Risk Assessment

Risk Assessment1 Key To Process Improvement (Safety)

EFFORTRisk Assessmentrisknoun Definition of RISK1something that may cause injury or harm Synonyms hazard, imminence, menace, peril, pitfall, risk, threat, troubleRelated Words snare, trap; booby trapNear Antonyms guard, protection, safeguard, shield, ward; asylum, harbor, haven, refuge, retreat, shelter2the state of not being protected from injury, harm, or evil Synonyms distress, endangerment, harm's way, imperilment, jeopardy, peril, risk, troubleRelated Words exposure, liability, openness, vulnerability; precariousness, threat; susceptibility, susceptibleness; defenselessness, helplessness, weaknessNear Antonyms preservation, salvation; defense, protection; exemption, immunity, impunity, inviolability, invulnerabilityAntonyms safeness, safety, secureness, securityThe Oxford English Dictionary cites the earliest use of the word in English (in the spelling of risque) as from 1621, and the spelling as risk from 1655. It defines risk as:(Exposure to) the possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such a possibility.[7]

http://en.wikipedia.org/wiki/Risk

Risk AssessmentRisk versus uncertainty[edit]In his seminal work Risk, Uncertainty, and Profit, Frank Knight (1921) established the distinction between risk and uncertainty.... Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated. The term "risk," as loosely used in everyday speech and in economic discussion, really covers two things which, functionally at least, in their causal relations to the phenomena of economic organization, are categorically different. ... The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomenon depending on which of the two is really present and operating. ... It will appear that a measurable uncertainty, or "risk" proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all. We ... accordingly restrict the term "uncertainty" to cases of the non-quantitive type.:[53]Thus, Knightian uncertainty is immeasurable, not possible to calculate, while in the Knightian sense risk is measurable.Another distinction between risk and uncertainty is proposed in How to Measure Anything: Finding the Value of Intangibles in Business and The Failure of Risk Management: Why It's Broken and How to Fix It by Doug Hubbard:[54][55]Uncertainty: The lack of complete certainty, that is, the existence of more than one possibility. The "true" outcome/state/result/value is not known. Measurement of uncertainty: A set of probabilities assigned to a set of possibilities. Example: "There is a 60% chance this market will double in five years" Risk: A state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome. Measurement of risk: A set of possibilities each with quantified probabilities and quantified losses. Example: "There is a 40% chance the proposed oil well will be dry with a loss of $12 million in exploratory drilling costs". In this sense, Hubbard uses the terms so that one may have uncertainty without risk but not risk without uncertainty. We can be uncertain about the winner of a contest, but unless we have some personal stake in it, we have no risk. If we bet money on the outcome of the contest, then we have a risk. In both cases there are more than one outcome. The measure of uncertainty refers only to the probabilities assigned to outcomes, while the measure of risk requires both probabilities for outcomes and losses quantified for outcomes.

Risk AssessmentRisk attitude, appetite and toleranceThe terms attitude, appetite and tolerance are often used similarly to describe an organization's or individual's attitude towards risk taking. Risk averse, risk neutral and risk seeking are examples of the terms that may be used to describe a risk attitude. Risk tolerance looks at acceptable/unacceptable deviations from what is expected. Risk appetite looks at how much risk one is willing to accept. There can still be deviations that are within a risk appetite.

Risk AssessmentRisk = Likelihood x Vulnerability x Intensity x ConsequenceLikelihood=Probability=Chance=Possibility=Plausibility=Feasibility=Potentiality=Viability=ReasonabilityAnecdotes: Likelihood is often substituted for RISKex. That probably wont happenex. Will probably be okay

Interesting Facts: The FAAs Art of Aeronautical Decision Making includes the following: A good rule of thumb for the processing phase: if you find yourself saying that it will probably be okay, it is definitely time for a solid reality check.http://www.faasafety.gov/files/gslac/courses/content/28/216/The%20Art%20of%20Aeronautical%20Decision.pdf

Risk Assessment5 Key Human ErrorsHighlights high interactive complexity and tight coupling of deepwater drilling activities

