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FAQ on Risk Management

In this FAQ on Risk Management, I will point you to some lessons where you will get some answers to basic questions.

Lessons on this Topic

Welcome to Risk Management 101, where we’re going to go through these basic concepts of risk management. We’re going to break it down into the constituent parts and then we’re going to build it up again and show you how it’s done.

So what is this risk analysis stuff all about? What is ‘risk’? How do you define or describe it? How do you measure it? In Risk Basics I explain the basic terms.

Risk Analysis Programs – Design a program for any system in any application. You’ll be able to:

  • Describe fundamental risk concepts;
  • Define what a risk analysis program is;
  • and much more…

If you don’t find what you want in this FAQ on Risk Management, there are plenty more lessons under Start Here and System Safety Analysis topics. Or just enter ‘risk’ into the search function at the bottom of any page.

The Common Risk Management Questions

Click here to see the most Commonly-asked Questions

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Mil-Std-882E Safety Analysis

System Safety Risk Assessment

Learn about System Safety Risk Assessment with The Safety Artisan.

In this module, we’re going to look at how we deal with the complexity of the real world. We do a formal risk analysis because real-world scenarios are complex. The Analysis helps us to understand what we need to do to keep people safe. Usually, we have some moral and legal obligation to do it as well. We need to do it well to protect people and prevent harm to people.

You Will Learn to:

  • Explain what a system safety approach is and does; and
  • Define what a risk analysis program is; 
System Safety Risk Analysis.

Topics: System Safety Risk Assessment

Aim: How do we deal with real-world complexity?

  • What is System Safety?
  • The Need for Process;
  • A Realistic, Useful, Powerful process:
    • Context, Communication & Consultation; and
    • Monitoring & Review, Risk Treatment.
  • Required Risk Reduction.

Transcript: System Safety Risk Assessment

Click here for the Transcript on System Safety Risk Assessment

In this module, on System Safety Risk Assessment, we’re going to look at how we deal with the complexity of the real world. We do a formal risk analysis because real-world scenarios are complex. The Analysis helps us to understand what we need to do to keep people safe. Usually, we have some moral and legal obligation to do it as well. We need to do it well to protect people and prevent harm to people.

What is System Safety?

To start with, here’s a little definition of system safety. System safety is the application of engineering and management principles, criteria, and techniques to achieve acceptable risk within a wider context. This wider context is operational effectiveness – We want our system to do something. That’s why we’re buying it or making it. The system has got to be suitable for its use. We’ve got some time and cost constraints and we’ve got a life cycle. We can imagine we are developing something from concept, from cradle to grave.

And what are we developing? We’re developing a system. An organization of hardware, (or software) material, facilities, people, data and services. All these pieces will perform a designated function within the system. The system will work within a stated or defined operating environment. It will work with the intention to produce specified results.

We’ve got three things there. We’ve got a system. We’ve got the operating environment within which it works- or designed to work. And we have the thing that it’s supposed to produce; its function or its application. Why did we buy it, or make, it in the first place? What’s it supposed to do? What benefits is it supposed to bring humankind? What does it mean in the context of the big picture?

That’s what a system is. I’m not going to elaborate on systems theory or anything like that. That’s a whole big subject on its own. But we’re talking about something complex. We’re not talking about a toaster. It’s not consumer goods. It’s something complicated that operates in the real world. And as I say, we need to understand those three things – system, environment, purpose – to work out Safety.

We Need A Process

We’ve sorted our context. How is all this going to happen? We need a process. In the standard that we’re going to look at in the next module, we have an eight-element process. As you can see there, we start with documenting our approach. Then we identify and document hazards. We document everything according to the standard so forget that.

