Preventing Catastrophe in Organizations. The ConocoPhillips IRIS Seminar Series January 22, 2015

Transcription

1 Preventing Catastrophe in Organizations The ConocoPhillips IRIS Seminar Series January 22, 2015

2 Slides and Research Reports are Available Slides: Research Reports: Slides:

3 Are we as safe as we think? Every leader in an organization with hazardous operations believes they have adequate measures in place to prevent catastrophe. Usually they are right.

4 Should you sleep well tonight? Catastrophes are exceedingly rare Many organizations have sophisticated risk management systems Boards and senior management are more attentive to risk than they have ever been Regulators are very concerned about catastrophic risk and yet.....

5 We are rarely wrong, but it matters Photo: USCG BP Deepwater Horizon / Macondo April 20, crew members killed Four million barrels of oil spilled Financial cost to BP $60-90 billion ($11-17 billion fine) All the technical failures can be traced back to management errors by the companies involved in the incident. Chief Counsel s Report

6 Lasting pain from known risks Fukushima Daiichi Nuclear Plant, March 11, ,000 people were nuclear refugees in 2013 Japan s entire nuclear power industry still shut down until tonnes of contaminated water added to on site storage every day in workers on site , all but 200 working on water Cleanup expected to take 40 yrs. There was a worry that if the company were to implement a severe-accident response plan it would lend momentum to the anti-nuclear movement TEPCO

7 New Year s Eve 2012 Kulluk Grounded, Sitkalidak Island, Alaska December 31, 2012 Shell rig under tow from Dutch Harbor, Alaska to Seattle Rig was a total loss, no spill No injuries, no fatalities Photo: USCG The consequences of inadequate management of risks impacts all operators, not just the specific company or party involved. USCG April among the most treacherous winter waters in the Northern Hemisphere The tow planners did not recognize the risks, nor adequately plan for a towing evolution of such a unique vessel during the height of winter in the Gulf of Alaska. USCG Investigation Report, April 2014

8 Summer 2013 Lac-Mégantic, PQ July 6, people killed Downtown gutted Montreal, Maine & Atlantic Railway in receivership "You always think of something you could have done that you didn't do, but were you unreasonable in how you ran your business up to that point? I think not in this case. I think we were following industry practice. Edward Burkhardt, CEO MM&A,

9 How to prevent catastrophe in your organization? Research project done in Expert group of operations, technical and executive leaders who had a reputation of managing projects and companies with catastrophe potential with no drama Participants resident in Canada, US, Britain, Europe; experience world-wide 23 members of the Expert Group

10 Research Overview: Delphi Study To download reports:

11 Expert Group used in the research Sectors Offshore drilling Pipelines O&G production Oilsands Nuclear power High speed trains Construction Refining Regulatory Locations Alberta New Brunswick Europe UK USA Sample of Titles (23 Participants) Business Leader, Operations CEO Chief Reservoir Engineer Corporate Director Director of Engineering, Major Projects GM SAGD Major Projects GM Refining Manager Process Safety Principal Structural Engineer Project Manager Visiting Professor VP Midstream VP Operations & Engineering VP QHSET VP SAGD Well Engineering Manager

12 Barriers to Preventive Action List 4-5 key barriers that make it difficult to build preventive action into a team or organizational culture.

13 Key barriers

14 Failure to perceive risk Inadequate risk assessment systems and processes Short term focus. Everybody looking for quick wins but not correcting systemic issues Normalization of deviance. Experienced personnel pass these habits on to younger personnel as on the job training : Complacency. Silos. Teams are blind to the ripple effect of decisions

15 Leadership failure Senior leaders. Lack of buy-in, particularly from senior management Flawed management systems. Lack of clear accountability, discipline and strategy.

16 Production pressure Delay to schedule. It takes time to plan. Cost of preventive action. It is only when these measures fail that tracking is possible

17 CATASTROPHE FUNDAMENTALS

18 Catastrophe fundamentals In retrospect, after catastrophe hits, it is always evident that warning signs were not treated seriously, that preventive action could have arrested the problem with very little cost. But.... Catastrophe is a very low frequency occurrence. This adds significant challenges to prevention Performance on personal safety is a poor predictor of catastrophe potential Prevention of major accidents depends on defence-in-depth: a series of barriers to keep hazards under control Catastrophe happens when all these barriers fail simultaneously, or in rapid succession

19 Catastrophes are rare this is a problem for prevention Most people will exit their careers with no direct experience of catastrophe Stability is a cause of instability Hubris: It can t happen to me / us Experience is so dispersed it creates learning disabilities We have to learn, before the incident

20 Personal safety performance is a poor predictor of catastrophe potential Photo: USCG On the morning of April 20, 2010 two executives each from BP and TransOcean flew out to Deepwater Horizon Their purpose was to recognize seven years of work with no lost time accident At 9:45PM a blowout and explosion hit the rig All four executives were rescued 11 crew members died, 3-4 million barrels of oil spilled

21 BP Macondo Procedures BP and TransOcean had detailed procedures for walking on a stairway (use the handrail) and walking with a cup of coffee. TransOcean was starting a new campaign to increase awareness of the risk of hand injury and the risk posed by objects dropped from height. BP had no detailed procedure for plugging a well with cement, testing the cement bond, monitoring the well after the cement plug is set.

