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January 7, 2016

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Rest assured: Objectivity and the audit

David Shorrock, health and safety and regulatory consultant, looks at the importance of objective auditing and how bringing in external experts can offer your company a pragmatic benchmark, without the influence of company politics.

Benchmarking health and safety performance against industry standards and regulatory expectations has been a diminishing activity in many organisations in recent years. There has also been an almost terminal decline in proactive health and safety inspections being undertaken by regulators in the UK during the same period. This has resulted a significant number of organisations of all sizes not understanding what level they are performing to in terms of health and safety management or whether they are actually complying with the law.

In pre Fee For Intervention (FFI) days an organisation could expect a visit from an HSE inspector every 3-5 years, whatever the sector. In fact, Local Authority Inspectors may well have visited more regularly than that. The end product of these proactive inspections was that, irrespective of the outcome, you were clear where you stood in terms of compliance with the law. Many organisations welcomed the regulator’s view of how their business was performing, were appreciative of an independent view of how compliant they were and were grateful for any advice to help improve their performance.

The power of independent external audit and assurance is hugely underestimated. Internal audit can and does work for many but can it ever be completely objective? Auditors will often be long standing employees and the organisation’s culture is ingrained in the way they approach the audit task. This is not a criticism, but my view is that they cannot be entirely independent. External assurance is by far the best way to achieve the desired objectivity.

The cost of getting things wrong now is far more expensive than it ever was. If you are HSE enforced, a material breach of the law will cost you £124 per hour of inspector time for the duration of the intervention, whether that be a proactive inspection or more likely nowadays an investigation into a reportable incident. From February 2016 the sentencing guidelines will result in fines for health and safety offences increasing by an estimated factor of 10.

Organisations that have no independent audit and assurance provision never fully understand whether they are compliant or not. The majority are unlikely to be selected for a proactive inspection unless they sit within a relatively short list of high-risk sectors. They will only see an inspector from HSE, LA or CQC if they report an incident that is serious enough to require investigation. It is at this point when the regulator gets involved, that they find out they are not complying with the law, and by this time it is too late.

As an HSE Inspector in the days before FFI, my experience was that most organisations welcomed the input from their local inspector and working relationships were formed with even the poorest performers. The majority wanted to comply but many didn’t know what they had to do. HSE Inspectors assisted, informed and persuaded these dutyholders using a full range of enforcement powers and advice. I agree that HSE should not be seen as a free consultancy service, however the benefits of these relationships within the industry and other sectors have now gone forever.

The biggest hangover from the evaporation of this relationship with the regulator is that many organisations have not replaced this, albeit infrequent, assurance process. Many are labouring under a misapprehension that they are compliant when they may be some way from it. It is only when something goes badly wrong that they discover that they have been failing to comply for some time and are now exposed to the huge potential cost of a regulatory intervention.

Many regard independent audit and assurance as a non-value adding spend that is expensive and intrusive. Those who engage competent auditors to provide them with an objective view of their health and safety performance know that this is not the case. External auditors are best placed to conduct this benchmarking exercise, carry no historical baggage and are not influenced by internal politics.

Engaging this “fresh pair of eyes” to carry out a searching and challenging review in a pragmatic and supportive manner is invaluable and provides insight and confidence in the quality of the health and safety management system. Not only will it provide you and your employees with assurance that they will remain safe but it could well save you a fortune.

Burnley Bondholders_David SHorrock (Risk Management Ltd)David Shorrock, is managing director of DS Risk Management Ltd and a former inspector for the HSE.

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