Risk AssessmentMichael Davis assessment of the one common thing about the BP operation at Macondo?LACK OF, SHAME IN, and ABSOLUTE DISDAIN FOR:EFFORTWhy? ( later!)Risk AssessmentRisk = Likelihood x Vulnerability x Intensity x ConsequenceVulnerability = Exposure or susceptibility to a hazard =Proneness=Sensitivity=Weakness=Liability=Openness=Predisposition=Gullibility=Naivete=PenetrabilityAnecdotes: Vulnerability is often substituted for exposure in health care in regards to exposure to a doseex. Potassium Chloride is a great salt substitute yet our vulnerability is to death in high doses as Dr. Kevorkian knows.ex. We are more susceptible to errors at moments of lower capacity during iesensory overload, or split attention effect of cognitive load theory.ex. When drilling with low margin we are more vulnerable to worse consequences from kicks.Interesting Facts: The reason new hires wear yellow hats because they are vulnerable to errors and cognitive dissonance as well as increasing the cognitive load of others with their questions and wanderings.Risk AssessmentRisk = Likelihood x Vulnerability x Intensity x ConsequenceIntensity=Size=Volume=Dose=Density=Temperature=Pressure=Emotion=Enthusiasm=Fervency=Fervor=Passion=Vehemence=Zeal=Histrionics=Melodrama=Eagerness=Excitement=KeennessAnecdotes: ex. Water can kill people that drink too much volume.ex. When drilling with low margins we are more vulnerable to higher intensity kicks; meaning volume.ex. Intense thought can prevent us from hearing someone addressing us.

Interesting Facts: Most modern casing designs utilize kick tolerance measured in kick volume, completely neglecting kick intensity and this is hazardous in many situations as risk increases subsequently.

Risk AssessmentRisk = Likelihood x Vulnerability x Intensity x ConsequenceConsequence=Result=Outcome=Product=Sum=Aftereffect=Issue=Ramification=Aftermath =Conclusion=Denouement=Implication=Repercussion=Side effectAnecdotes: Keeping consequences in mind can improve decisions.ex. The Outcome Bias is judging behavior based on its outcome and ignoring the risk. This is one of the greatest contributors to poor risk assessment when luck is attributed as success and prudent behavior.ex. Assuming high unlikelihood is an entitlement to ignore consequences of risk altogether becomes a socialization of risk if the consequence exceed the operators valuation.

Interesting Facts: Consequentialism is a theory in philosophy in which the morality of an act is determined by its effects. An unintended consequence is the result of encountering the unexpected or unplanned for uncertainty. Punishment, is an imposed consequence. In music, a consequent is the second half of a period. Risk AssessmentThe Goal Is To Avert Blowouts and Worst Case AccidentsRisk AssessmentRisk comes from not knowing what you're doing.Warren Buffett Every man has the right to risk his own life in order to preserve it. Has it ever been said that a man who throws himself out the window to escape from a fire is guilty of suicide? Jean-Jacques RousseauBecause if youre prepared and you know what it takes, its not a risk. You just have to figure out how to get there. There is always a way to get there. Mark CubanYes, risk taking is inherently failure-prone. Otherwise, it would be called sure-thing-taking. Jim McMahonPeople who dont take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year. Peter F. DruckerOne hour of life, crowded to the full with glorious action and filled with noble risks, is worth whole years of those mean observances of paltry decorum. Sir Walter ScottSecurity is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure or nothing. Helen KellerThe dangers of life are infinite, and among them is safety. GoetheTo be a good human being is to have a kind of openness to the worldan ability to trust uncertain things beyond your own controlthat can lead you to be shattered in very extreme circumstances for which you were not to blame. That says something very important about the condition of the ethical life: that it is based on a trust in the uncertain and on a willingness to be exposed; its based on being more like a plant than like a jewelsomething rather fragile, but whose very particular beauty is inseparable from that fragility. Martha NussbaumThe young do not know enough to be prudent, and therefore they attempt the impossibleand achieve it, generation after generation. Pearl S. Buckhttp://www.youtube.com/watch?v=0ZhL7P7w3as Addicted to Risk 2:28 4:44, 7:05 13:36 (8 min 47 sec)Fixed Trait(unwilling to affect learning)/Overconfidence/Recklessness/Addiction to Risk/View of Limitlessness and Resilience of Systems We Risk Destroyinghttp://geert-hofstede.com/Twenty years from now you will be more disappointed by the things you didnt do than by the ones you did. So throw off the bowlines, sail away from the safe harbor, catch the trade winds in your sails. Explore. Dream. Discover. Mark TwainIt is better to be careful 100 times than to get killed once. Mark TwainA ship is always safe at the shore but that in NOT what it is built for. - Einstein