We assess risk. We plan how we’re going to mitigate the risk. We identify risk mitigation measures or controls as there are often known. Then we apply those controls to reduce risk. We verify and confirm that the risk reduction that we have achieved, or that we believe we will achieve. And then we got to get somebody to accept that risk. In other words, to say that it is an acceptable level of risk. That we can put up with this level of risk in exchange for the benefits that the system is going to give us. Finally, we need to manage risk through the entire lifecycle of the system until we finally get rid of it.

The key point about this is whatever process we follow, we need to approach it with rigor. We stick to a systematic process. We take a structured and rigorous approach to looking at our system.

And as you can see there from the arrows, every step in the eight-element sequence flows into the next step. Each step supports and enables the following steps. We document the results as we go. However, even this example is a little bit too simple.

A More Realistic Process

So, let’s get a more realistic process. What we’ve got here are the same things we’ve had before. We’ve established the context at the beginning. Next, there’s risk assessment. Risk assessment consists of risk identification, risk analysis, and risk evaluation. It asks ‘Where are we?’ in relation to a yardstick or framework that categorizes risk. The category determines whether a risk is acceptable or not.

After determining whether the risk is acceptable or not, we may need to apply some risk treatment. Risk Treatment will reduce the risk further. By then we should have the risk down to an acceptable level.

So, that’s the straight-through process, once through. In the real world, we may have to go around this path several times. Having treated the risk over a period of time, we need to monitor and review it. We need to make sure that the risk turns out, in reality, to be what we estimated it to be. Or at least no worse. If it turns out to be better- Well, that’s great!

And on that monitoring and review cycle, maybe we even need to go back because the context has changed. These changes could include using the system to do something it was not designed to do. Or modifying the system to operate in a wider variety of environments. Whatever it might be, the context has changed. So, we need to look again at the risk assessment and go round that loop again.

And while we’re doing all that, we need to communicate with other people. These other people include end-users, stakeholders, other people who have safety responsibilities. We need to communicate with the people who we have to work with. And we have to consult people. We may have to consult workers. We may have to consult the public, people that we put at risk, other duty holders who hold a duty to manage risk. That’s our cycle. That’s more realistic. In my experience as a safety engineer, this is much more realistic. A once-through process often doesn’t cut it.

Required Risk Reduction

We’re doing all this to drive risk down to an acceptable level. Well, what do we mean by that? Well, there are several different ways that we can do this, and I’ve got to illustrate it here. On the left-hand side of the slide, we have what’s usually known as the ALARP triangle. It’s this thing that looks a bit like a carrot where the width of the triangle indicates the amount of risk. So, at the top of the triangle, we’ve got lots of risks. And if you’re in the UK or Australia where I live, this is the way it’s done. So there will be some level of risk that is intolerable. Then if the risk isn’t intolerable, we can only tolerate it or accept it if it is ALARP or SFARP. And ALARP means that we’ve reduced the risk as low as reasonably practicable. And SFARP means so far as is reasonably practicable. Essentially, they’re the same thing – reasonably practical.

We must ensure that we have applied all reasonably practicable risk reduction measures. And once we’ve done so, if we’re in this tolerable or acceptable region, then we can live with the risk. The law allows us to do that.

That’s how it’s done in the UK and Australia. But in other jurisdictions, like the USA, you might need to use a different approach. A risk matrix approach as we can see on the right-hand side of this slide. This particular risk matrix is from the standard we’re about to look at. And we could take that and say, ‘We’ve determined what the risk is. There is no absolute limit on how much risk we can accept. But the higher the risk, the more senior level of sign-off from management we need’. In effect, you are prioritizing the risk. So you only bring the worst risks to the attention of senior management. You are asking  ‘Will you accept this? Or are you prepared to spend the money? Or will you restrict the operational system to reduce the risk?’. This is good because it makes people with authority consider risks. They are responsible and need to make meaningful decisions.

In short, different approaches are legal in different jurisdictions.

Summary of Module

In Module Two, we’ve asked ourselves, ‘How can we deal with real-world complexity?’. And one way that’s developed to do that is System Safety. System Safety is where we take a systematic approach to safety. This approach applies to both the system itself – the product – and the process of System Safety.

