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June 27, 2012

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Risk management in the recession – Out of the shadows

Investment in health and safety may have taken a hit in many organisations, but the resulting cutbacks provide an opportunity for the savvy practitioner to highlight – to an even greater extent – the power of effective risk management. Bernie Catterall, Nigel Heaton and Claire Williams describe how best to trump the slump.

As the financial woes of the UK and Europe continue to grow, organisations are seeking to strip away anything that will not deliver greater profitability, or contribute directly to reductions in overheads. Health and safety, with its promise of a safer tomorrow, is an obvious target for such cuts.

What tactics can health and safety professionals employ to cope with the downturn? Moreover, is there anything practitioners can do to benefit from the recession? 

Many organisations understand that their health and safety budgets constitute a worthwhile investment, but in the current climate even the most prudent have concluded that the monies available – as with many departments – must be reduced. Unfortunately, many businesses don’t exercise clear enough control, or have the appropriate information, to be able to recognise what level of budget cuts can be sustained without resulting in an equally significant drop in performance.

In a survey we carried out recently, employers reported annual budget cuts for health and safety ranging from 15 per cent to a massive 65 per cent. ‘Costs’ were reported as coming under much greater scrutiny, and reactions such as reducing or withdrawing completely from undertaking health and safety training, and reducing or freezing safety-team headcounts, were common. Budgets for certain groups, including facilities management and engineering – departments that, in larger companies, often act as the prime drivers for improvements in health and safety provision – were also viewed as being casualties of cutbacks.

Living in the past

When health and safety budgets are reduced, the inevitable ‘lag’ means it takes time before systems and procedures decay to such an extent as to result in measurably higher accident rates. Consequently, over-reliance on ‘lagging’ performance measures conceals the problem, and many companies end up making cuts in the mistaken belief that these will not have a major effect on health and safety outcomes. 

According to our own findings, many practitioners are reporting a significant real-time upturn in incident rates that have not yet manifested at board level – and may not do so for many months to come. Too great a focus on such figures means that boards are in danger of failing to see what’s going wrong right in front of them, and so ignore the disastrous effects their cuts are having until it’s too late. 

Using accident statistics as a measure of success makes health and safety an easy target for cuts, both in cases where your organisation has lots of accidents – evidence that might be interpreted as underperformance by your health and safety team, so they could be ‘axed’ – and where your organisation has very few accidents – in which case, your organisation could be seen as inherently safe and the safety team viewed as unnecessary.

In times of economic strife, it becomes imperative that practitioners move their organisation towards a better understanding of what good health and safety looks like. Companies that have already implemented pro-active performance measurement and reporting – such as meeting training targets, or substantial completion of risk-assessment actions or audit outcomes – report either an improved ability to identify and highlight issues when things start to go wrong or, better still, an ability to fend off cuts because boards are well placed to understand the likely impact of the cuts being considered.

Training trouble

Cuts in training budgets are a further classic ‘cost-control’ measure. In-house training, in particular, has suffered – with some organisations reporting a complete freeze of all expenditure on training provision, and travel-budget restrictions that prevent or deter delegates from attending courses that are organised off-site. Sadly, the ‘bean-counters’, who so readily cut the training budget because they see it as an easy saving, never seem to carry any responsibility for the resulting failings associated with poorly-trained staff. 

Competence remains a pivotal issue in health and safety practice. The ability of organisations to provide proof that quality training in the requisite health and safety skills, tools and techniques has been provided and that competencies have been maintained over time is a basic principle underpinning the profession. Practitioners need to make their managers fully aware of the impact of reduced training in the context of criminal prosecutions and civil litigation cases.

Personal-injury claims

Some larger organisations have told us that they have experienced significant increases in year-on-year personal-injury (PI) claims from employees, as well as from other members of the public. Many stakeholders believe that the compensation culture is a myth, but in our expert-witness work we have seen an almost direct association between the contraction in the public and private finances and an upturn in the numbers of PI claims.

Putting aside the obvious potential for an increase in fraudulent claims, the reality for many potential PI claimants, according to interviews with them, is that where they might have been prepared to settle for a lower amount in ‘better times’, they are now encouraged to fight harder because they have little to lose. 

Furthermore, it is conceivable that the lower end of the legal profession could also be feeling the pinch and could therefore be further fanning the flames of discontent. 

Undermining ‘core values’

There are many examples of where the financial downturn has resulted in poor health and safety management, but perhaps the most far-reaching cases are those in which the cuts undermine the values on which a good health and safety culture depends.

Behaviour towards safety is fundamentally driven by the cultural ‘core values’ held by the organisation’s management team – as it is these that are communicated to and demanded of the workforce. As management teams make sweeping cuts, so they undermine the very basis of the ‘contract’ that has been set up with employees to deliver all its health and safety policies, procedures and systems. 

Many of these values rightly underline that the reason we manage health and safety is primarily moral – people have the right not to be hurt at work. However, if cuts are, or even appear, uncaring, then that contract is broken. Worse still, if commercial delivery becomes the only obvious value held by a company, then workers – especially those concerned about their jobs – will be encouraged to take risks that, previously, they wouldn’t have taken. This is already a major factor in many personal-injury cases.

