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Risk Management, Measuring Benefit, and Costs of Safety

Posted By Robert Cormier, Tuesday, March 01, 2005
Updated: Saturday, February 16, 2013

From a presentation at the Canadian Section meeting.

Inspections—Necessity or Burden

There is a constant movement towards decreasing the cost of doing business both in the private as well as the public sector. This is not a new phenomenon but a mainstay of operating a business effectively and efficiently. There are costs for inspection programs that are a reality to an industry: permits, time delays, notification process and the inability to use new but safe technology. On the government side there is a balancing act between expenditures and income. Income equals taxes and no North American government wants to increase taxation, including user fees. We are in a period of reduced red tape and increased access to employment. The demand for decreased costs has no sacred cows and now includes all regulatory management systems. The reality is, your inspection program will be reviewed for right sizing or elimination. I am not an individual who likes to crawl on the bandwagon for the latest flavour of the month, but in this instance I have. Our salvation and not our destruction should lie within the concept of a full risk management program. We have a private sector demand to decrease costs and government’s demand to balance a budget, with the regulatory system caught in the middle. Safety must be paramount in our review processes with all programs based upon a defined unacceptable risk countered by a validated risk management process.

As inspectors we must be cautious not to allow our positions on this issue to be based on subjective reasoning. I once had a chief inspector berate me for even suggesting that inspections could be decreased or altered in scope. His reasoning, I believe, was based upon an opinion that his previous efforts were being called in question. This is certainly not my position, but I did come to realize that I could no longer meet the Public Safety Division’s legislated mandate solely through an inspection program.

What are the costs associated with inspection programs? The one we all hear about is the cost of meeting code requirements, especially when someone is caught doing the wrong thing (they do not reveal that information). We must be very cautious not to let this sector dictate what the regulatory process will be. We have all read the headlines of major and minor corporations who have not done the right thing. Risk management does not include accepting companies or individuals without proof of a commitment to public safety. This may be a motherhood statement, but defending any regulatory process must be based on objective proof and not subjective arguments.

There Will Always Be a Risk

How unsafe can this be? This question, though simple, is the starting point for any safety program review. I will attempt to state both sides of the equation—the uninformed manager responsible for budgets and good order, and the long-term well trained chief inspector.

In general the public today is extremely safe from incidents and accidents in relation to the turn of the 20th century. I often use the example of my short period as a deep-sea fisherman, 35 years ago. An old friend of the family taught me to pull up my hip boots if the boat was about to sink, not to save me, but so I would drown quickly and not suffer. Today, fishing boats are designed and operated to provide the crewmen a high level of safety, even in the perfect storm. Technology and inspections have created an expectation that there is little or no risk in life today, what most people do not realize is how we reached that milestone. As a result, apathy about safety has evolved; individuals increasingly believe they do not have a personal responsibility for their own safety. In this environment of individuals disregarding safety rules every day thus risking their own and others’ lives, the argument over the right level of regulatory management takes place.

The manager is informed that incidents are at an all-time low, modern technology has eliminated all the hazards, inspections have a low benefit and red tape is preventing the economy from growing. The chief has spent 20–30 years building what he personally considers to be the best system in the country, the number of violations found during each inspection proves how incompetent everyone else is and downsizing will decrease safety and will result in the ruination of the safety system. Who is right?

The insurance industry learned long ago that if the risk of payout was not properly measured, then bankruptcy occurred either when claims were higher than income or when premiums are overpriced. Public safety programs are now at the same point, we have a responsibility to measure and evaluate risk or face elimination. Not only do we have to measure the risk, we must also define the best solution to decrease the risk.

There are two standard measures for risk—probability and impact—however, government officials see one more, societal acceptance.

Probability should be the simplest equation as it is based upon historical data. The problem is that we depend upon the local night watchman to provide that data. Electrical risk relates to three issues: loss of power and finances, shock or electrocution, and fires. The first two have been tracked very well through lawsuits and hospital or coroners’ records. The third, as a fire official I am sorry to say, is not so simple. I continue to ask the question. Is the decrease in electrical fires related to better installations or better-trained investigators? One headline revealed that a Fire Marshal’s Office could not determine the cause of a fire as the electricity had been disconnected. We do know there is a risk with energized electrical equipment; it is, after all, a source of energy that can kill, injure and cause property damage unless it is properly built, installed and used.

The second question is what will the impact of an incident be? The fire in a shed caused by a homeowner doing his own wiring will not have the same impact as a negligent electrician wiring a self-serve service station. The risk of an incident is higher with untrained persons than with certified persons. The impact or cost is higher at some locations than others. The possible electrocution from a faulty GFI is greater than the inconvenience of a circuit breaker that activates and has to be reset.