We address product and process. We need that rigorous process to give us confidence that what we’ve done is good enough. We have a realistic, useful and powerful process that enables us to put things in context. It helps us to communicate with everyone we need to, to consult with those that we have a duty to consult with. And also, we put around the basic risk process, this monitoring and review. And of course, we analyze risk to reduce it to acceptable levels. So we’ve got to treat the risk or reduce it or control it in some way to get it to those acceptable levels. In the end, it’s all about getting that required risk reduction to work. That reduction makes the risk acceptable to expose human beings to, for the benefit that it will give us.

This is Module 2 of SSRAP

This is Module 2 from the System Safety Risk Assessment Program (SSRAP) Course. Risk Analysis Programs – Design a System Safety Program for any system in any application. You can access the full course here.

You can find more introductory lessons at Start Here.

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Safety Analysis Start Here

SSRAP Module 1 – Hazard and Risk Basics

Learn Hazard and Risk basics with The Safety Artisan.

So what is this risk analysis stuff all about? What is ‘risk’? How do you define or describe it? How do you measure it?

In this free session, I explain the basic terms and show how they link together, and how we can break them down to perform risk analysis. I understand risk and that allows me to explain it in simple terms. I’ve used all my 20+ years in the business to help me unpack the jargon and focus on what’s really important.  

You Will Learn to:

  • Describe fundamental risk concepts.
Recap: Risk Basics

Topics: Hazard and Risk Basics

  • Risk & Mishap;
  • Probability & Severity;
  • Hazard & Causal Factor;
  • Mishap (accident) sequence; and
  • Hazards: Tests & Example

Transcript: Hazard and Risk Basics

Click here for the Transcript on Risk Basics

Let’s get started with Module One. We’re going to recap on some Risk basics to make sure that we have a common understanding of risk. And that’s important because risk analysis is something that we do every day. Every time you cross the road. Every time you buy something expensive. Every time you decide whether you’re going to travel to something, or look it up online, instead. You’re making risk analysis decisions all the time without even realizing it. But we need something a little bit more formal than the instinctive thinking of our risk that we do all the time. And to help us do that, we need a couple of definitions to get us started.

What is Risk?

First of all, what is Risk? It’s a combination of two things. First, the severity of a mishap or accident. Second, the probability that that mishap will occur. So it’s a combination of severity and probability. We will see that illustrated in the next slide.

We’ll begin by talking about ‘mishap’. Well, what is a mishap? A mishap is an event – or a series of events -resulting in unintentional harm. This harm could be death, injury, occupational illness, damage to or loss of equipment or property, or damage to the environment.

The particular standard we’re looking at today is covering a range of different harms. That’s why we’re focused on safety. And the term ‘mishap’ will also include negative environmental impacts from planned events. So, even if the cause is a deliberate event, we will include that as a mishap.

Probability and Severity

I said that the definition of risk was a combination of probability and severity. Here we got a little illustration of that.

Probability is; how likely is this thing to go wrong? How likely is this thing to happen?

And severity is; How significant is this event? This can vary in seriousness. From death to injury, illness, property damage or equipment loss, damage to the environment, or monetary loss.

And to be honest, we can apply or define risk any way we want. It doesn’t have to be a Safety Risk. We could be thinking about Financial Risk, Reputational Risk, whatever it might be. But what you see there with the little matrix is we measure risk. And whether we say the risk is high, medium or low, or whatever scheme we use. A combination of high severity and high likelihood is going to result in high risk. At the opposite end of the scale, the low probability that a low impact event is going to happen, we would call a low risk.

That’s what we mean by this combination of probability and severity. We put them together and we can measure risk in, to be honest, whatever way we choose to do so. This is a very simple example.

