Simplify EHS Decision Making Riskbased Decision Support Tools

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Simplify EHS Decision MakingRisk-based Decision
Support Tools

• Jatin Shah and Cheryl Grounds

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Decisions are

• An irrecoverable allocation of resources
• Made by people
• Made every day
• Made based on decision makers values and
  objectives
• Simple or complex and difficult

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EHS risk management decisions

• are difficult because
• Its difficult to quantify uncertainty -- risk
• Many of the issues involve multiple drivers
• Most issues are emotionally charged
• Some issues reduce risk in one area but increase
  risk in other areas
• Both tangible and intangible benefits are present
• Benefits are difficult to quantify due to
  disparate metrics

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What are your Beliefs

• Just do the right thing
• Regulations apply equally
• EHS Costs Are non-discretionary

• Right depends upon the situation
• They disadvantage some and benefit others
• There is more discretion and control

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The Decision Challenge
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Solving the Decision Problem
the problem
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Spending pattern
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Two example operational budgets
Facility A Total Operating Costs 294 Million
Facility B Total Operating Costs 74 Million
EHS Costs Account for 8-23 of Operating Budgets
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Decision Problem - Prioritizing

• Studies
• PHA
• LOPA
• QRA
• Risk Guidelines
• Quantitative guidelines
• Risk Matrix

Tend to prioritize problems instead of solutions
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Risk-based Decision Making
Objectives

• Understood by decision makers
• Clarifies the significance of risk
• Aids in identifying best risk reduction options
• Supports decision making to capture best
  shareholder value
• Address different risks more consistently
• Improve the allocation of resources
• Improve decision-making efficiency and
  defensibility
• Used across a wide range of business activities

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Multi-attribute decision model

• Assesses different projects, activities, and
  risks based upon impact to chosen objectives
• Utilizes a common metric to evaluate the
  effectiveness of each funding opportunity
• Captures economic benefit from reducing risk to
  business objectives
• Allows for consistent allocation of resources to
  optimize benefits

Allows apples to be compared to oranges and
bananas
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Building a multi-attribute decision model

• Identify the Players
• Decision makers -- set values
• Subject matter experts -- develop measures
• Establish fundamental decision objectives
• Identify key factors affecting objectives
• Business
• Risk Management
• Personnel
• Quality
• Build attribute scales to measure impacts to
  objectives
• Determine decision-maker preferences
• Monetize these preferences

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What are decision objectives?

• Something that one desires to achieve
• Principles used for evaluation
• relevant to things we are interested in
• fundamental -- not a means to an end
• well defined for consistent application
• Used to evaluate the actual or potential
  consequences of
• action or inaction
• proposed alternatives

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Defining benefits
Business operating objectives
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Factors Influencing Health and Safety
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Quantifying benefits Health safety measures
Severity 1. No significant impact 2.
First-aid only 3. Medical attention 4.
Hospitalization 5. Fatality or permanent
debilitation
Number impacted 1. One 2. Three 3. Five
4. Ten 5. Twenty
Frequency of occurrence
Frequency of occurrence 1. X.XXE-0X 2. About
once in 100 years 3. About once in 50 years 4.
About once in 25 years 5. About once in 10
years 6. About once in 5 years 7. About once a
year 8. About once a month
Fraction of Incidents 1. About one in a
thousand 2. About one in a hundred 3. About
one in ten 4. About one in two 5. Virtually
all
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Use utility theory HS impact values
A representative value function
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Monetization - Corporate Reputation Impacts

• Severity
• Negative national media coverage (CNN, WSJ,
  etc.)
• Local/regional negative media coverage not
  likely to branch out to national coverage.
• Community complaints to regulators adverse
  comments at public hearings (by any single member
  of the public)
• Community verbal or written complaints to local
  plant management
• Neutral
• Community support/ Positive local media coverage
  / Public Awareness Programs
• Community/civic association sponsorship of our
  activities partnership
• Positive national media coverage

3MM 150M 15M 2M 0 -6M -12M -65M
120 110 15
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Overall Benefit
Risk Dimensions
Maximize Regulatory Compliance
Maximize Health Safety
Maximize Environmental Protection
Maximize Financial Performance
Maximize Corporate Reputation
Maximize Customer Satisfaction
Maximize Employee Alignment
Scoring Scales Risk assessment
Xi
Xi
Xi
Xi
Xi
Xi
Xi
WEE
WH-S
WCorp
W
WCust
WRegs
WEnv
Weights Risk tradeoffs
Example Rule Fund projects from the top down
until available funds are exhausted
Activity benefit Risk with - Risk
without Risk-based prioritization
Overall measure of risk (or risk reduction)
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Ranking Opportunities by Benefits-vs.-Cost
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Decide What to Do
Decisions are Easier when Solutions are
Prioritized
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How it worked at one location

• Prioritize funding opportunities for over 200
  open risk and other recommendations reallocated
  400K of funding to more effective risk reduction
  projects
• During benchmarking phase evaluation of funding
  requests in the pipeline
• address protection of building occupants from
  explosion -- savings 1.6 million (not typical)
• address repair of tube leak justified project
  on multiple objectives and achieved net gain of
  20K in benefit
• reallocated funding from a secondary egress
  stairway from reactor catwalk to two alternative
  options -- savings of 153K
• switch from gaseous chlorine to bleach -- gain of
  25K in benefit

These benefits are just for the first year The
benefits are recurring year after year
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What does it achieve?

• Best use of limited resources
• Easily understood method for communicating why a
  decision was made
• Transparency improves the defensibility of
  decision-making
• Provides a logical and consistent process
• Buy-in at all levels by allowing various internal
  stakeholders to participate in the development
  process

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Application

• Capital projects
• Audit findings
• Operational recommendations
• Human resource findings
• Post-incident recommendations
• Compliance issues

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Closing Thoughts
It can be done Better!
Questions Cheryl Grounds Jatin Shah