The third measurement is society’s acceptance of the risk. The death of a child who puts a knife in the socket has more impact than the marijuana grower operator who is electrocuted while bypassing the meter. Try to pass a law preventing the sale of electrical construction material to anyone except a certified electrician. So even within the measure of risk, we have certain caveats that restrict our ability to objectively provide a solution.

Education, Engineering and Enforcement

Once an unacceptable risk has been identified, we now have to determine what is the most relevant means of decreasing the risk. We must accept that we are the informed party, but not necessarily the responsible party. Analysing the means of decreasing unacceptable risk requires an open mind and an objective process. I will use a couple of examples to attempt to provide some flow to the information.

Risk does exist and the first question should be, Can my agency’s activities prevent or even decrease the probability that an incident will occur? Individuals who steal power for drug operations are not concerned with your regulations or safety programs. We may be able to engineer a program that will identify increased power flows, but we will not prevent the electrocution of someone who is gambling that they can hook up to the main power lines. We educate the electrician so as to prevent situations from arising that will cause an electrocution created by a faulty installation. We also educate the public to use electricity properly. Advertisements were used to help decrease the number of electrocutions caused by radios falling into the bathtub. The first element of risk reduction is education.

We often think of engineering as being the process for planning large projects; this, however, is a small element of engineering. When electrical equipment is developed there is a process that requires the product to meet certain safety standards. The lower the standard of education for the user the safer the product must be. The homeowner is restricted to a plug which only enters the socket one way while the engineer uses calculations to determine a safe installation. We have even engineered the safety for homeowners by replacing fuses with circuit breakers so as to prevent over fusing. Education failed so we use ground-fault interrupters in the bathroom to prevent electrocution.

Enforcement is a reactive response to the situation. When I talk about enforcement I am referring to it in the purest sense. The inspector who helps through education or engineering during an inspection is not enforcing. Pure enforcement holds people accountable for having done something wrong. The police officer by being beside the road may prevent accidents or speeding just by their presence. Once the blue light comes on, police are in a reactionary mode. The lack of, or improper installation of a GFI, could result in fines or a lawsuit as a reactionary result.

So we have the three processes for decreasing risk: education, engineering and enforcement. It is important for us to remember that we have a responsibility to use our resources wisely. I have often used the term over control to describe some of our safety systems. The increased safety that is engineered into a system or increased education of trades persons and the public may have created some redundancy in the safety system. We are responsible to recognize where we can use one process—education—to offset inspection frequency. A number of jurisdictions use education and experience to set the inspection frequency for various firms.

We must, however, be aware of other changes to the education and engineering programs. There is a growing labour shortage especially in the skilled trades and the labour cost for certified personnel is growing. The demand to require persons who are competent just for the activity they are required to carry out is growing. Pulling wire and placing connection boxes does not require a certified electrician, according to these proponents. Computer cabling was once the realm of the electrician; more and more of this work is being done by computer cabling specialists. The major safety issue with cabling is not the installation, but the removal of the replaced materials.

The equipment certification process is under review to determine if it is a trade barrier and if it is cost effective. We in North America have come to rely on the CSA and UL labels to inform us that the electrical products we purchase are safe. There are a number of different programs related to product acceptance used throughout the world and each one works within its own environment. These include a supplier’s declaration of conformity, product testing by third parties, an engineer’s stamp for commissioning, or buyers beware. Each program is a valuable element for risk reduction if the environment within which they operate provides the right supports. For North America, we have a proven track record for regulated certification and testing programs. The cost is borne by the consumer as part of the purchase price. Other systems include costs for professional buyers and more government enforcement costs. Society in Europe has an expectation that corporations or individuals who do not ensure safety will be held accountable. Both the US and Canada have recently passed legislation holding corporations to a higher standard for their actions. We cannot simply say that one works better than the other but we must always review the full environment within which any safety system functions.

We have all noticed what occurs over time when police officers are not visible on the highways. There is a need for a visible and active enforcement program that is based upon accountability.

The danger is not that a decrease in effectiveness of the risk management program will come about by a decrease in inspections but that all three factors, education, engineering and enforcement, may be decreased to a level where a new unacceptable risk is created.

This warning is not to prevent us from using risk management concepts to address safety but to indicate to you that any program must be continually reviewed and altered. Databases of problems are critical to evaluating products or processes, but make sure the information is validated. Product certification is useless unless you participate by helping to remove products that you found to be unsafe and take part in the certification approval process. Providing a validated level of educational requirements to carry out a task is one thing, ignoring the role that trained technicians have in the safety system is another.

In summary, we have a choice to quantify and qualify what we are doing and adjust our regulatory program or have it done for us. Risk management is not the enemy, but one of the tools we have at our disposal to provide a fair and equitable regulatory program. The program must be flexible enough to respond to trends and new technology but firm enough to ensure the public safety system addresses unacceptable risks and meets society’s reasonable expectations.


Read more by Robert Cormier

Tags:  Featured  March-April 2005 

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