Safety Risks: Hazards

In safety, we have another concept. One that gives us a much finer degree of control over how we’re thinking about risk. We have this concept of hazards. As it says, a hazard is a real or potential condition that could lead to a mishap. It’s not the mishap, it’s a sort of an intermediate stage, as we will see. And the mishap can result in death, injury, property damage, damage to the environment.

Then there’s also this thing called causal factors, or causes. It might be one or several mechanisms that could trigger the hazard. Or they could lead to the hazard, which in turn can lead to a mishap. So the causal factor or the cause can trigger the hazard and then the hazard can lead to the mishap.

(Mishap) Accident Sequence

Here we have an illustration of an accident sequence or a mishap sequence if you prefer. Let’s not get hung up on terminology. So, we may have many causal factors on the left-hand side of this bow tie diagram. Any one of these factors may lead to a particular hazard. A single hazard we’re looking at here. And then that hazard may lead to a range of different consequences.

Not all these consequences are going to be bad. Not all the consequences are going to result in a mishap. There may be lots of consequences where there is no mishap, no accident, no harm whatsoever. There’s going to be a range of possible consequences. What I would like to take away from this diagram is one thought. That thought is ‘Yes, we can have causes leading to a hazard’ – this sort of pinch point in the middle. And from that hazard and number of consequences can arise.

Now that thought is important. It’s a very powerful concept because it helps us to reason about accident sequences. Also, it helps us to do some much more sophisticated work that would otherwise be possible.

Tests for a Hazard

There are three tests, that I know of, for a hazard. The first two are saying the same thing in different ways. We can think of a hazard as being both necessary and enough for harm to occur. We need the hazard to be present before harm can occur, but the hazard is enough for harm to occur. In other words, once the hazard is present, nothing else unusual needs to happen for harm to occur. Once the hazard is there, nothing else needs to go wrong for somebody to get hurt. Normal events can lead to a mishap once the hazard is present. Another helpful way of thinking about it is ‘hazard is an accident waiting to happen’.

Then the third on this list, we can think of a hazard at the point at which we lose control of something. It might be an energy source that we lose control of. It might be something toxic. It might be a physical piece of equipment that we’ve lost control of or a vehicle. It might be a substance. Whatever it might be, we’ve lost control and now somebody could get hurt.

So, those are some tests for a hazard and some different ways of thinking about hazards.

Example of a Hazard

But I always think it’s helpful to have an example. Let’s imagine we’ve got a causal factor. We’ve got some oil that is leaking from its container.

And we can imagine the hazard. The oil has got onto a walkway. Or pavement or a sidewalk or whatever you want to call it. It gets on to an area that human beings would walk on, as the name implies. It’s normal. So once the oil is on the walkway, nothing else unusual needs to happen for there to be an accident. But it doesn’t make the accident inevitable. Because if nobody comes along, there can be no accident. If somebody comes along, but they see the oil and they step over it and avoid it. Or even better, they warn other people about it and tear it up – but that’s another story. But the accident, the mishap is not inevitable.

One of the combinations that is possible is that we get a mishap. A person comes along, doesn’t see the oil, steps on it, slips, and hurts themselves. All these things have to happen in a sequence in this accident sequence for the mishap to occur. For people to get hurt. So there we have a little summary of those risk concepts that we need to get a hold of.

Summary of Module

We’ve covered risk and mishap, probability and severity, hazards, and causal factors. We’ve looked at the mishap or accident sequence, looked at hazards, and at some tests for what makes up a hazard. Including how we tell where the hazard is in the sequence? Where is it between cause, hazard, and consequence, the hazard is? We looked to an example of this in the module.

From this module, we have a common understanding of risk. This will form the foundation for everything that we’re going to do with risk from now on.

This is Module 1 of SSRAP

This is Module 1 from the System Safety Risk Assessment Program (SSRAP) Course. Risk Analysis Programs – Design a System Safety Program for any system in any application. You can access the full course here.

You can find more introductory lessons at Start Here.