Wider risk-management training

For all the doom and gloom, however, there is good news, with some health and safety teams actually benefiting from the downturn or, at least limiting the potential cuts that might otherwise have occurred.

Given that in most companies senior managers have the task of making cuts, it arguably makes sense that they undertake health and safety training, so that they are more aware of the knock-on effects of their potential decisions. Rather than sessions about health and safety regulations, or those that emphasise the potential for managers to end up in jail, there is surely a need for a calm and reasoned approach to the consideration of health and safety in a wider business risk-management context. Where does health and safety sit in relation to other business exposures, and what opportunities does it present? 

Being ‘business-savvy’

Health and safety professionals who invest in ‘learning the business’ – especially financial and management terminology, as well as the ins and outs of the company’s project-management processes – will be able to engage with managers on their terms. Health and safety is then much more likely to be seen as a positive contributor to the business and not, as is more often the case, the usual ‘business stopper’.

Engaging, for example, with ‘lean’ processes and with financial planning and performance-measurement terminology overcomes the perception held by many managers that the health and safety function is a solely non-productive ‘cost centre’, and transforms their view that it is very much a department that is worth engaging. Companies whose health and safety teams cannot deliver that level of business engagement report ongoing problems – not only in getting managers to attend health and safety training but in getting approval for training in the first place.

Risk-management prioritisation

It is still astonishing that so many risk-management programmes deliver so little clear benefit. Many of them are characterised by numerous risk assessments of poor quality, which end up being filed and mostly forgotten.
Companies whose health and safety programmes are sufficiently mature are able to use their risk reporting and communication programmes to demonstrate a clear and consistent cost-benefit case for continued investment in health and safety – and, thus, to stave off cuts. Effective risk management must deliver clear and very tangible prioritisation – and this is even more vital at times when budgets come under pressure.

Simplified systems

As managers and employees become ever-more hard-pressed, so the policies and procedures designed to drive effective health and safety practice must be effective and usable, as well as appropriate to the economic conditions that organisations face.

The usability of health and safety management systems has often been forgotten or neglected, as practitioners have resorted to regurgitating regulations and guidance in multi-page documents, which mix information aimed at managers with information for users, along with detail that is only meaningful for safety professionals themselves Such a mishmash – never very usable at the best of times – becomes practically useless as pressures on time and finances increase. The result is that no one has the time to look at the information and work out what needs to be done!

The message is: keep it simple – not only in terms of providing usable, readable and practical advice on health and safety matters but, above all, by making the responsibilities and accountabilities for action on health and safety concerns far more specific. What matters is delivery, not paper. 

Improved claims management

Given that, in our experience, personal-injury claims rise when the economy is struggling, there is clearly a need for organisations to tighten their PI claims-management procedures. Those companies that have done this very thing are better placed to fight spurious claims and work more effectively with potential claimants to reduce the size of the claims.

The opportunity for the health and safety professional is in creating conditions that are more inherently safe and in dealing with the vexatious litigant, or the law firm that is just “testing the water”.

Practitioners should be able to show their bosses what claims are costing the organisation, and how many plaintiffs the business is facing, and in relation to what issues. They should also be able to identify why some claims succeed and others fail. This information can even be used to help practitioners become more proactive, by identifying and dealing with the failings that expose organisations to claims. This is not about dealing with all risks simultaneously, but about managing risk – allocating the right resource to cover the most relevant risks at the most appropriate time.

Investing in ergonomics

The value of ergonomics input to any health and safety programme was underlined in an article in SHP last year.1 The article not only promoted the idea of ‘fitting the task to the person’ (rather than the other way round), as a means of avoiding accidents and ill health, but also emphasised that by the time ergonomics issues manifest as injuries or illnesses, they have almost certainly presented as quality or productivity issues for many months, or years previously.

During the past year, we have been involved in increasing numbers of ergonomics projects where the issues of productivity and quality, rather than simply the injury concern, have driven a desire for improvement. In one such example, an aerospace company that invested in training for on-site ergonomics teams not only achieved reduced levels of accidents, particularly in relation to poor postures during work tasks, but also made numerous demonstrable manufacturing improvements as a result. People were not only safer but they could do their jobs more effectively, and improvements were achieved in performance above and beyond previous output targets. Instances such as this show that ergonomics pays, not least during times of economic pressure.

Shout, shout, let it all out

Finally, celebrate success and communicate the wins! Sell continued investment in health and safety by showing where it has contributed to the business by making savings or, better still, where it has speeded up production or improved the quality of service delivery. This will ensure that the benefits of health and safety remain at the forefront of decision-makers’ minds when they’re looking at areas to potentially cut back. 

Summary

It’s a tough world out there and, for most organisations, it will probably be a good while before things get any better. But the message is clear: as budgets are cut, so health and safety still has a vital place in ethical companies – not just for the sake of employees and members of the public but also to enable effective business planning.
Even in the face of recession, or very low levels of growth, the straightforward aims and actions outlined above should help organisations derive the maximum benefit from their health and safety teams.

Reference
1    www.shponline.co.uk/features-content/full/lifting-handling-and-ergonomics-perfect-match


Bernie Catterall, Nigel Heaton and Claire Williams work for risk-management consultancy Human Applications.

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