ALL HAZARD RISK MANAGEMENT -
BEYOND SAFETY TO THE BOTTOM LINE ©
A decade ago, the hot topic in management circles was Quality with a capital Q. Quality programs touted improving customer satisfaction by setting appropriate standards, empowering workers and measuring results. Sound management practices with an updated spin. Now ISO certification represents the commitment to "getting it right the first time." Grounded in employee involvement, All Hazard Risk Management - Beyond Safety to the Bottom Line © complements existing programs. A powerful tool in the pursuit of excellence, this program helps organizations identify, prioritize and manage the hazards that threaten their success.

In today's hyper competitive climate, cost control and productivity increases are critical. Getting a handle on recurring cost is relatively easy; there is history to guide your efforts. But managing risk - and the associated costs of unusual events, can be much more challenging. Successful risk management requires a team effort driven by a culture of cost consciousness. All Hazard Risk Management, Beyond Safety to the Bottom Line © is a program designed to get employees to care as much about cost control as management does.

In the course of our work, we have frequently found organizations and businesses facing hazards that they were either unaware of, or ill prepared to deal with. These hazards often posed significant risk, sometimes to the very viability of the enterprise. What was lacking was a management process to focus appropriate attention on the threat to success that these hazards posed. Impressed by the success of safety programs in reducing physical hazards during the past two decades, PFA Consulting decided to apply safety methodology to all hazards, expressing the results in terms of the "bottom line." If cost savings are important to you, allow us to give you a brief overview of our program.

Did you ever wish that everyone in your organization were as concerned about cost as you are? Here's an idea - if you want your employees to be more cost conscious, make them your partners in risk management. Risk management is all about controlling avoidable costs. Risk management partners help you identify and control the costs associated with hazards to your success. More importantly, the process of risk management helps build a culture of thorough, cost conscious decision-making that will improve the performance of any organization.

Since risk management begins with the identification of all those hazards that place your objectives at risk, including your entire organization significantly multiplies the power of this process. Comprehensive identification of as many "stumbling blocks" as possible gets your whole team involved and cost conscious. An increased sense of ownership and accountability are important byproducts of this process. The goal is for everyone to realize that they can directly affect your bottom line by controlling avoidable costs. When employees assume cost-ownership of their responsibilities, organizational performance increases.

The program begins with the development of a resource protection plan. This document is customized to complement your existing management programs and is designed to help you comprehensively identify, prioritize and manage the hazards that threaten your organization. We emphasize workforce involvement in this process and recognize that risk management is the responsibility of each employee and vendor. Everyone is accountable for this team effort.

The plan works like this. First using our process to identify a list of hazards, we next assess their relative importance. The logic here is familiar, because you use it every day to assess personal risk. Whenever the walkway is slippery or there is thunder in the distance. Every time you drive in bad weather or eat a strange food. It's become so automatic that you may not do it consciously, but the process is there. It is why you have survived in a hostile world. You ask yourself: What is the chance that this hazard will result in an unwelcome event and if it does, what will my consequences be? Based on your assessment, you choose to avoid, eliminate, mitigate or insure against the risk that the hazard represents. Your intent is to choose a strategy that lowers the chance or cost of a problematic outcome. When you formalize and extend this same process to the workplace, the result is the same. Decision-making improves and costs are better controlled.

The risk assessment code is a simple way to prioritize risk. We recommend it as a tool to help you focus on hazards that are really important. While the principle is simple, the process can be as complex as you prefer and it can be integrated with your existing management systems. We present this technique to illustrate an important aspect of our all hazard risk management program.

When the hazards threatening your success have been identified, they need to be assessed. We do this by considering two factors. The first is likelihood of occurrence. This value can be intuitively estimated, reasoned through experience or derived using a number of analytical techniques. While a full range of determinations is possible, we normally categorize them into four groups - ranging from "unlikely" to "probable" - based on thresholds that you set.

Once the likelihood of occurrence has been estimated, the severity of the unwanted event must be determined. We recommend that severity be expressed in monetary terms. This focuses on cost and normalizes all hazards to a common denominator for basis of comparison. It also provides an interface between this process and your budget. We usually recommend four levels of impact. You have to carefully choose the category thresholds to make them meaningful to your business. A severe impact for a small business may be only a minor impact for a large corporation. A severity level I for a small business may equate to a severity level IV for a larger corporation. Again, four categories - based on levels of severity that are significant to you - will usually suffice.

The results of this exercise are related using a matrix to assign a risk assessment code. To accomplish this, the probability categories are matched with the corresponding levels of severity. They are arranged so that a high probability combined with a severe impact gives the highest priority risk assessment code, RAC 1. A four by four matrix produces five RAC outcomes. While you can vary the number of outcomes by changing the number of categories, thereby changing the size of the matrix, we think that five priority outcomes is a reasonable number to work with.

Each hazard that you assess will be assigned a RAC. The RAC will then be used to prioritize the risk each hazard presents to help you decide on appropriate management attention and strategy. Best of all, once you've created this prioritized list, it will be possible to focus your management attention appropriately and drain that swamp.

Risk management logic prioritizes attention on the most serious hazards. This is where the formal process can be most helpful. We all suffer to some degree from placing inappropriate attention on the latest crisis. The idea that "when surrounded by alligators, it's hard to remember that you set out to drain the swamp," is well grounded in fact. The challenge is to clearly compare hazards that seem to be "apples and oranges" in the workplace, set management priorities and stick to them.

All Hazard Risk Management - Beyond Safety to the Bottom Line © helps organizations and businesses look at areas that may not have previously had full risk management attention. Subjects such as protecting office equipment and supplies, safeguarding information systems and company data now receive the same rigorous treatment as traditional safety hazards. And since no business runs without healthy, productive employees, there are losses associated with human factors to consider. After all, what good does it do to have a safe manufacturing operation but lose the business to a sexual harassment judgment?

Is all hazard risk management worth your commitment? Competition and a challenging economy are pressuring profit margins, making controllable losses increasingly difficult to absorb. Beyond the direct dollar costs of a mishap, there may be a myriad of additional ancillary costs including overtime, lost productivity, replacements, customer dissatisfaction and increased insurance premiums. When you consider the total cost, it's easy to see how a comprehensive loss control program can quickly pay for itself. All Hazard Risk Management - Beyond Safety to the Bottom Line © brings leadership, employees and vendors together in a powerful process to help control avoidable cost. Use it to advantage your organization in an increasingly competitive market, control cost and improve your bottom line.