Sphera’s operational risk management (ORM) experts always have their fingers on the pulse of operational risk. They are instrumental in producing our annual Process Safety Report, which takes a deep dive into the factors that aid or interfere with effective process safety management. And they also keep watch on emerging trends in operational risk. Recently, they offered their insights on the ORM risks to watch for in 2024.
1. Labor shortages
One worrying trend is the labor shortage that companies continue to experience. Populations in industrialized countries are aging in greater numbers, which has many implications for businesses and policymakers. For companies, it represents the departure of skilled workers and a loss of expertise that younger workers can’t yet offer. In industries where process safety is critical, this loss can translate into lower productivity, and in worse-case scenarios, it can result in serious accidents.
Digital tools can capture and share expertise and lessons learned from senior workers, so this information is not lost when they retire. These tools can also provide robust controls and real-time visibility that enable managers to prevent hazards and incidents. Sphera’s ORM solutions offer capabilities that are essential for managing safety and productivity, especially when the labor supply fluctuates.
2. Failure to operationalize sustainability
Another key trend—and one that business leaders should try to avoid—is a failure to operationalize sustainability. Operationalizing sustainability requires companies to go beyond an ad hoc, piecemeal approach. They need to embed sustainability across their operations and acquire tools that enable them to measure, track and report their sustainability performance.
Why? Because customers, partners and the general public are calling on companies to reduce their GHG emissions and their impact on the environment while ensuring the safety of their employees and the communities in which they operate. Also, regulators in the EU, U.S. and several Asian countries are mandating climate-related and other ESG disclosures to provide stakeholders with transparent accounts of companies’ sustainability performance.
Companies will also need to demonstrate that they’ve addressed any sustainability areas in which they’ve fallen short. The EU’s upcoming Corporate Sustainability Due Diligence Directive (CSDDD) will require companies to rectify any negative impacts caused by their operations, those of their subsidiaries or their supply chains. Businesses that do not operationalize sustainability run the risk of reputational harm and noncompliance, which can come with fines and penalties. Our Corporate Sustainability software offers tools and capabilities that help companies advance sustainability across the organization and address the growing demands of regulators and stakeholders.
3. Supply chain compliance
Our ORM experts also identified supply chain compliance as a trend for 2024. While it’s closely related to operationalizing sustainability, it’s significant enough that it merits its own spot on this year’s list of risks. The CSDDD is just one regulatory initiative that applies to supply chains. Germany’s Supply Chain Due Diligence Act (LkSG); the Uyghur Forced Labor Prevention Act, enacted in the U.S.; and the U.K.’s Modern Slavery Act also compel businesses to closely monitor their supply chains for human rights violations and unethical practices.
Sphera continues to add to its range of supply chain risk management solutions—most recently through our acquisition of SupplyShift. These solutions vastly improve a company’s ability to manage its supply chain operations and comply with regional and global regulations. Our new Supply Chain Sustainability offering promotes greater supply chain transparency and more sustainable procurement practices. And our Compliance Incident Management solution performs real-time risk analysis and alerts supply chain managers to any infractions that should concern them. It also helps companies track remediation activities.
4. Digital ORM tools
There’s a thread that runs through these risks, which is the usefulness of technology in managing them. Digital ORM tools are widely available, and they provide powerful capabilities. They have advanced the practice of process safety management and ORM to the extent that resistance to them constitutes a risk.
When we surveyed operational risk and process safety management professionals last year for our Process Safety Report, we learned they believe that digital tools enable—or will enable—effective process safety management. Yet the level of technology adoption among the companies represented by these respondents does not match their support for digital tools. The costs associated with hazards and incidents that affect the safety of workers or assets can be astronomical. There is certainly a risk in failing to deploy solutions that can prevent or mitigate accidents in the plant, in the mine or on the pipeline.
Be sure to read our blog to learn about the other risks on this year’s list. And if you’d like information or advice on how to manage and mitigate the risks we’ve identified, please get in touch. It’s our mission to create a safer, more sustainable and productive world using a collaborative, customized approach, and we are ready to help with software, data and decades of expertise.
–Paul
