The way we work is undergoing a massive transformation. Today’s workplaces are remarkably different from what we could have imagined even three years ago. This is due to a web of complex challenges, including the pandemic, supply chain disruption, cyberthreats, geopolitical tension, the climate crisis and more. Yet one thing remains certain — keeping workplaces safe and processes running smoothly is mission critical.
Workplaces are ground zero for roughly 340 million occupational accidents and 160 million cases of work-related illness each year, according to the International Labour Organization. Working to prevent these incidents and near-misses through operational risk management (ORM) and process safety management (PSM) protects people, processes and the planet — keeping businesses’ reputations and bottom lines in check along the way.
This year we are seeing many industries grapple with the growing pains of ORM digitalization, with a focus on how to make the most of newfound predictive capabilities. Of course, great technological progress also brings new technological threats. Increasingly sophisticated cyberattacks pose a significant risk for the year ahead, particularly in areas that are already vulnerable, like the global supply chain. To be sure, the ripple effects of a global supply chain buckling under enormous pressure are influential in more ways than one.
We tapped Sphera’s subject matter experts to make sense of the risk landscape and what it means for ORM professionals in 2022. Based on their combined 100+ years of ORM expertise, here are the top 10 operational risks for 2022 (in no particular order):
1. Economic ‘Supercycle’
While pandemic slowdown was a common theme on last year’s list of leading risks, this year promises to bring the inverse. The economic taps are being turned back on, so to speak, as the world enters post-pandemic recovery. Financial analysts are drawing parallels to post-World War II economic growth, predicting an economic “supercycle,” or a prolonged phase of growth, particularly in demand for raw materials. As companies accelerate to meet the demands of a world back in motion, they will likely be pushed to make assets “sweat” harder, introducing a new set of challenges for maintenance, operations and production. Managing risk in periods of rapid growth will require strong support for Control of Work (CoW) and Management of Change (MoC) processes. Businesses will need systems in place to identify operational limits, conduct process hazard analyses, manage critical barriers and ensure work permits are keeping everyone safe.
2. New Energy, New Hazards
Oil and gas prices were already climbing before Russia invaded Ukraine. Against this backdrop and the ongoing climate crisis, we expect to see continued investments in alternative energy solutions, starting with liquified natural gas (LNG), as well as hydrogen, hydroelectricity and more. After decades of living and working in a hydrocarbon-based economy, this shift is monumental and still somewhat uncertain in terms of emerging hazards. As companies shift to new sources of energy, they must be prepared to build new infrastructure. And as they begin to handle and store new substances, they must be prepared to manage new hazards.
In an increasingly digital world, cyberattacks are a real and growing threat. The past year brought a 105% increase in ransomware attacks, according to a report from internet cybersecurity firm SonicWall. Hefty payouts to cybercriminals over the past year, including the $11 million ransom for meat-processing company JBS Foods and the $5 million ransom for the oil pipeline company Colonial Pipeline, are sure to motivate continued cyberthreats. The supply chain is a particularly vulnerable target because disruption can trigger major revenue losses, not only when systems are down, but also during recovery. The U.S. Chamber of Commerce estimates the average downtime associated with a ransomware attack is 21 days — but it takes 287 more days to fully recover, conduct forensic analysis, remove ransomware, back up data and get systems back online. While industry-level cybersecurity standards lag, companies need modern solutions for security and vulnerability analysis.
4. Workforce Turnover
As workplaces continue to rebound from the pandemic and the Great Resignation, businesses are welcoming back staff from furlough or training new workers/contractors to fill in the gaps. Companies are grappling with significant ORM “brain drain” associated with this turnover. As such, they will need to amp up safety communication and training for shift handover, permit to work (PTW), contractor safety management, activity risk management and more. Spreadsheets and paper files are not the answer. Instead, companies should look to real-time software solutions to document procedures and lessons learned in one centralized location. This will ensure knowledge doesn’t walk out the door when staff changes.
5. Finding the (Critical Data) Needle in the Haystack
The days of tracking down risk-related information hidden away in spreadsheets are long gone. But finding the right data can still be a challenge. Today, companies are faced with a problem of excess: It is easy to miss important information in rapidly growing stacks of data, particularly as assets and Internet of Things (IoT) devices multiply. The priority for companies this year is getting their hands around big data with Industry 4.0 sensors and software solutions. Filtering big data down into meaningful, digestible insights will help mitigate health and process safety risks and streamline decision-making at all levels.
6. Functional Safety
The past year has brought an enhanced focus to functional safety related to EHS system design and management. This interest isn’t driven by organic growth; instead, businesses in high hazard industries are getting a strong push forward from insurance providers to conduct functional safety audits and Layer of Protection Analysis (LOPA) studies, despite a lack of experience and tools. For folks who are new on the functional safety bandwagon and wondering what to do, relying on EHS expertise and software can help automate these processes, improve visibility and streamline the governance process. We expect to see businesses begin to take functional safety to the next level this year with digital tools and machine learning to support enhanced EHS management.
7. Compliance Gaps
Widespread gaps in existing PTW systems stemming from ineffective permits, especially those completed on paper or delayed due to staffing shortages, are a risk for far too many companies in hazardous industries. These inefficiencies can lead to delays in production and operational blind spots at audit time. Now that software systems can manage CoW systems with a few clicks of a smartphone, our experts expect regulatory agencies like the U.S. Occupational Safety and Health Administration to soon shift to digital for PTW regulations. Until then, forward-thinking businesses are going digital to close compliance gaps and better support Environmental, Social and Governance (ESG) initiatives.
Don’t talk the talk unless you can walk the walk, as the saying goes. As attention on ESG performance grows, so too does the reputational risk of “greenwashing” or flashy sustainability talk backed with little action. To help mitigate this risk and capture some of the ESG budget for ORM, business leaders must make the connection between sustainability and operational excellence. Operating a well-run plant is truly the baseline for ESG and it’s time for companies to communicate and emphasize that connection to drive change.
9. Risk-Driven Action Enforcement
Is your action enforcement strategy holding you back? After the completion of a safety investigation, many organizations are still taking a task-based approach to action item management. However, not all action items are created equal. In 2022, businesses need to be prioritizing action items by associated risk. To work smarter (and not harder), businesses can leverage Industrial Internet of Things (IIOT) technology and machine learning to enhance risk visibility and provide a clear action plan for ORM teams.
10. Regulatory Change
Late last year, after a yearlong COVID-19 delay, the world’s sustainability stakeholders convened in Glasgow for the 26th United Nations Climate Change Conference of the Parties (COP26) to review net zero progress and discuss future action. With key goals to step up mitigation efforts, build more resilient infrastructure, mobilize climate finance and spur international collaboration, pending regulatory changes are sure to change the ORM landscape in the year ahead. Businesses that rely on traditional energy will need to rethink how they sustain themselves to survive.