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Welcome
by Tariq Minhas
FLIGHT SAFETY COURSE
1For Training Purpose Only
Operational Risk Management
OVERVIEW• What is ORM - The Essentials• Why ORM?• The Integration Imperative• ORM Leadership Opportunity• ORM Applied
Operational Risk Management
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Operational Risk Management
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What is Risk Management?
Risk Management is a decision making process aimed at reducing the number of losses of people, equipment and material due to accidents.
It is a pro-active approach to accident reduction which has been proven on the battlefield as well as in private sector companies.
Risk management applies to war, an emergency and to peace time operations
Operational Risk Management
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What is Operational Risk Management?The risk formula : The risk formula attempts to capture the various components which influence the amountof risk which a hazard may produce for a community or population.
Operational Risk Management
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Risk : The probability and severity of accident or loss from exposure to various hazards, including injury to people and loss of resources.Risk = the possibility of loss, injury, death or other consequenceHazard = a destructive phenomenon or eventExposure = duration and/or extent of a hazardVulnerability = susceptibility to damage or harm by a hazard Manageability = the capacity to respond to Needs created by a Disaster
Operational Risk Management
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What is Operational Risk Management?
Operational Risk Management (ORM) The process of detecting, assessing, and controlling risk associated with organizational operations.
It is a logic-based, common sense approach to making calculated decisions on the various factors associated with any kind of activity.
Operational Risk Management
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What is Operational Risk Management?
These factors include: human(s), machine(s), environment, management, and mission. Because risk is inherit in CAP missions and activities, CAP officially adopted the six-step ORM process in May, 1997 as its method for evaluating the level of risk; identifying ways to control, mitigate, or eliminate risk; and making decisions on whether and how to proceed with the activity.
WHY DO DISASTERS HAPPEN?
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Disaster: A disaster is a natural or man-made (or technological)
hazard resulting in an event of substantial extent causing significant physical damage or destruction, loss of life, or drastic change to the environment.
A disaster can be defined as any tragic event resulting from events such as earthquakes, floods, catastrophic accidents, fires, or explosions. It is a phenomenon that can cause damage to life and property and destroy the economic, social and cultural life of people.
WHY DO DISASTERS HAPPEN?
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• Disaster: The word disaster implies a sudden irresistible and
unforeseen event. Unexpected interruption of critical infrastructure
induced by nature, humans, or technology failure.• A disaster could result in a major illness, death, a
substantial economic or social misfortune.• At the community level, it could be a flood, a fire, a
terrorism act, a collapse of buildings in an earthquake, the destruction of livelihoods, an outbreak or displacement through conflict.
WHY DO DISASTERS HAPPEN?
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• Disaster Risk Factors Factors that alone or with the combination of other
factors can effect to achieve safety 10 Basic factors to be considered;
1. Design and Construction Flaws2. Deferred Maintenance 3.Economic Pressure4.Schedule limitations
WHY DO DISASTERS HAPPEN?
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• Disaster Risk Factors (continued--)5.Inadequate Training6.Not Following Procedures7.Lack of Planning and Preparedness8.Communication Failure9. Arrogance10.Stifling Political Agendas
WHY DO DISASTERS HAPPEN?
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WHY DO DISASTERS HAPPEN?
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• Disaster Recovery: According to ReaR's home page, disaster recovery is
“the process by which a business function is restored to the normal, steady state after a disaster.”
WHY DO DISASTERS HAPPEN?
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Classifying Disasters;
Disasters come in many different forms mainly can be divided in to three groups;
1. Man Made Accidents2. Terrorist Act(Attacks)3. Natural disasters
WHY DO DISASTERS HAPPEN?
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Classifying Disasters;
Disasters come in many different forms mainly can be divided in to three groups;
1. Man Made Accidents2. Terrorist Act(Attacks)3. Natural disasters
WHY DO DISASTERS HAPPEN?
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Classifying Disasters;1. Man Made Accidents• Disasters directly caused by people• Conflict• Industrial events: explosions, hazardous• materials and pollution• Transportation events
WHY DO DISASTERS HAPPEN?
