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RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Risk Management in the Shipping Industry Intertanko Vetting Seminar Miami, Florida Ben Poblete.

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Presentation on theme: "RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Risk Management in the Shipping Industry Intertanko Vetting Seminar Miami, Florida Ben Poblete."— Presentation transcript:

1 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Risk Management in the Shipping Industry Intertanko Vetting Seminar Miami, Florida Ben Poblete HSE Manager / Senior Risk Management Specialist Lloyds Register Americas

2 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Are Shipping Companies Managing Risks?

3 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Introduction / History The shipping industry is different from other modes of transportation due to the international nature of the industry (including the nationalities of the crew), the volume of hazardous material transported per shipment and the operation in a marine environment. Since the demand for ships are dictated by the international economic cycle it is apparent that a majority of the ships would be custom built, manned by crews with different nationalities, which can lead to difficulties in communications, and a management reluctance on incurring expenditures on safety. The international agreements or regulations have represented the lowest common denominator with regards to effective controls dealing with the health, safety and environment of the industry. Marine safety enforcement is performed by the state in which the vessel is registered; the flag state. The classification rules are intended to provide a proven basic design with some freedom for innovation using the principle of equivalence. - F.P. Lees Loss Prevention in the Process Industries 2 nd Edition

4 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Current Risk Management Practice High levels of risk International regulatory framework National standards Enforcement regime Risk-based approach in its infancy

5 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Risk Assessment / Management Mandatory ISM Code – Implicit EU Regulations IMO Flag Requirements Industry Best Practice – TMSA (Tanker Management and Self Assessment) – Mandatory!

6 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 ELEMENTS OF RISK MANAGEMENT (a) Identification of undesired events (b) Analysis of the mechanisms of the undesired events (c) Consideration of the extent of any harmful events (d) Consideration of the likelihood of the undesired events and specific consequences (probability/frequency). (e) Judgement about the significance of the identified hazards and estimated risks. (f) Developing and implementing decisions on the courses of action.

7 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 ELEMENTS OF RISK MANAGEMENT HAZARD IDENTIFICATION (a) Identification of undesired events (b) Analysis of the mechanisms of the undesired events (c) Consideration of the extent of any harmful events (d) Consideration of the likelihood of the undesired events and specific consequences (probability/frequency). (e) Judgement about the significance of the identified hazards and estimated risks. (f) Developing and implementing decisions on the courses of action.

8 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 ELEMENTS OF RISK MANAGEMENT RISK ESTIMATION (a) Identification of undesired events (b) Analysis of the mechanisms of the undesired events (c) Consideration of the extent of any harmful events (d) Consideration of the likelihood of the undesired events and specific consequences (probability/frequency). (e) Judgement about the significance of the identified hazards and estimated risks. (f) Developing and implementing decisions on the courses of action.

9 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 ELEMENTS OF RISK MANAGEMENT RISK (HAZARD) ANALYSIS (a) Identification of undesired events (b) Analysis of the mechanisms of the undesired events (c) Consideration of the extent of any harmful events (d) Consideration of the likelihood of the undesired events and specific consequences (probability/frequency). (e) Judgement about the significance of the identified hazards and estimated risks. (f) Developing and implementing decisions on the courses of action.

10 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 ELEMENTS OF RISK MANAGEMENT RISK ASSESSMENT (a) Identification of undesired events (b) Analysis of the mechanisms of the undesired events (c) Consideration of the extent of any harmful events (d) Consideration of the likelihood of the undesired events and specific consequences (probability/frequency). (e) Judgement about the significance of the identified hazards and estimated risks. (f) Developing and implementing decisions on the courses of action.

11 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 ELEMENTS OF RISK MANAGEMENT RISK EVALUATION (a) Identification of undesired events (b) Analysis of the mechanisms of the undesired events (c) Consideration of the extent of any harmful events (d) Consideration of the likelihood of the undesired events and specific consequences (probability/frequency). (e) Judgement about the significance of the identified hazards and estimated risks. (f) Developing and implementing decisions on the courses of action.

12 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 ELEMENTS OF RISK MANAGEMENT RISK MANAGEMENT (a) Identification of undesired events (b) Analysis of the mechanisms of the undesired events (c) Consideration of the extent of any harmful events (d) Consideration of the likelihood of the undesired events and specific consequences (probability/frequency). (e) Judgement about the significance of the identified hazards and estimated risks. (f) Developing and implementing decisions on the courses of action.

13 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Identify Assess Define means to reduce risk Establish priorities Allocate resources Communicate Monitor ELEMENTS OF RISK MANAGEMENT RISK MANAGEMENT

14 Lloyds Register Americas 16 th November 2005 Declaration of Goals and Objectives? Authorities DomainEngineering Domain Hazard Identification? Hazard Assessment? Hazard Evaluation? Formulation of Acceptance Criteria? Hazard Treatment – Prescriptive Requirements? Approval Monitoring Hazard Treatment – Prescriptive Solution CONVENTIONAL HAZARD MANAGEMENT PROCESS

15 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Authorities DomainEngineering Domain Hazard Identification? Declaration of Goals and Objectives? Hazard Assessment? Risk Evaluation? Formulation of Acceptance Criteria (Life Safety & Third Party) Risk Treatment – Performance Based Options Approval Monitoring Risk Treatment – Performance Based Solution PERFORMANCE BASED HAZARD MANAGEMENT PROCESS