22 Texas City Refinery Explosion March 23, 2005 Explosion & fire in BP refinery 15 people killed Nearly 200 people injured Safety measured in terms of total recordable injuries Texas City was doing very well by this measure: its OSHA recordable injury rate was at an all time low. Moreover, the rate was one-third the industry average. Andrew Hopkins, Failure to Learn (2008) Loss of containment incidents increased 52%, Numerous fires at the refinery, not tracked as a safety issue

23 Personal safety / process safety Personal or occupational safety hazards give rise to incidents such as slips, falls, and vehicle accidents that primarily affect one individual worker for each occurrence Process safety hazards give rise to major accidents involving the release of potentially dangerous materials, the release of energy (such as fires and explosions), or both. Process safety incidents can have catastrophic effects and can result in multiple injuries and fatalities, as well as substantial economic, property, and environmental damage The Report of the BP US Refineries Independent Safety Review Panel (Baker Report), January 2007

24 BP Macondo: Failure of Defence-in-Depth

25 RISK SCORECARD

26 Should you sleep well tonight? It s complicated No one person in your organization can really know the answer We can show you where to look

27 Capabilities needed to prevent catastrophe

28 Organizational readiness to prevent catastrophe Risk Scorecard Sample Results Regulator RMS 5 4 Systems to Protect Diverse Input Ops performance 3 Compliance & Incident Process Redundancy Management of Change Emergency Response 3rd Part Review Asset integrity Sincere Mgmt. Support Procedures Preventive Actions Taken Ops Discipline Staff, Leaders Competence Structure & Vision Governance Strategy Aligned Open Communication RMS Risk Culture Operational Excellence Regulator

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30 Where do you start?

31 Key messages from the sample capabilities Prevention of catastrophe affects every nook and cranny of the organization RMS is a vital component, but it is not even remotely adequate on its own RMS must be surrounded a healthy risk culture, operational excellence and a skilled regulator You cannot outsource the responsibility for preventing catastrophe It is difficult to measure organizational readiness

32 The bar on each element is high Staff and leadership competence. Key barrier to preventing catastrophe is weak management who cannot comprehend the risks. Sincere management support. Board and senior Executive team walking the talk about RMS all the time even if it costs more, reduces earnings, disappoints shareholders or analysts or results in dismissal of a senior executive. RMS can t be seen as being implemented only when it doesn't hurt. Preventive action taken when appropriate. being the bearer of bad news is not popular. Open communication about risk. Everyone is accountable for awareness and attention to risk warning signs WITHOUT fear of reprisal.

33 All 20 capabilities are essential and hard to measure Nature is very good at discovering the one fatal flaw in the organization Weakness in any required capability can open the pathway to catastrophe It is a challenge to measure competence, sincere management support, when appropriate, comprehensive, open communication and discipline, yet each of these capabilities must be robust in order to reduce the risk of catastrophe

34 HEALTHY RISK CULTURE OR CULTURE OF RISK?

35 Assessing the risk culture Components of the Risk Culture RMS Risk Culture Operational Excellence Regulator Sincere management support Preventive actions taken when appropriate Open communication about risk Governance Organizational strategy and systems aligned with risk management Organization structure and vision

36 Assess your organization s risk culture Rating Sincere Management Support. Board and senior executive team walk the talk about RMS Preventive actions taken when appropriate. Evidence the organization has taken appropriate preventive action to control risks Open communication about risk. People discuss concerns about risk in an open manner, without fear of reprisal Governance. Active governance of risk in place and widely understood. Board committees in place, sound decision making processes at executive and Board levels. Organization strategy and systems aligned with risk management. Risks identified and managed through normal organizational systems and processes such as capital allocation, budgeting, bonus structure and objective setting. Organization structure and vision. Organization structure enables risk identification and management within functional areas and across the organization. Long term vision aligns with requirements of risk management

37 Healthy risk culture: the bar is high Board and Senior Executive team walking the talk about RMS all the time even if it costs more, reduces earnings, disappoints shareholders or analysts or results in dismissal of a senior executive. RMS can t be seen as being implemented only when it doesn't hurt.

38 REGULATOR S ROLE

39 Role of the regulator

40 Specifics of the regulator s role in question The regulator is a key player Our research group did not have a clear consensus about the specific role The regulator can increase the risk of catastrophe The regulator can increase costs without reducing risk More work needs to be done on defining the regulator s role in preventing catastrophe

41 Regulator s questions Risk Blindness: do they see and acknowledge the risks? Risk Deafness: do they hear and act on signals of risk within their system? Risk Takers: do they care?

42 SUMMARY

43 Will this be a good day? Preventing catastrophe requires a whole company response You have to have confidence in the system, and the people in the system Defence-in-depth can protect and build complacency Work that strengthens capacity to prevent catastrophe strengthens the whole organization

44 You are still vulnerable When you have 32,000 people worldwide working in various countries I mean, you can have the best systems in place, you can have the best training in place; you re still vulnerable. Pierre Shoiry, CEO, WSP Global Inc. Globe & Mail,

45 All 20 components must be strong Risk Scorecard Sample Results Regulator RMS 5 4 Systems to Protect Diverse Input Ops performance 3 Compliance & Incident Process Redundancy Management of Change Emergency Response 3rd Part Review Asset integrity Sincere Mgmt. Support Procedures Preventive Actions Taken Ops Discipline Staff, Leaders Competence Structure & Vision Governance Strategy Aligned Open Communication RMS Risk Culture Operational Excellence Regulator

46 Slides and Research Reports are Available Slides: Research Reports: Slides: THANK YOU

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