threats and opportunities that can impact on the company's ability to achieve its ..... Marsh and McLennan Group, The 100 largest losses 1974â2013: Large ...
Paper ref no: HazAus2015/1535
Lessons learned from teaching about risks and impacts in industry Maureen E Hassall Associate Professor - Risk University of Queensland St Lucia, Brisbane, 4072 Robert Hannah Senior Lecturer University of Queensland St Lucia, Brisbane, 4072 Paul Lant Professor Chemical Engineering University of Queensland St Lucia, Brisbane, 4072
Abstract Modern industry is facing increasing internal and external complexity, performance pressures and technological and social change. To survive in this world of change, organisations have to extend their traditional siloed risk management practices beyond just addressing the things that threaten safety and environmental performance to all the risk factors that impact strategic decisions, operating performance and other key business metrics [1]. In response to this changing industrial need, The University of Queensland has reviewed and redesigned the risk courses it delivers to fourth year chemical engineering students. The redesigned courses (CHEE4002 and MINE4200) extend the focus of risk beyond just process hazard identification and analysis techniques to the analysis of risk as it relates to the management of human factors, projects, contractors, the environment, the community and other stakeholders, and to engineers practicing as professionals. The redesigned courses have now been run for two years and over this period a number of lessons have been learned and refinements made. These lessons include 1) Representing the course using visual frameworks so students see the connection between the material taught and overall business objectives, 2) Tailoring the instructional material to build the type of knowledge required to do quality risk assessments, and 3) Using subject matter experts from industry to present the different workshops. This paper outlines the course content and concludes with a discussion of learnings from the past two years of delivering and refining the course. Introduction Industry today is faced with an increasingly complex and rapidly changing business environment. Sustaining operations requires understanding and managing the risks and uncertainties “that matter” – the threats and opportunities that can impact on the company’s ability to achieve its strategic objectives. A summary of the risks that are important as obtained from a survey of public information available on the internet is shown in Table 1. These risks extend beyond occupational health, safety and environmental risks usually addressed by risk courses. To address the ranges of risks present in today’s industrial environment, organisations have to extend their traditional risk management practices beyond just addressing the things that threaten safety and environmental performance to all the risk factors that impact strategic decisions, operating performance and other key business metrics [1]. “Today’s complex environment requires an even stronger capability to master and optimize risk management” [2].
Paper ref no: HazAus2015/1535 In response to the changing industrial context, The University of Queensland has reviewed and redesigned its chemical engineering risk courses: CHEE4002 which is taught to approximately 125 fourth year chemical engineering students and MINE4200 which is taught to approximately 25 fourth year chemical-metallurical engineering students. In doing so we hope to begin to address the “widening divergence between risk management as traditionally practiced and the growing expectations from senior management and their boards of directors as to what it should provide. . . to become increasingly strategic in support of organizational prosperity” [3]. In this paper we described the redesigned Risk and Impact courses and outline the lessons learned teaching and refining these courses over the last two years. Table 1: Top 10 Risk Concerns for Industry Hazardous Industry Risks Oil and Gas (ey.com) 1
Access to reserves
2
Mining and Metals (ey.com) Capital allocation and access
Overall Business Risks (ey.com)
(marsh.com)
Pricing pressure
Legal or regulatory shifts
Uncertain Margin Cost cutting energy policy protection and and profit productivity pressure improvement 3 Cost Resource Market risks containment nationalism 4
Worsening fiscal terms
(agcs.allianz.co (www.aon.com (www.kpmg.co m) ) m)
Business Economic Regulatory interruption, slowdown/slow pressure/ supply chain recovery changes in risk regulations Litigation or Natural Regulatory/legi Reputational claims catastrophes slative changes risk (e.g. storms, floods, quakes) Regulatory Fire, Increasing Credit/market/ compliance explosion competition liquidity risk
Social license Economic risk: Brand/reputati Changes in Damage to Geopolitical to operate weaker/ more on legislation and reputation/bra risk (e.g. volatile world regulation nd Eurozone crisis) growth outlook 5 Health, safety Skills shortage Managing Economic Market Failure to Supply chain and talent and skill conditions stagnation or attract or disruptions environmental shortages decline retain top risks talent 6 Human capital Price and Regulation and Workforce Loss of brand Failure to Information deficit currency compliance health and value or innovate/meet security/fraud volatility safety reputation customer needs 7 New/ Capital project Expansion of Business Intensified Business Disruptive unfamiliar execution government’s continuity/ competition interruption technology operational role crisis mgt challenges execution 8 Climate change Sharing the Emerging Talent Cyber crime, IT Commodity Data concerns benefits technologies availability failures, price risk governance espionage and quality 9 Price volatility Infrastructure Political shocks Competitors Theft, fraud, Cash flow/ Legal risk access corruption liquidity risk 10 Competition Threat of Sovereign debt: Business Quality Political risk/ IT from new substitutes fiscal austerity disruption deficiencies, uncertainties infrastructure technologies impacts serial defects
