You’ve heard the saying, “With great risk comes great reward,” but we believe great reward comes from not having great risks. Makes perfect sense, right?
Of course, operational risk has been around for as long as there have been operations, but the level of risk sophistication has changed as technology has evolved and machines and such have gotten much more complicated. There are just a whole lot of things that could go wrong.
That’s why operational risk management (ORM) is the backbone of workplace safety and productivity. You can add process safety management to the mix, too, especially for organizations in hazardous industries. But—as we all know—incidents and near-misses that affect people, processes, operations and, ultimately, a company’s reputation and bottom line are still pervasive throughout organizations. Even signs that say things like, “We have worked XX days without a lost time accident,” are reminders that there was an incident at some point and there will probably be another in the future.
To combat risks to people, processes, assets, etc., ORM has been moving toward digitalization for the past several years with predictive and prescriptive capabilities to help prevent incidents before they can even occur.
The International Labour Organization says 374 million nonfatal work-related injuries occur each year. Keeping people safe is the most important aspect of any operational risk management initiative, and as we’ve said in the past: “Primum non nocere (first, do no harm)” applies to a workplace safety culture, too.
Additionally, what we are seeing today is technological innovation being sabotaged by people whose full-time “job” is to cause mayhem. While incidents affecting people are the prime concern, the number of ransomware attacks is on the rise, too. And any such attack on operational technology could have disastrous consequences for a company—or a community.
While compiling the list with Sphera’s Philippe Guillard, John Crosman and Simon Jones who have more than 75 years of combined ORM experience, we took all of this into consideration. So without further ado, here are the Top 10 Operational Risks for 2021 (in no particular order.)
1. Cybersecurity
Until recently, there was no way you would see cybersecurity on a list of operational risks, but the times they are a-changin’ quickly. Cyberthreats can mean disruptions throughout an organization or even a community. As Spark recently reported, separate cyberattacks against a meat company and an oil and gas organization wreaked significant havoc in a short amount of time. According to the Institute for Security and Technology, “Ransomware is no longer just a financial crime; it is an urgent national security risk that threatens schools, hospitals, businesses and governments across the globe.” No doubt. And hackers are continually looking for new and “creative”—for lack of a better term—ways of infiltrating an organization’s information. All it takes is one employee to click on the wrong link, and the problems can snowball in just a few moments. While antivirus software can help prevent attacks, Security and Vulnerability Assessment (SVA) can show companies what could happen if a successful attack were to occur to help the organization better prepare for such a scenario.
2. Maintenance
Every day, people go searching for parts in their inventory, but—without quality data—the search can be time-consuming, sometimes fruitless, often frustrating and many times quite expensive. Maintenance issues can lead to incidents whether it’s from parts that fail, productivity loss or even safety violations related to the work. Companies that cannot properly plan for keeping or acquiring the parts they need either waste money by “guess”-stocking parts or having to spend hours locating said parts within their own organization or externally. Predictive and prescriptive Maintenance, Repair & Operations (MRO) software has changed how companies ensure they have the parts they need at hand when they need them.
3. Risk Visualization
When an incident occurs, especially in a complex industry such as oil and gas, it’s almost always when a confluence of events occur, which is sometimes referred to as a “risk pathway.” Marsh’s annual “100 Largest Losses in the Hydrocarbon Industry” report is chock-full of examples. For example, according to the report, “In older plants, mechanical-integrity-related failures account for 65% of losses. Failure of piping becomes increasingly more prevalent as plants age.” Keeping a risk pathway from developing is no small task in an intricate organization such as a chemical plant or refinery, but being able to have a digital twin of the plant for risk visualization can help diagnose problems before they even develop. Additionally, having bowtie capabilities can help people easily visualize risk and ways to help mitigate it.
4. Contractor Safety
It’s not too surprising that contract work was stymied by COVID-19 in 2020 and into 2021, but as organizations begin to return to operations at full or at least fuller strength, the contract work will return, too. Of course, with any delayed maintenance, there is a chance for increased risk for workers—and contractors are already often on the frontlines when it comes to doing work in the hazardous industries. Another issue that contractors often have to deal with are related to shift-handover issues where information isn’t properly communicated to the new shift taking over a safety or maintenance project (more on this in a moment). Whether it’s metals and mining, building and construction or oil and gas, incidents continue happening to contractors; companies can and must do more to help these workers stay safe.