DICHOTOMY OF DIALOGUE ON RISKOne hand we applaud risk and credit it with progress, innovation, courage and successOn the other hand we condemn risk and destroying pristine beauty and as the result of psychopathic addiction to riskRisk AssessmentFirst the BIG PICTUREHow risky is it?Perhaps the even BIGGER PICTURE is how is risk TRENDINGRisk Assessment

Risk Assessmenthttp://www.drillscience.com/DPS/Deepwater%20GOM%20Oil%20Bubble%20Point%20Graph.jpghttp://www.drillscience.com/DPS/Deepwater%20Kick%20Stats%2097-99.docxhttp://www.drillscience.com/DPS/Deepwater%20Trending%20Increased%20Complexity%20and%20Tighter%20Coupling.jpghttp://www.drillscience.com/DPS/DeepwatervsShallowWaterBlowoutTrend.jpg

Risk AssessmentLink to Article cited on previous slideRisk AssessmentEnactmentWeick (1988) describes the term enactment as representing the notion that when people act they bring structures and events into existence and set them in action. The process of enactment involves two steps. First, preconceptions are used to set aside portions of the field of experience for further attention, that is, perception is focused on predetermined stimuli. Second, people act within the context of these portions of experience guided by preconceptions in such a way as to reinforce these preconceptions. Hence, attention to certain stimuli will guide subsequent action so that those stimuli are confirmed as important. The result of the process of enactment is the enacted environment (Weick, 1988). This enacted environment comprises "real" objects but the significance, meaning and content of these objects will vary. These objects are not significant unless they are acted upon and incorporated into events, situations and explanations. In this way the enacted environment is a direct result of the preconceptions held by the social actor. An enacted environment is internalised by social actors as the way in which actions have led to certain consequences; it is therefore analogous to the concept of schema and is the source of expectations for future action (Weick, 1988) . An enacted environment is "a map of if-then assertions in which actions are related outcomes" that in turn serve as expectations for future action and focus perception in such way that these preconceived relationships will be supported. The importance of the notion of enactment is that it provides a direct link between individual cognitive processes and environments. By showing how preconceptions can shape the nature of the environment this concept allows one to argue the importance of schema in the sensemaking process. Schema guide both perception and inference (Fiske & Taylor, 1991) and so will 'enact' environment by assigning significance, meaning and content to objects perceived in the environment.

Risk AssessmentEnacting Sensemaking as THE MITIGATIONLink to Weick's "Enacted Sensemaking"

Risk AssessmentHROs are in essence the best at risk assessment and containment of unexpected eventshttp://www.mydrivingseat.com/the-blog/booklink-22/Capacity to Anticipate Unexpected ProblemsPreoccupation with failureReluctance to simplifySensitivity to Operations

Capacity to Contain Unexpected ProblemsCommitment to ResilienceDeference to ExpertiseRisk AssessmentThis last statement in Carl Weicks article Enacted Sensemaking tells me what Ive know all along; engineers shy away from acknowledging risk in risk registers, peer reviews, in the open, etc, that they do not open know how to mitigate.What personality or mentality promotes this error?First we must have a low UAISecond we must have a low desire to withstand the humility of learning and competency improvement. If I dont understand it the last people I want to know are my peers that may judge me. I wont look good.Third we must not have the experience that might have taught us the lesson the hard way even with the first two condition.Fourth with an attitude towards risk perhaps: If I dont do this they will find someone else that will. "But, who cares, it's done, end of story, will probably be fine. In other words, STOP WORRYING contrary to the first principle of high reliabilityFifth

So what we end up with is a person that has low aversion to uncertainty, no desire to diligently endeavour to reduce the uncertainty with a low experience level.This is scary!!!!!!