Paper ref no: HazAus2015/1535 The courses The Risk and Impact fourth year chemical engineering courses (CHEE4002 and MINE4200) are structured as a series of weekly 3 hour workshops. There are three main themes that run through all workshops which are as follows: 1. In order for organisations’ to sustainably deliver optimised operational performance, professional engineers must make decisions in the midst of uncertainty and incomplete information. 2. Taking a risk-based approach helps focus attention on the things that matter. It can help identify the range of factors (human, social, environmental, financial) that positively or negatively impact organizational performance and the tradeoffs needed to deliver sustainable operations. 3. Professional engineers need to understand the range of risks and impacts faced by industry and by themselves as professional engineers as well as the modern risk management approaches and tools that can support risk-based decision making. In addition to these main themes, each workshop is focused on a particular topic as outlined below. Workshop 1: Introduction to Risk Management Objectives: • Introduction to ‘Risk and Impacts in the Process Industries’. • What is risk and how to express it – an introduction to core risk terminology. • Why learning about risk is important for professional engineers. • Understanding that risk management needs to consider the interface between people and engineered systems. • Understanding the importance of learning from incidents and using what was learned to improve our ability to manage risk. Workshop 2: Risk Management Fundamentals Objectives: • Understanding components of risk – threats, opportunities, barriers, etc. • Understanding ISO 31000 and prospective and retrospective risk management approaches. • Legal and regulatory requirements associated with risk management. • Introduction to risk assessment techniques – HAZID, RAM, Bowtie. Workshop 3: Interpreting P&IDs and Safety Culture Objectives: • A structured approach to P&IDs and using them to inform risk assessments and incident analysis. • Understanding safety culture and the role it can play in delivering improved OH&S performance. • Understanding the cultural maturity/ladder model and doing a cultural survey. Workshop 4: Humans and risk Objectives: • Understanding the contribution that human performance has on risk in hazardous industries. • Introduction to human factors. • Understanding that good engineering design is not just about preventing human error, it must also be about enabling successful human control of all situations including beyond-design situations. Workshop 5: Risk Management Tools and Techniques Objectives: • Experience doing three different risk assessment techniques – HAZID, HAZOP and SAfER. • Gain appreciation that different Risk Management Tools focus of different aspects of risk.
Paper ref no: HazAus2015/1535 Workshop 6: Incident Investigation Objectives: • Understanding the purpose of conducting incident investigations. • Understanding the process for doing quality investigations. • Introduction to incident investigation/representation techniques – Timeline, 5 whys analysis, Accimap, HFACs, and Bowtie Analysis Workshop 7: Projects and Contracting Objectives: • Risks management across the whole project lifecycle. • Risks associated with project management. • Contractor risks – both from a company and contractor perspective Workshop 8: Social Impact Objectives: • Why do we care about social impact and what is social licence to operate? • Stakeholder analysis and social impact assessments. • Contextualise social impact within the broader risk framework and within you professional engineering accountabilities. Workshop 9: Environmental risk Objectives: • Understanding environmental risks and impacts. • Environmental law and environmental impact statements. • Identification and management of major environmental risks. Workshop 10: Professional risk Objectives: • Understanding the nature and complexity of the professional world you are entering. • Understanding professional ethics, competency, and performance and how they relate to obligations, accountabilities, and responsibilities. • Understanding professional risks. Workshop 11: Sustainability Objectives: • What is sustainability and how is it linked to risk management? • Summarising and reiterating how the entire course content fits within sustainability framework. The CHEE4002 and MINE4200 courses have been running, in this format, for two years. Over this period of time a number of lessons have been learned about teaching risk and impact courses. These lessons are described in the next section. Lessons Learned The main lessons learned from teaching risk and impact courses to fourth year chemical engineers are as follows: 1. Representing the course using visual frameworks so students see the relationships between the workshops and the connection between each workshop and the course objectives. 2. Tailoring the instructional material to build the type of knowledge required to do quality risk assessments. 3. Using subject matter experts from industry to present the different workshops. Each of these lessons are explained in more detail below.
Paper ref no: HazAus2015/1535 Visual representations used in the risk and impact courses. To help students understand the overall course and the relationship between each workshop and the overall course and organizational objectives, we created two visual frameworks as shown in Figure 1 and Figure 2. We use Figure 1, to highlight that risk is the uncertainty that matters and it is managed by human decisions and actions as shown in the inner green ring. Human decisions and actions impact on and are impacted by the risk management tools and techniques selected, influences and advice provided by others, and professional ethics and standards that specify the quality of output produced as shown in the middle blue ring. The decisions, actions, and work produced to manage risks and uncertainty impacts and is impacted by an organisation’s human performance, technical performance, financial performance and its ability to comply with legal and regulatory requirements as shown in the outer red ring. Lastly the internal workings of an organization, as shown in all three rings, impacts and is impacted by external factors including community and social factors, human health and safety, asset security, economic conditions, and environmental conditions.