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Classifying Disasters;2.Terrorist Act(Attacks)• Terrorist groups• Designated terrorist organizations• Charities accused of ties to terrorism• State terrorism• State-sponsored terrorism By state: Israel , Russia, India,
United States• Organization Financing, Fronting, Training camp,
Leaderless resistance• Fighting terrorism
WHY DO DISASTERS HAPPEN?
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Classifying Disasters;3.Natural disasters• Tropical storms (hurricanes, cyclones)• Floods• Droughts• Extreme hot or cold• Volcanoes• Earthquakes• Landslides• Tsunamis
WHY DO DISASTERS HAPPEN?
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WHY DO DISASTERS HAPPEN?
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• Disaster Recover Plan: A strategy to recover from a disaster with minimum impact on infrastructure
Why ORM? • It is impossible to completely reduce all risk. • We must know to control hazards in order to decrease
the amount of risk that we are exposed to.• To ensure necessary risks are taken ORM: • Is an important tool for training realism• Provides potential to expand capabilities• Assures necessary risk taking to enhance superiority• Natural evolution from traditional risk management• Systematic decision-making tool that balances risk cost
& benefits
Operational Risk Management
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OBJECTIVE of the ORM process:
Protecting people, equipment and other resources, while making the most effective use of them.
Preventing accidents, and in turn reducing losses, is an important aspect of meeting this objective.
In turn, by minimizing the risk of injury and loss, we ultimately reduce costs and stay on schedule.
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OBJECTIVE AND GOALS
IDENTIFY, CONTROL, AND DOCUMENT HAZARDS
IDENTIFY, CONTROL AND DOCUMENT OPPORTUNITIES
EVALUATE AND MINIMIZE RISKS
EVALUATE AND MAXIMIZE GAIN
PREVENT OR
MITIGATE LOSSES
ADVANCE OR OPTIMIZE GAIN
PROTECT PERSONNEL & RESOURCES
MAXIMUM
CAPABILITY
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4 KEY ORM PRINCIPLES
1.Accept no unnecessary risks.2.Make risk decisions at the appropriate level.2.Accept risks when benefits outweigh costs.3.Integrate ORM into doctrine and planning at all levels.
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BUT.... NOBODY TAKES “UNNECESSARY” RISKS?If all the hazards that could have been detected have not been detected then unnecessary risks are being accepted.
The single greatest advantage of ORM over traditional risk management is the consistent detection of 50%+ more hazards.
1 .Accept No Unnecessary Risks
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2. Make Risk Decisions at the Appropriate LevelFactors below become basis of a decision- making system to guide leaders;•Who will answer in the event of a mishap?•Who is the senior person at the scene?•Who possesses best insight into the full benefits and costs of a risk?•Who has the resources to mitigate the risk?•What level makes the most operational sense?•What level makes these types of decisions in other activities?•Who will have to make this decision in combat operations?
Operational Risk Management
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3 .Accept Risks When Benefits Outweigh Costs.WHAT HAPPENS WHEN AN ORGANIZATION STOPS TAKING RISKSMERIUM-WEBSTER: “BUREAUCRACY: A system of administration characterized by lack of initiative and flexibility, by indifference to human needs or public opinion, and by a tendency to defer decisions to superiors or to impede action
with red tape”.MAINTAINING A BOLD, RISK-TAKING ORGANIZATION IS ALWAYS A CHALLENGE WHEN YOUR UNIT IS NOT ON A MISSION .
ORM HELPS.
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Operational Process
Operational Process
Operational Process
Loss Control Staff Injects
Operational Leaders Add-
On
Loss ControlOccurs Within
The Process
This is the one we want!!
4.Integrate ORM Into Doctrine and Planning At All Levels.
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and all their sub-processes
BuildingSecuringSupplyingMaintainingOperationalPlanning
WHAT IS AN “OPERATIONAL PROCESS”?
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ORM IS BASED ON SYSTEMS MANAGEMENT CONCEPTS
5M Model
ManMachine
Media
MissionManagement
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THE ORM 6-STEP PROCESS
1 .Identifythe Hazards
2 .Assessthe Risks
3 .Analyze Risk Control
Measures
4 .MakeControl
Decisions
5 .Risk ControlImplement
6 .Superviseand Review
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Step 1 - Identify the HazardProcess: Emphasize hazard ID tools. Adds severity and early detection.Output: Significant (50%+) improvement in the detection of hazards.
