1. Risk Tolerance Factor # 6 Cost of Non-Compliance
Strategies for Understanding and Addressing
Risk Tolerance
Factor # 6 Cost of Non-Compliance
This presentation is 1 of 10 supporting packages for Lowering Risk Tolerance. This and the other 9 packages can be used at safety meetings, special meetings, group discussions etc. to communicate the details on how to address this influencing factor for risk tolerance. The ‘General’ presentation on Risk Tolerance should have already been provided before these individual modules are delivered.
This factor deals with the Cost of Non-Compliance.

2. Cost of Non-Compliance
10 Factors That Influence Risk Tolerance
Overestimating Capability/Experience
Familiarity with the Task
Seriousness of Outcome
Voluntary Actions and Being in Control
Personal Experience with an Outcome
Cost of Non-Compliance
Confidence in the Equipment
Confidence in Protection and Rescue
Potential Profit & Gain from Actions
Role Models Accepting Risk
When there is a high cost or penalty for not complying (e.g. not performing to the predetermined standard), a person may be more reluctant to take that risk.
A person’s decision to accept risk can be influenced by how high the cost of non-compliance will be. If the cost of non-compliance (e.g. taking a risk) is going to be very high, the person may decide to conduct themselves in the manner that will not result in the cost or penalty. As we go through this discussion on using the Cost of Non-Compliance as a method for reducing the acceptance of risk, it is very important to note that this factor is only one of the ten and must be used in conjunction with the others. It is not acceptable to chose this factor as a ‘favorite’ and to resort to punishment as the sole tool for reducing risk tolerance. This factor must be used selectively and must be used with an understanding of how to identify and classify performance issues (see Managing Personnel Performance Issues EMFOS Module # 5).

3. Cost of Non-Compliance
A greater cost of non compliance can lower risk tolerance.
Example:
A speeding ticket of $200 – may be viewed as acceptable by some drivers.
A ticket of $10,000 and confiscation of the vehicle
Would a driver be willing to accept that?
As the cost of non-compliance increases, the willingness to take the chance may decrease.
For Example:
If the cost of a speeding ticket is $200, a driver may accept that as a reasonable cost and be willing to accept that penalty for achieving the goal of getting there faster, for the ‘rush’ of driving at a high speed or simply to ‘get the job done’.
If the cost of a speeding ticket is increased to $10,000 and the penalty also includes the impoundment of the vehicle, the willingness to take that chance will be greatly reduced. This is an actually example from Ontario where signs are posted on the highways that state “Drivers exceeding the speed limit by more than 50 kmph are subject to a fine of $10,000 and confiscation of the vehicle”.

4. Cost of Non-Compliance
Commercial Passenger Aviation – Very high cost of non-compliance, strictly regulated - low tolerance for risk
Private Aviation – Minimal cost for non-compliance, minimal regulation, voluntary – significantly higher acceptance of risk
Another example of how this factor works comes from the aviation industry. This is a highly regulated industry where the cost of non-compliance to safety standards has a high financial consequence on three levels. First, fines for non-compliance can be extremely high including loss of license to transport passengers. Second, the financial loss associated with customers avoiding airlines with poor safety performance. And third, the cost of damage to this very expensive equipment. These high costs of non-compliance to safety standards ensure that airlines have low tolerance for risks.
Aviation risk experts report that some of these very same pilots with low risk tolerance while flying commercially, will accept considerably higher risk when flying privately. There is minimal enforcement and minimal penalties for non-conformance. (this factor overlaps with risk tolerance factor # 4 Voluntary Actions and Being in Control)
A discussion can be generated using this slide on why would the risk tolerance be different in the two different scenarios. Also, ask the question “Are there tasks that we do differently in our work place when we know we are being watched by a regulator or authority figure?”

5. Cost of Non-Compliance
Costs of non-compliance in our company can include costs at the corporate level and costs at the individual level.
Corporate:
Loss of ‘license to operate’
Loss of reputation
Fines, penalties
Other??
Supervisor/Manager/Technical:
Limitations on promotion
Individual Worker:
Loss of privileges (i.e. driving)
Limitations on jobs that can be done
Loss of pay
OH&S Stop Order
Costs for non-compliance can be addressed at three levels.
It is important to address the costs of non-compliance at all levels in the corporation, not just at the front line worker level.
The company as a whole can be impacted by external regulators through fines, penalties and revoking of the ‘license to operate’ (permission to be able to operate in that jurisdiction). Loss of the corporate reputation could be a cost where the company sells products.
Supervisors and managers who make decisions to accept higher risks or who simply allow higher risks to be taken, should know that there is a cost to them of non-compliance. This could mean limitations on promotion.
Individual workers must also know that there is a cost for non-compliance where the consequences of non-compliance are high. This may include limiting the worker from engaging in the task where the non-compliance occurred. In the case of driving, this may mean limiting or withdrawing the workers right to drive. The costs of non-compliance must be used in conjunction with knowledge of how to assess and deal with safety performance issues specifically EMFOS Module #5 Managing Personnel Performance Issues.

6. Costs of Non-Compliance
Strategies for using the cost of non-compliance as a means for reducing the acceptance or tolerance of risk:
Increase the cost of non-compliance on critical tasks:
Be selective and only apply this where the standard can always be applied (do not use this where exemptions or deviations to the standard exist or have been allowed).
Remove barriers that prevent the conformance to standards
Inadvertently rewarding non-compliance can be a barrier
Increase the reward for compliance
Incentives can be used as a positive motivator for compliance.
The principles of Managing Personnel Performance Issues (EMFOS Module #5) must be used in conjunction with this strategy for reducing risk.
The penalties or punishment for non compliance on critical tasks can be used. Before this is used, it must be determined that the standard can be applied consistently, that there are no barriers to compliance and that there are no inadvertent rewards for non compliance.
The penalties can be warnings, suspension, loss of privileges (i.e. Driving) for an individual or, at the corporate level, loss of a contract or work.
Sometimes a standard is not conformed to due to barriers. For example, the requirement to bump test a gas detector might not be done because the bump gas is not available. Ask the participants if they have other examples where conformance to a standard is not possible due to barriers.
Occasionally, the barrier may be an inadvertent reward such as positive reinforcement for finishing a job ahead of schedule. This may create incentive for short cutting and other non conformances.
Positive reinforcement for a task done safely, following the standards and with a low acceptance of risk must be reinforced. This can be significantly more effective and will help the long term conformance.

7. Exercise and Discussion on “Cost of Non-Compliance”
Are there standards we have in this group where the risk of injury warrants a high cost (penalty) for non-compliance?
Are there standards in this group that are difficult to conform to? What are the barriers to conformance?
Can you identify any examples from work or off the job where an increased cost of non-compliance has been effective in reducing the acceptance of risk?
The intent of this slide is to generate a group discussion on very specific issues in this work place on safety standards that are very important to the group. If the group needs prompts, lockouts can provide a good example. This is a standard that protects a worker directly and violation of that standard by another worker (i.e. removing someone else’s lock) would warrant a more severe penalty.
Use this discussion to also identify standards that are difficult to conform to or where there are barriers to conforming. It is important to understand the concept of ‘Erosion of Standards’ to support this discussion. See EMFOS Module #5 Managing Personnel Performance Issues.
Track and assign follow up responsibilities for actionable items.
What are we going to do about these?

8. Use Stop and Think ...
Is this the safest way to do this task! Would I be doing it this same way if my supervisor or the OH&S officer were watching?