In our last edition of Insight, we talked about Risk Appetite and Risk Tolerance and how these terms are commonly interchanged when discussing risk management. In this edition, we will explore a somewhat related theme in relation to risk assessments and ask, how do we know we have accurately assessed the risk of a hazard?
According to ISO 31000 Risk Management Standard, risk is defined as “the effect of uncertainty on objectives”. This effect can be either positive or negative, or both, and because we can’t predict the future, there is always the chance that things won’t always go according to plan. ISO 31000 recognises that we all live and operate in an uncertain world and that every step we take has an element of risk to it. And, although there are many different risk assessment tools used widely across the risk management world today, when it comes down to it, the assessment process itself is simply a function of consequence and likelihood. Did I say simple…?
This article won’t go into the entire process of identifying, assessing and controlling risks, as these components of risk management are well known and understood. However, examining the part cannot be done without the context of the whole, and similarly the outcome of a risk assessment needs to be affirmed within an understanding of the whole risk management process and context. This might be illuminated by an example: a lot of organisations and people, if you asked them, would say that driving a motor car is a high-risk activity, and that it’s the most dangerous thing that they will do each day. But what does your gut say about this ? Does this feel right?
The national road toll and road safety campaigns continually remind people that driving a car, can and has resulted in over 1100 people tragically losing their lives each year on Australian roads. Not downplaying the impact and devastation to families when car accidents occur, however, when consideration is given to the number of vehicles, the number of people in these vehicles and the number of hours spent driving each year, the number of fatalities per driving time period (similar ,say, to the common WHS frequency rates of per 1 million hours) is extremely low.
Like most things in life, the answer isn’t always black or white. There are people whose job involves being on the road in heavy transport, delivery drivers, people movers, couriers, sales reps and many others whose driving hours, and therefore risk exposure is certainly higher than that of the general population. On the other hand, the advancement in technology that has introduced a myriad of car safety features from seat belts to airbags to collision detection and avoidance systems, together with regulatory compliance measures such as random breath testing, speed cameras and an increased police presence on the roads, has significantly reduced the potential consequence of a fatality occurring from a motor vehicle crash. Particularly in those higher speed zones where the majority of road fatalities occur. So, is driving a motor car really a high-risk activity? What does your gut say now? Does this still feel right?
Earlier the risk assessment process as a function of consequence and likelihood was mentioned. Whilst this is essentially true, understanding the surrounding context, and of course the effectiveness of the range of risk control measures is a critical part of this assessment. Can you imagine driving to work in a car these days with no seat belts, no traffic lights, no regular maintenance and repair, no speed limits, no keeping left on the road, no need for a driver’s licence? A gut feel assessment of that situation would surely suggest that this really would be a high-risk! Today, however, with all these (and more) risk controls in place, is it accurate to say that driving is still high-risk? What does your gut say?
The regular references throughout this article to our “gut feel” have been deliberate. It’s common to be told to “trust your gut” and if something doesn’t feel right, then it probably isn’t. Similarly, it can be worth listening to your gut when it comes to risk assessments. It’s that intangible factor that usually comes with experience that says, hang on, something doesn’t feel right about this. But does all this really matter in the process of conducting organisational risk assessments? Well, yes, it does.
Conservative risk assessments where the risk levels are assessed as higher than what may be considered reasonable can hamstring an organisation from performing its day-to-day operational activities. If everything is assessed as High or Extreme, work activities typically don’t commence, senior managers are called, further expenditure and time is needed to introduce more controls and things come to a grinding halt. Conversely, risk assessments that result in risk ratings lower than what may be considered reasonable can see work commence with little or no controls in place and can expose an organisation to a level of risk higher than what its Risk Appetite or Risk Tolerance principles deem acceptable. Neither outcome is desirable.
When undertaking risk assessments, it is worth applying the gut feel test to the outcome of the risk assessment. The question to the group involved in the risk assessment that says “does that feel right?” is worth asking as a secondary check that your gut-feel against the assessment is in line with your risk appetite and risk tolerance principles. If the risk assessment result doesn’t feel right, check if something is off in the consequence, likelihood or controls data that has fed into the assessment. As Dennis Denuto says in that iconic Australian film, The Castle, “it’s the vibe of it”.
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