Operational Risk Management – From lagging to leading Indicators

As chemical plant operations are typically associated with handling, producing and disposal of hazardous materials, people, asset and environmental safety has been on the agenda of manufacturing executives for a long time. Overall safety requirements are primarily driven by local regulatory needs and by plant specific products and chemical processes. In response to this, many chemical plants over the last years have established their individual frameworks and safety architectures, based upon best of breed point solutions or legacy IT applications with focus on compliance and rather lagging key performance indicators such as number of incidents per period.

However, following ICIS News, the recent past clearly evidenced that accidents in the chemical industry can have a devastating effect “and, consequently, led to changes in legislation. Also, the financial impact could be significant and easily reach several 100 M of US$ as penalty for safety violations. So “just being compliant” and reporting lagging indicators is not enough. A paradigm shift from a rather responsive and EHS centric view of the world towards a more proactive and holistic approach with focus on Operational Risk Management is required. Besides alignment of maintenance work with real time status of equipment, systematically assessing risks and managing skill sets and behavior of workers is moving more and more into the focus. This means building layers of organizational and procedural protection to avoid human error and prevent these errors from evolving into severe incidents. From an architectural standpoint, this requires establishing integrated processes and an IT platform tying together EHS with key elements of Risk Management, Enterprise Asset Management, Human Resource Management, Safety Audit Management and operational change management. Along with that, new leading indicators related to process safety, safety culture and management of change as proposed by the Center for Chemical Process Safety have started replacing retrospective lagging indicators.

Please share your view with us. How much has your company embraced this shifting paradigm and adapted from lagging to leading operational risk indicators?