Figure 1: Engineering sustainability in process operations We use the pillar diagram as shown in Figure 2 to describe the scope of modern risk management. At the bottom of the diagram are the foundations that underpin modern risk management. These include its fundamental definitions, first principle concepts and core approaches. Sitting on top of the foundations is the base level of risk management which consists of complying with professional, ethical, legal and regulatory requirements. The middle of the diagram shows the pillars which represent the range of internal factors that need to be managed in order for an organization to achieve its objectives. A riskbased approach is needed to ensure that these factors, and the tradeoffs between them, are managed in such a way as to reduce the likelihood of negative outcomes and increase the likelihood of positively outcomes. Sitting on top of the pillars are the external factors that need to be managed if an organization is to achieve its objectives. In the diagram these factors have been labelled ‘stakeholder and reputational management’. At the top or apex of the diagram is the objective of risk management work and of organisations’ themselves – that is to achieve sustainable operational excellence.
Paper ref no: HazAus2015/1535
SUSTAINABLE OPERATIONAL EXCELLENCE
ASSET PROTECTION
COMMERCIAL PERFORMANCE
ENVIRONMENTAL IMPACT
3RD-PARTY MANAGEMENT
TECHNICAL PERFORMANCE
HUMAN WELL-BEING
STAKEHOLDER & REPUTATION MANAGEMENT
PROFESSIONAL, ETHICAL AND LEGAL CONSIDERATIONS FOUNDATIONAL DEFINITIONS, CONCEPTS AND APPROACHES Figure 2: The Scope of Modern Risk Management in Process Industries (red dashed line represents scope of CHEE4002 and MINE4200 courses)
Paper ref no: HazAus2015/1535 Tailoring the instructional material to build the type of knowledge required to do quality risk management In refining the course we draw from the work of Aristotle and the teaching practices of Oliver and Dennison [4]. From these sources, we use a three-tiered system to describe the different types of engineering knowledge: 1. Underpinning knowledge and understanding - episteme (systems of knowledge) and sophia (book smarts). 2. Engineering tools – techne (applying knowledge). 3. Professional practice – phronesis and praxis (practical wisdom and thoughtful doing). Traditional engineering courses tend to focus on building episteme, sophia and techne. The risk and impact courses have been designed to enhance the Aristotelian concepts of phronesis and praxis. Phronesis involves practical wisdom or “context-dependent knowledge and it guides practitioners to make choices and find solutions good for man” [5]. Praxis is about practical action or “practical, thoughtful doing with the goal of action” [4]. The courses aim to maximize phronesis and praxis by getting the students to try different risk management approaches both in class and as part of their assessments as shown in Table 2. It is hoped that focusing the courses on phronesis and praxis based learning will enhance students’ ability to transition into professional practice.
Table 2: Risk and impact course content broken down by knowledge type
Using subject matter experts from industry to present the different workshops Having industry practitioners present the workshops provided an opportunity for the students to learn from the practical wisdom of subject matter experts. These experts were able to take each topic and teach the students “the things that matter” to industry and to process engineers. The experts were also able to share stories of relevance to enhance knowledge acquisition and to help the students learn from others
Paper ref no: HazAus2015/1535 experiences – both good and bad. Informal feedback suggests that the contributions made by industry practitioners are valuable and a memorable part of the course.
Summary A paradigm shift in risk management is beginning, which according to EY [1], is 1) Tied to the increasingly complex world in which companies now operate, 2) Based on the awareness that uncertainty is embedded in ( and impacts) everything we do, and 3) Focused on both capturing upside opportunities as well as protecting the business. To help prepare graduate chemical and metallurgical engineers for this paradigm shift and for the professional work they will face, The University of Queensland has redesigned their fourth year risk courses. The courses – CHEE4002 and MINE4200 – have been extended beyond the traditional hazardprevention focus of risk management to include all factors that can positively or negatively impact an organisation’s objectives. The courses start with teaching the fundamentals and first-principles of risk management and then show how these apply to the different sources of risk including human, technical, environmental, financial and social. Teaching about systemic risk or risk at an enterprise level can be enhanced by providing visual frameworks that create mental models of the factors and how they can interact in ways that impact strategic objectives. Teaching about risk can also be enhanced by focusing on instructional material that promotes the acquisition of phronesis and praxis – practical wisdom and thoughtful doing. Finally a valuable way for fourth year engineering students to learn about the risk challenges that they may face as graduate professionals is by listening to wisdom of industry practitioners.
References 1. 2. 3. 4. 5.
EY, Expecting more from risk management: Drive business results through harnessing uncertainty. 2014, Ernst & Young Global Limited: UK. KPMG, Expectations of risk management outpacing capabilities - It's time for action. 2013, KPMG International. Marsh and McLennan Group, The 100 largest losses 1974–2013: Large property damage losses in the hydrocarbon industry 23rd edition. 2014, Marsh and McLennan Group: USA. Oliver, P. and W. Dennison, Dancing with dugongs: Having fun and developing a practical philosophy for environmental teaching and research. 2013, University of Maryland US: IAN Press. Kirkeby, I.M., Transferable knowledge: an interview with Bent Flyvbjerg. Architectural Research Quarterly, 2011. 15(01): p. 9-14.