http://www.depts.ttu.edu/cehrop/Weick.phpRisk AssessmentHRO Principle 1: Preoccupation with Failure They treat any lapse as a symptom that something may be wrong with the system, something that could have severe consequences if several separate small errors happened to coincide. They also make a continuing effort to articulate mistakes they dont want to make and assess the likelihood that strategies increase the risk of triggering these mistakes. In essence Responding Strongly to Weak Signals and Worry.Risk AssessmentHRO Principle 2: Reluctance to Simplify When they recognize an event as something they have experienced before and understood, that recognition is a source of concern rather than comfort. The concern is that superficial similarities between the present and the past mask deeper differences that could prove fatal.Risk AssessmentHRO Principle 3: Sensitivity to Operations They are attentive to the front line where the real work gets done. People who refuse to speak up out of fear undermine the system, which knows less than it needs to work effectively. It makes no difference whether information is withheld for reasons such as fear, ignorance or indifference. HIGH PDI causes mitigated speech.

Risk AssessmentHRO Principle 4: Commitment to Resilience HROs develop capabilities to detect, contain and bounce back from those inevitable errors that are part of an indeterminate world. The hallmark of an HRO is not that it is error-free but that errors dont disable it. Resilience is a combination of keeping errors small and of improvising workarounds that allow the system to keep functioning. Both these pathways to resilience demand deep knowledge of the technology, the system, ones coworkers, and most of all, oneself. Example eColors.

Risk AssessmentHRO Principle 5: Deference to Expertise HROs push decision making down and around. Decisions are made on the front line, and authority migrates to the people with the most expertise, regardless of their rank. The decisions migrate around these organizations in search of a person who has specific knowledge of the event.Risk AssessmentInput from Working Paper 7 Hopkins at DSCResearch best Risk Assessment Techniques and theory from web, etc.Risk AssessmentSafety requires competenceThe danger in culture and competenceHow do we make our teams competent?Geniuses!How to spot a geniusEffortless Perfection!

No! Effortful DiligenceRisk AssessmentRequires admitting imperfection

How can we have both?We cannot!Risk Assessment

Risk AssessmentBeing PerfectIs it detrimental to risk assessment?The Fixed mindset is proven to:Cause adherents:Interact in Risk Assessment Peer Reviews in a guarded fashion to seek the easy button (see Dweck video)to curate perfect imageTo hide and see errors and setbacks as calamities not learning opportunities. Detecting, processing, and correcting - 27:22To put forth less effort (Effortless Perfection => Good Luck!)Who Cares? (Does this no embody both disdain for worry & effort?)Avoid dumb questionsNurture some of the worst Narcissistic traits to most susceptible.Seek to only focus on things they do well already. Ignore things they do not understand, uncertainty, they have not mastered; ie. Mitigations to unlikely risks will be ignored unless they come very easy. Innovation suffers and fantasy thrives (Walruses & Seals)

Risk AssessmentGrowth mindsetProcess Praise = Process Improvement (Dweck On Being Perfect 24:30Risk AssessmentTypes of Risk:

Normal Inherent RiskNormal SituationSituational RiskAberrant SituationsAnomalous Model (Interface between planned and actual)Ergonomics (Interface between machine and man)High Cognitive LoadsDecreased Cognitive Capacities

Risk AssessmentMany industry statistics are skewed because the risks are highly variable between different companies and projects mainly because the likelihoods and exposures vary respectively.ExposureExposure is highly variable between different organizations depending on situations such as availability, capacity, capability of talent, finances, etc.Risk Assessment

Risk AssessmentOther kinds of risks not ordinarily accounted for.Increased Activity with decreased Cognitive CapacityUnexpected events not reacted to with a strong response in increasing cognitive capacity in terms of numbers of people or perhaps lightening the duties of one area in deference to the highest risk/cognitive load activity.This is an ergonomics risk or Human Factors based risk.This type of risk is typically either:Overlooked by the engineerOr within the realm of the operations engineering team that isnt involved concurrently in the engineers pre drill risk assessment.This is a disconnect that needs to be remedied and has not been and was the biggest part of the Macondo disaster not addressed.This highlights the need for a BROADCAST systemRisk Assessment1 Key To Process Risk Assessments?

EFFORT