16 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Reasons for development of Risk Assessment option Industry trends to Risk-based design Industry trends to Risk-based management of integrity in service Enables approval of novel arrangements Effort focused proportionately on critical areas Better fit with requirements of Safety Case / Formal Safety Assessment Perceived Industry preference

17 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Model-based Data-based Knowledge based Compliance based Decision based on increasing amount of information Decision includes projections and what-ifs Increasing complexity LEVELS OF RISK MANAGEMENT PROGRAMS

18 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 How Are Shipping Managing Risks? Re-active not Pro-active (After an inspection/audit or incident) Often not structured (based on experience of officers and crew) Specific assessments carried out independently not considering impacts on other areas of the Company

19 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 How Successful are We in Managing Risk Effectively ? Still thinking about it!

20 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Definition of Risk Management (BS4778) …the process whereby decisions are made to accept a known or assessed risk and/or the implementation of actions to reduce the consequences or probability of occurrence

21 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Principles of Risk Management What are the risks in shipboard operations? How often are you at risk? What are the consequences of an accident? What can you do about it?

22 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Business Management and Risk Management Business management is about maximising the chance of success Risk management is about minimizing the chance of failure Effective risk management requires structured risk assessment as an input

23 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Risk Management Model Management of risk in shipboard operations Control Procedure, Equipment Review Reactive monitoring Trends Investigation & corrective action Risk assessment Trends Inspection & corrective action Active monitoring

24 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Risk Assessment in Simple Terms What are the criteria? What can go wrong? How likely is it to go wrong? What happens if it does go wrong? Does it matter? What do we do if it does go wrong? Prevent it happening Reduce its frequency Mitigate its consequences

25 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Purpose of Risk Assessment To ensure that a careful examination of shipboard operations is carried out to determine: what can cause an undesirable event whether existing controls are adequate if risk levels are tolerable

26 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Objective of Risk Assessment Where risk levels are unacceptable, to identify and implement appropriate controls to reduce risk levels to as low as reasonably practicable.

27 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Expected Outputs of a Risk Assessment Minimisation of risk to people and the environment Improvement in operational performance Assist in establishing a responsible image within the marketplace Risk Assessment should be managed as a key business activity (KPI)

28 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 What Affects Operational Performance Accidents Near misses Unsafe ships Lack of a safety culture Lack of shipboard teamwork

29 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Where to Spend the Money Effective risk management requires effective risk assessment Minimising risk improves operational performance Budgets are limited so need to know where to spend money to improve safety

30 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Hazards Identified using Different Approaches % Actual Total HazardsID from Prescriptive ID from Structured Risk ID from Unstructured Risk

31 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Risk Assessment Process Inventory of shipboard operations Identify hazards Identify existing controls Determine risk Decide if risk is tolerable Implement controls Review

32 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Stage 1 - Inventory of Shipboard Operations Deck Engine Hotel Cargo Operation type Vessel integrity Routines Mooring Navigation Operation group Men on deck in heavy weather Watchmen doing rounds in darkness Lowering/launching of lifeboat/MOB boat Entering cold weather Operation

33 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Which Operations do You Assess First? Operations with the potential for loss which could most harm your business Operations where most accidents occur

34 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 What Causes Accidents? ROOT CAUSE LACK OF CONTROLS CONSEQUENCES Falling, slipping, fire, explosion, oil spill, collision, grounding, systems failure etc. ACCIDENT DIRECT CAUSES Unsafe Acts Unsafe Conditions INDIRECT CAUSES Job Factors Personal Factors

35 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 To make operations safe, CONTROLS have to be in place Controls are put in place to minimise or negate against the effects of HAZARDS Therefore the first step in creating a safe working environment is HAZARDS identification ROOT CAUSE LACK OF CONTROLS

36 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Reporting and Investigating Minor Incidents BIRD (1969)TYE / PEARSON (1974) SERIOUS OR DISABLING FATAL OR SERIOUS MINOR INJURIES MINOR PROPERTY DAMAGE INCIDENTS (NO INJURY OR DAMAGE) FIRST AID CASES PROPERTY DAMAGE INCIDENTS UNKNOWN NUMBER OF HAZARDS

37 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Pump failure Equipment failure Operator error Process failure Environmental extreme conditions Control valve failure Instrument air failure Understanding Root Cause

38 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 How do you make risk management effective?

39 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Link Risk Management to Performance (KPIs) To time (man-days) lost due to accidents To days off-hire/breakdowns To non budgeted maintenance costs (mean time to repair) To PSC (Port State Control) results To financial results To insurance claims To crews! Retention / Satisfaction

40 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 New ILO Regulations What are the Risks? Good test maybe? Financial Costs to the Company Country of Ownership Flag Crew Nationality Crew Contracts New Requirements Ship Requirements Overview Of Company Possible Scenarios Known Changes What If Changes Procedures Shipboard Activities

41 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 Summary Proactive Take an Overall / Global View (across project / operations groups and including life-cycle) Training / Guidance Commitment

42 RISK MANAGEMENT Lloyds Register Americas 16 th November 2005 What do you think?


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