best practices for operational risk management information, insight & improvement todd lunsford,...
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Best Practices for Operational Risk ManagementInformation, Insight & Improvement
Todd Lunsford, Sr. Manager Solution EngineeringOperational Excellence & Risk ManagementOctober 9th, 2013
Copyright © 2013 IHS Inc. All Rights Reserved.
Purpose & agenda
All too often performance is measured by lagging indicators as we try to drive a proactive culture of safety first. Learn how to predict safety performance in a way that is actionable and measureable, and turn your risk management data into predictive analytics for operational excellence. Hear descriptions of industry best practices for benchmarking your own operational risk management program.
1. The problem asset-intensive organizations are facing today
2. How better information can lead to insight & improvements
3. The journey to operational excellence
2
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Todd’s 11-year IHS journey
3
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= more than 20 ski days
Score10893
Complete “honey-do” lists (on-time rate)Keep kids while wife goes out (duration)Help around the house (total # jobs)Compliment wife (total # times)
Behavior
4
Leading indicators of Todd’s # of ski days
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QUESTION for the audience:
0.39Stable total recordable incident rate (TRIR), using 200k hrs.
The problem asset-intensive organizations are facing today
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The rate of catastrophic incidents has not changed
7
Source: Dr. Tom Krause, Organizational Psychologist, Founder of BST Delivered at IHS CERA Week 2013
Based on BST study: ‘Serious Injury and Fatality Prevention Study”
“A reduction in less serious injuries does not necessarily correspond to a proportionate reduction in serious incidents and fatalities.”
— Thomas Krause Ph.D. (Behavioral Science Technology, Inc.)
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Corporate leaders are addicted to lagging metrics
Days Away from Work Total Recordable Injuries
Injury AVG Workforce HoursWorked First Aid Actual Target
NumberDAFWRate
TargetRate Actual Target
NumberTRI
RateTargetRate
Employee 0 0 0 0 0 0.000 0.000 0 0 0.000 0.000
Contractor 0 0 0 0 0 0.000 0.000 0 0 0.000 0.000
Workforce 0 0 0 0 0 0.000 0.000 0 0 0.000 0.000
Limited insight = limited ability
to prescribe or recommend
improvements
Copyright © 2013 IHS Inc. All Rights Reserved.
QUESTIONS for the audience:
• How does your reporting culture compare with other similar organizations?• Does your organization have a good level of action item
activity?• Is your workforce engaged?• Are your leaders responsive?• How well do you perform key process steps (root cause
analysis, risk evaluation, lessons-learned, etc.) compared to others.• Is your organization risk driven and sensitive to risks?• Is your organization learning-minded? How does it compare to
others?
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A tale of two sites
Significant PSM Incident
Culture of Ingenuity
Clean Record
Culture of Discipline
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Business process
discipline
Behaviors
Organizational factors
Leadership
examples
Risk sensitivity
What if you could gain additional insight into your culture?
11
Copyright © 2013 IHS Inc. All Rights Reserved.
What if you could monitor and improve cultural factors at these sites?
Recordable Rate (lagging)
Event Rpt Ratio (as %)
% On-Time Actions IMPACT Index
Reporting Culture
Action Execution
Leader / Process
Site 1 2.50 37% 67% 4.79 2.10 24% 75%
Site 2 3.10 22% 62% 5.25 1.40 17% 41%
Site 3 1.70 83% 95% 17.10 7.50 54% 57%
Site 4 1.30 75% 77% 7.10 4.10 72% 91%
Site 5 0.95 93% 75% 22.00 18.30 46% 72%
Site 6 5.10 5% 34% 5.20 6.10 64% 80%
Corp Mean 2.44 53% 68% 10.24 6.58 45% 24%
1st Quartile 0.51 91% 87% 4.10 1.50 93% 90%
50% Level 1.75 63% 64% 9.70 6.30 71% 31%
Managed KPI Scorecard Executive Analysis ONLY
A simple scorecard example
Engage the workforce in reporting events and fixing issues on time at Site 6 to improve safety culture and ultimately lower incident
rates
“You can’t manage what you can’t measure.”
– William Hewlett 12
How better information can lead to insight & improvements
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0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 5
The goal of leading indicator statistical analysis
TRIR of over 1 million
incidentsLowest Highest
Orders of magnitude worseSustaining near zero
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Research: Answer the Question…
What are the actionable, measurable differences that lead to the below results?
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Cross Customer /
Industry Dataset
Metrics Factors IndicatorsD
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Data Extraction/Calculation Factor Analysis Predictive Modeling
Subject Matter Expertise and Insights
Performance Outcomes
OE benchmark indicator analytics Insight driven analytical process
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Business process measurement = insight into culture
Unplanned Events Injuries Spills/Releases Product/Service Quality Property Damage Security Transportation Near misses
Planned Events Audits & Assessments Management of Change Risk Assessments Hazard ID’s Deviations Findings Non-conformancesThe list goes on and on…
Iterate Where
Applicable
Risk ExposureIdentify Failed
Controls
Implement / Repair
Controls
Measure
Potential Risk
Obtain /
Review Date
Exposure to Loss
Reduced
No Loss
Low
Hi
Leadership Feedback
Reporting Culture 1
Work
Practice Steps
1a
1b
2
Risk
Reduction
Cycle
Reported
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Reporting Culture Metrics
Leadership Responsiveness
Metrics…
Risk-Driven Metrics
Process Execution
Metrics
Action Effectiveness
Metrics
Learning Mindedness
Metrics
Copyright © 2013 IHS Inc. All Rights Reserved.