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7 - Primary Hazard ID ToolsBROAD RANGE OF APPLICATION AT ANY LEVEL• Operations Analysis/Flow Diagram• Preliminary Hazard Analysis• What If• Scenario• Logic Diagrams• Change Analysis• Cause and Effect
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Specialized and Advanced Hazard ID Tools• Specialized tools accomplish specific ORM objectives.
Map analysis, interface analysis, mission protection tools, training realism, opportunity assessment
• Advanced tools are used by specialists and professionals to add depth to ORM applications
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EXAMPLE: THE DRIVE TO WORK
What if the car catches fire.
What if a carjack is attempted.
What if I have to take an unknown detour.
What if I run out of gas.
What if another car rear ends me.
WHAT IF ANALYSIS
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Step 2 - Assess the RiskProcess: All hazards evaluated for total impact on mission or activity. Root causes determined and risk levels assigned (EH, H, M, L)Output: Personnel throughout the organization know the priority risk issues of the command and of their function.
Operational Risk Management
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THE ASSESSMENT TOOLS ADD OBJECTIVITY TO THE EVALUATION OF RISK• Risk assessment matrix: Requires specific
evaluations of severity, probability, and when necessary, exposure
• Totem pole: Induces the prioritization of risk issues across functions and across the organization
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THE RISK ASSESSMENT MATRIX KEY TOOL FOR RISK ASSESSMENT
ProbabilityFrequent Likely Occasional Seldom Unlikely
I
II
III
IV
Catastrophic
Critical
Moderate
Negligible
A B C D E
SEVERITY Low
Medium
High
Risk Levels
Extremely
High
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EXAMPLE:THE DRIVE TO WORK
Type of Risk Risk LevelWhat if the car catches fire.
What if a carjack is attempted.
What if I have to take an unknown detour.
What if I run out of gas. MED
What if another car rear ends me.
MED
HIGH
LOW
MED
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Step 3 - Analyze Risk Control MeasuresProcess: Comprehensive risk control options are developed for risks based on a worst-first basis.Output: A full range of cost effective, mission supportive, risk controls for the consideration of the decision maker.
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The Risk Control Option Tools Add Scope & Depth
• Basic or “macro” risk control options: Reject, Avoid, Delay, Transfer, Spread, Accept, Compensate, Reduce
• Risk control options matrix: 46 specific “reduce-focused” control options - applicable at up to four levels in the organization
Operational Risk Management
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EXAMPLE: THE DRIVE TO WORKWhat if the car catches fireMEDIUMMacro options:
Transfer - InsuranceReduce (use Control Options Matrix) -
Engineer gas tankDrive defensivelyFocused maintenanceEmergency response plan & equipment
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Step 4 - Make Control DecisionsProcess: A decision-making system gets risk decisions to the right person, at the right time, with the right support.Output: Personnel know their decision-making authority and limitations and take necessary risks.
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ORM Uses Proven Decision-making Tools• Decision-making systems get the decision to the
right person, at the right time, with the right support.
• Basic cost benefit and return on investment analysis assure maximum benefit for the risk control $.
• Decision-making matrices and other modern decision-making tools improve decision quality.
• The leader question list induces better staff inputs.
Operational Risk Management
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ESTABLISHING A DECISION MAKING GUIDELINEESTABLISHING A DECISION MAKING GUIDELINEEXAMPLERISK LEVEL DECISION LEVELExtremely High Wing Commander or specifically
authorized designee(Top level M)High Group Commander or
specifically authorized designee
Medium Team leader, or senior leader on the scene
Low Any person in a leadership position
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EXAMPLE:THE DRIVE TO WORK
What if the car catches fireMEDIUM
Who decides: Vehicle owner(s)Control: Emergency response plan & equipment
Decision :Cost of loss
Cost of control
$500 - Deductible
Rate increase?
Car down-time
Repair/Replacement hassle
$15 Fire extinguisher
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Step 5 - Risk Control ImplementationProcess: Leaders lead, operators are involved, all are accountable.
Output: ORM initiatives always have positive mission impact.
