporate governance and due diligence process evaluated.