Example: leadership responsiveness
Mean days for
supervisor
response
Iterate Where Applicable
Risk Exposure Identify Failed Controls
Implement / Repair
Controls
Measure
Potential Risk
Obtain /
Review Date
Exposure to Loss
Reduced
No Loss
Low
Hi
Leadership Feedback
QHSE Reporting Culture 1
QHSE Work
Practice Steps
1a
1b
2
Risk
Reduction
Cycle
Reported
Accepted by supervisor
via email
17
Copyright © 2013 IHS Inc. All Rights Reserved.18
0% 25% 50% 75% 100%
87%
84%
80%
77%
69%
61%
60%
59%
55%
51%
36%
30%
2%
2%
0%
0% 25% 50% 75% 100%
84%74%
73%72%
71%68%68%
67%62%
61%55%
43%21%
2%1%
0% 25% 50% 75% 100%
79%
78%
78%
77%
75%
71%
70%
63%
62%
56%
53%
26%
21%
4%
1%
0% 25% 50% 75% 100%
84%
84%
78%
77%
71%
70%
65%
64%
48%
45%
42%
14%
6%
1%
0%
Process Execution Learning Minded
Risk Driven Operating Discipline Index
Asset 1Asset 2Asset 3Asset 4Asset 5Asset 6Asset 7Asset 8Asset 9Asset10Asset11Asset12Asset13Asset14
Asset 1Asset 2Asset 3Asset 4Asset 5Asset 6Asset 7Asset 8Asset 9Asset10Asset11Asset12Asset13Asset14
Asset 1Asset 2Asset 3Asset 4Asset 5Asset 6Asset 7Asset 8Asset 9Asset10Asset11Asset12Asset13Asset14
Asset 1Asset 2Asset 3Asset 4Asset 5Asset 6Asset 7Asset 8Asset 9Asset10Asset11Asset12Asset13Asset14
Real world example–prescriptive analytics Benchmark metrics
Copyright © 2013 IHS Inc. All Rights Reserved.19
3b3a21Near Miss0
40
80
120
160
Fire Explosion Avg Days for Iv
Spill/Release Avg Days for Iv
Injury/Illness Avg Days for Iv
All Avg Days for Iv
II&R specifies “one-month” completion time for investigations on Level 2 and Level 3 incidents. To be effective, time requirements for investigations actually should vary according to the complexity and risk potential of the incidents.
30 days
Real world example – prescriptive analytics Average days for investigations
Copyright © 2013 IHS Inc. All Rights Reserved.2020
Data Metrics Factors Indicators
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Data Extraction and Calculation Factor Analysis Predictive Modeling
Data Metrics Factors Indicators
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Data Extraction and Calculation Factor Analysis Predictive Modeling
Data Metrics Factors Indicators
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Data Extraction and Calculation Factor Analysis Predictive Modeling
Data Metrics Factors Indicators
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Data Extraction and Calculation Factor Analysis Predictive Modeling
P
rog
ress
ive
Op
erat
ing
Dis
cip
line
Par
adig
m
ReportingCulture
Process Execution
RiskDriven
Learning-Mindedness
Progressive benchmark indicatorsOE benchmark indicator analytics
Copyright © 2013 IHS Inc. All Rights Reserved.
Leading IndicatorScorecards. Benchmarking.
LeaderResponsiveness
Manage with naturally-produced leading indicators
21
Reporting Culture
ProcessDiscipline
Action ItemExecution
The journey to operational excellence
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How do you get there?
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The journey to operational excellence
Engage the Workforce
Manage with Progressive Leading KPIs
Optimize Business Processes
Data Efficiency on a Common Platform
IT Integration
Data Integrity
Compliance
Improved reporting culture
Improved risk mitigation
Reduction of incidents
through continuous
improvement
Improved organizational
effort and disciplineDeep
Broad
Initial
World
Class
Copyright © 2013 IHS Inc. All Rights Reserved.
OE processes must be analytics ready
Enterprise-wide
Platform
Many
Silo’s
Aggregate Quantities,
-- or -- Subjective
Full Process Execution,
-- and – Objective
“Ideal for Analytics”
Copyright © 2013 IHS Inc. All Rights Reserved.
Are you ready?
Enterprise-wide
Platform
Many
Silo’s
Aggregate Quantities,
-- or -- Subjective
Full Process Execution,
-- and – Objective
“Ideal for Analytics”
Incident
Audit
BBS
Risk Assessment
MOC
MOC
Copyright © 2013 IHS Inc. All Rights Reserved.
Accelerating continuous improvement
27
Continuous Improvement
Cycle #1
Analytic Readiness
Continuous Improvement
Cycle #2
Implementation
Analytics
Potential Policy, Procedure And
System Changes
Opportunitiesfor Improvement
BreakthroughInsights
PerformanceIndicators
Apply Change
AnalyticsReadiness
Operational Excellence
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Next steps?
Questions? THANK YOU!Todd LunsfordSolution Engineering Manager, [email protected] email us at [email protected]