5. Shift Handover
While shift handover is certainly an issue for contractors, that doesn’t mean it’s not an issue for a company’s own full- and part-time workers as well. Without the proper software and processes in place, shift handover can turn into a game of telephone where information can easily be conveyed improperly and cause incidents in the process. On the other hand, proper communication can help prevent incidents and near-misses. Shift handover issues were at least partially to blame for some of the largest oil and gas incidents of all time, including Piper Alpha, Texas City, Buncefield and Deepwater Horizon.
6. Deferred/Delayed Turnarounds (COVID-19)
There aren’t many areas of our personal and professional lives that have not been affected by COVID-19, but delays in plant turnarounds could potentially lead to much greater risk. For one, any process hazard analysis (PHA) recommendations could easily be out of date if turnarounds or other maintenance-related areas are off-schedule. Plant turnarounds are huge undertakings that are often scheduled years in advance, so any delays could potentially lead to a dominolike effect where one delay leads to further delays based on losing one’s turn in line to bring in contractors. In some cases, there have also been changes put into place for how closely contractors and staff can interact as well. In 2020 in particular, we saw many turnaround delays, particularly in the oil and gas industry. One potential problem, especially for older plants, is corrosion. As Spark wrote earlier this year, a 2019 Philadelphia refinery explosion was found to have been caused by a pipe elbow that was in place since 1973 and had worn down to a hundredth of an inch.
7. Data Is the New Oil
Today’s global organizations are constantly collecting risk-related data, which is a great thing. The problem is collecting data and being able to use data are two different things—as is being able to share data among different business units. Factor in that more and more baby boomers are retiring and bringing their wealth of experience with them, and you start to realize how big of a problem data siloes can be. Siloed data is not a new problem, but this risk makes the list because we’re scratching our heads how this problem is still so omnipresent in industry, especially with all of the Industry 4.0 sensors and software solutions available. Risk assessment software allow companies to share incident and near-miss reports as well as other risk-related information while allowing users to mine the data for predictive and prescriptive opportunities. That’s why we think data is the “new oil.” The days of risk-related data captured with paper and pen or even spreadsheets should be going the way of the dinosaurs. And, yes, we realize birds and crocodilians are relatives of the dinosaurs, but at least they’ve been able to adapt to living in modern times.
8. Barrier Management
From the Great Wall of China to castles with moats to trenches during conflicts, humans have been erecting barriers to help protect themselves for thousands of years. It’s not too surprising that in hazardous industries barrier management is just as important to help prevent incidents. Barriers are a key area of the process safety fundamentals, and there’s lots of them to be found within many industries. Maintaining barriers and having visibility into their performance—preferably in a bowtie format that is easy to understand—at any given moment is a critical innovation that wasn’t available to previous generations. Today’s plants are complex, so barrier management is more important than ever to create a safer, more sustainable and productive operation.
9. Global Shortages
As we said, COVID-19 has wreaked all kinds of havoc, and that’s especially true throughout the supply chain. One recent report suggested supply chain issues could be in place through Christmas, and a computer chip shortage has hindered production in the auto industry for months. New cars are currently in short supply, and that limited stock is also driving up prices for used cars. Add a ship getting stuck in the Suez Canal to the equation, and you can see how important it is for companies to be as prepared as possible for supply-chain challenges. When critical maintenance is held up waiting for parts, or where availability of critical barriers or safeguards is impacted because of supply chain issues, each situation needs to be individually risk assessed, and mitigating measures need to be put into place and tracked until the barrier/safeguard is fully remediated. The cumulative impact of all these impairments on safe operations must be continually assessed and communicated.
10. Climate Change
One might not automatically correlate sustainability issues related to the planet with operational risk management, but the two travel in the same orbit. As the world continues to warm because of climate change, risks go up as well from wildfires, ocean and surface temperatures rising, and more. Earlier this year we saw just this scenario play out in India when melting glaciers led to a catastrophic event where it was reported that more than 200 people were killed. According to a report that appeared in the journal Science, “Human activities that intersect with the mountain cryosphere can increase risk and are common in Himalayan valleys where hydropower development is proliferating due to growing energy demands.” As environmental, social and governance (ESG) objectives become more and more critical to investors and the public at large, we will see the intersection of safety, sustainability and productivity play out in real time. Organizations cannot overlook sustainability-related risk when they calculate their overall operational risk because not only is the world watching but how we treat the world is also a catalyst for risk when it comes to climate change and its effects on people, assets and processes.
