THE BRITANNIA GROUP WHITE PAPER UNDERSTANDING EFFECTIVE RISK ASSESSMENT 2 | THE BRITANNIA GROUP | WHITE PAPERUNDERSTANDING EFFECTIVE RISK ASSESSMENT CONTENTS DEFINITIONS 3 REASONS WHY RISKS NEED TO BE ASSESSED AND MANAGED 4 RISK MANAGEMENT AND THE ISM CODE 4 RISK ASSESSMENT METHODS AND TECHNIQUES 5 RISK ASSESSMENT PROCESS 5 RISK APPETITE AND RISK TOLERANCE IN HEALTH AND SAFETY 7 “AS LOW AS REASONABLY PRACTICABLE” (ALARP) 7 LEVELS OF RISK ASSESSMENT 8 EFFECTIVENESS OF RISK ASSESSMENT 9 INEFFECTIVE RISK ASSESSMENTS 9 SUMMARY 12 REFERENCES 13 UNDERSTANDING EFFECTIVE RISK ASSESSMENT 3 | THE BRITANNIA GROUP | WHITE PAPERUNDERSTANDING EFFECTIVE RISK ASSESSMENT For the purpose of the paper the following simplified definitions on how we understand the terms are applied: HAZARD is an event or a situation which has the potential to cause harm, such as injury, damage or pollution RISK is a combination of the likelihood and the severity (consequence) of a hazard RISK ASSESSMENT is the process of risk identification, analysis and evaluation 1 RISK MANAGEMENT is the coordinated activity to assess, control and monitor risk “A MAN EXERCISING NO FORETHOUGHT WILL SOON EXPERIENCE PRESENT SORROW.” – CONFUCIUS The ever-increasing scale and complexity of marine transportation requires a proactive approach to risk management. Professional skills, experience and regulation have great advantages but cannot foresee all possible risks in advance. A review of incidents often finds that opportunities were missed to identify and mitigate the risks. As with any process, risk assessments may be ineffective and unlikely to contribute to safety if they are missing the point, are not understood, or seen merely as a ‘tick box exercise’. Risk assessments should ideally occur on many levels, both as a formal, documented process and as a dynamic, ‘on the job’ activity. 3DEFINITIONS 4 | THE BRITANNIA GROUP | WHITE PAPERUNDERSTANDING EFFECTIVE RISK ASSESSMENT THE GENERAL PURPOSE OF RISK MANAGEMENT IS TO IDENTIFY THE HAZARDS BEFORE THEY OCCUR AND HAVE A PLAN FOR ADDRESSING THEM. WHILE SOME RISKS CAN BE AVOIDED ALTOGETHER, OTHERS CAN ONLY BE MINIMISED TO A TOLERABLE LEVEL. The reasons for managing risk may be summarised in the following groups: BUSINESS A company will be unavoidably exposed to various risks during business activities. If incidents do occur, they may lead to claims, losses, reputational damage and loss of competitive advantage. Efficient risk management will contribute to the overall success of the business. ETHICAL A company has a legal and moral duty to take reasonable care of the health and safety of their employees. These objectives extend to contractors, third parties, property and the environment. In turn, employees have a duty of care towards themselves, each other and the employer. This is also a prerequisite to achieving Environmental, Social, and Corporate Governance (ESG) objectives. REGULATORY A ship is subject to the regulatory requirements of the International Maritime Organization (IMO), flag state, and those imposed by the Port/Coastal State in which they trade. Legal requirements agreed in commercial contracts (such as a charterparty) and employment contracts may also apply. Where the requirements regarding risk management may be explicit or implied. INSURANCE There are both explicit and inferred risk management requirements arising from insurance: • Obligation to comply with class and statutory requirements • Cover limitations applicable to impr