The ever-increasing scale and complexity of marine transportation require 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, according to Britanniapandi.
Multiple Definitions
For the paper the following simplified definitions of how we understand the terms are applied:
- A hazard is an event or a situation that 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
- Risk management is the coordinated activity of assessing, controlling and monitoring risk
Need Of 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 minimized 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 its 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), the flag state, and those imposed by the Port/Coastal State in which they trade. Legal requirements agreed in commercial contracts (such as a charter party) 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 imprudent, unsafe, or unduly hazardous trading
- Obligation to mitigate loss, damage, expense, or liability following an incident.
The ISM Code
The ISM Code has specific requirements regarding risk management and the objectives of the company (section 1.2.2):
- Provide safe practices in ship operation and a safe working environment;
- assess all identified risks to its ships, personnel, and the environment and establish appropriate safeguards; and
- continuously improve safety management skills of personnel ashore and aboard ships, including preparing for emergencies related both to safety and environmental protection.
The above requires companies to carry out a systematic review of their operations and activities, assess the risk for all identified hazards, and develop adequate controls – such as the procedures and instructions included in the Safety Management System (SMS).
The ISM Code does not stipulate a particular risk assessment methodology to be used. This provides companies with the flexibility to utilize the approach most suitable for their operational profile. However, company policy as well as procedures for methods selected for risk assessment should be structured and documented. Authority, responsibility, and training requirements of the individuals involved with the risk assessment process should be defined in the SMS.
Methods and Techniques
The risk assessment may be based on the following foundations:
- Historical experience
- Analytical methods
- Knowledge and judgment
Depending on the nature and complexity of their operations, companies may adopt some different methods ranging from detailed quantitative assessments to less formal qualitative assessments.
QUALITATIVE risk assessments evaluate risks based on subjective judgments and descriptions, often using categories like high, medium, or low. They often rely on expertise and experience to assess the likelihood and impact of risks.
QUANTITATIVE risk assessments, on the other hand, use numerical data and statistical methods to measure risks. They may involve calculating probabilities and potential impacts in numerical terms to provide a more precise evaluation of risks.
Selecting the method appropriate to the situation is essential for successful risk assessment. In principle, a simple qualitative method should be applied first to determine if the risk can be assessed without having to resort to more complex quantitative techniques.
For simple, straightforward activities an assessment made on-site by a supervisor with an appropriate level of authority may be sufficient. Objective evidence of such risk assessment should still be maintained.
Risk Assessment Process
The required formal approach to risk assessment does not need to be overly complex. In essence, this process should fulfill the following objectives:
- Identify activities, operations, tasks, and processes that require a risk assessment
- Comprehensively identify the hazards
- Assess the risks associated with those hazards
- Identify and apply controls to reduce the risks that are considered intolerable
- Monitor the effectiveness of the controls
HAZARD IDENTIFICATION
The risk assessment can only be carried out once the hazards and their potential consequences have been identified and described.
Hazards differ depending on the ship type, cargo, navigational situation, operational scenario etc. A meaningful assessment of risk requires a thorough understanding of the hazards present. It should be accurate and may be performed explicitly using structured methods and techniques. However, in cases where the hazards are considered well known, hazard identification may be an implicit step that is not systematically performed2. Whilst it may be appropriate in some cases, implicit hazard identification may result in gaps and false assumptions.
It should be also noted that good seamanship, experience and compliance with rules and regulations may not be sufficient to identify all the hazards and manage risk effectively.
To identify all potential hazards, it is recommended that a broad team of personnel (both on board and within the shore management team) be involved in the risk assessment process, to ensure that all aspects are considered and that all reasonable potential hazards are identified for further consideration.
RISK ANALYSIS
Risk analysis should determine the frequency (likelihood) and the potential consequence (severity) associated with each of the identified hazards. The likelihood and severity are then combined to establish the level of risk. It should be noted that a hazardous event may have multiple consequences, therefore risk analysis should review all of them.
The risk analysis process should also include the evaluation of the existing risk barriers and mitigation measures.
RISK EVALUATION
The results of risk analysis are then evaluated by comparing them with the risk acceptance criteria. This is to decide whether the existing risk needs treatment and the risk abatement priorities.
RISK TREATMENT / MITIGATION
The next step of the risk management process is to specify and implement risk controls to mitigate the risk to an acceptable level.
Effectiveness Of Risk Management
The effectiveness of a risk assessment may be measured by achieving the following objectives:
- All hazards relevant to the activity are identified
- Risk controls are adequate and reduce the risk to an acceptable level
- The risk assessment and its outcome is considered as meaningful
- The participants feel their voice is heard and that they actively contribute to safety
- The assessment identifies the priority of risk controls
- Sufficient time and resources are allocated to implementing the risk controls
- The outcome is shared with all participants of the activity
- The perception of risk is shared and understood by all stakeholders, including shore management
- The participants recognize the value of risk assessment to their safety
- The participants understand the operational boundaries of the assessment
- The participants can recognise a hazard that had not been identified, or that a risk control failed
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Source: Britanniapandi