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ORM Implementation Tools & Guidelines Help Controls Click with Operators • The involvement continuum guides the high
degree of operator input to ORM actions• The leader involvement actions list and the leader
opportunity job aid help assure effective leader influence
• The motivation model makes application of modern behavior management techniques easier
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EXAMPLE:THE DRIVE TO WORK
What if the car catches fire
•Transfer - Insurance Reduce - OPR: Dad• Engineer gas tank OPR: Ford• Drive defensively OPR: Driver• Focused maintenance OPR: Dad• Emergency response plan & equipment OPR: Team Mom
& Dad
MEDIUM
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Step 6 - Supervise and ReviewProcess: Progress measured through increased mission effectiveness, mishap results and direct indicators of risk.
Output: ORM performance status determined real time.
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Review and Feedback Procedures Measure & Leverage ORM Results• Eliminate invalid statistical uses of mishap rates and
numbers• Refocus measurement on direct measures of risk
(critical behaviors, knowledge, conditions, etc.)• Radically improve the effectiveness of feedback
systems through modern data and communications systems
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USING THE 6-STEP PROCESS -THE RISK MANAGEMENT CONTINUUM
PLANNING OPERATIONS AFTER-ACTION
Deliberate ORMDetailed Hazard IDIntegration
Largely Time-criticalChange AnalysisReal TimeHighly Decentralized
Assess indicatorsDeliberate ORMIntegrationFeedback to Planning
We try to get most ORM done
here
But continue the process here
and here
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USING THE 6-STEP PROCESS LEVELS OF EFFORT
LittleTimeResourcesRisk
Lot ofTimeResourcesRisk
TIME CRITICAL DELIBERATE STRATEGIC
SELECTEDPRIMARY
PRIMARY SPECIALIZED ADVANCED
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Integrating the ORM Process
• Why integration is critical?• 12 Strategies for ORM integration.• The importance of pace.
Overview
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WHY INTEGRATION IS CRITICAL?Integration: • Forces balancing of loss control and other mission needs• Captures more of the knowledge and experience of
large numbers of operators• Reduces the number and diversity of references needed
to do the job right• Eliminates redundancy and gaps between loss control
functions• Strengthens accountability• Reduces costs and workloads (in plans, materiel
development cycles, etc.)
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THE TWELVE STRATEGIES FOR PROGRAM INTEGRATION
1. Accountability2. Teaming3. Partnership4. Integrate in Training5. Risk Decision Points6. Organization &
Policy Structure
7. Employee Activities8. Process Integration9. Direct Change10. Gain a Champion11. Integrate in Strategic
Planning12. Integrate into
Measurement
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THE IMPORTANCE OF PACE• Don’t use the shotgun• Don’t get out in front of the organization - too far• Don’t “inspect-in” ORM• Do focus on “targets”• Do expect crawl, walk, run• Patience, patience, patience
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ORM MATURATION Vision Organization Approach Background Strategy
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VISIONMacro:
Every Leader, Member, & Employee Manages Risk in All They Do... On- & Off-Duty
Micro:
On-Duty - Every Organization Manages Normal Operational Risk Profile
- Unique Operations Identified & AssessedOff-Duty - Every Individual Applies Risk ManagementProcess to Activities.
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CAP APPROACH :‘CAP’ Collect Data, Analyze, Prevent. Top-Down Approach Strong Senior Leader Backing Decentralized Implementation Moderate Implementation Tempo Safety Lead Role for Cross-Functional
Implementation
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ORM STRATEGY Miscellaneous Initiatives
• Automated “Tools”• Doctrine Integration• Crosstell• NEWS Release(s)• Video(s)
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The leader’s role will be a decisive factor in the
success or failure of ORM
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ORM Leadership Opportunities1. Commit to Breakthrough Improvement
Objectives: Put improvement of risk performance (control-
opportunity) on a competitive level with other important mission concerns.
2. Set Goals & ObjectivesObjectives:
Establish periodic ORM performance and programmatic goals.
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ORM Leadership Opportunities Continued3. Set a Personal Example
Objectives: To assure credibility of the ORM process through personal behavior.
4. Build an Aggressive Opportunity Mindset in the OrganizationObjectives: Create an organization as conscious of the opportunity aspects of ORM as it is the risk reduction
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ORM Leadership Opportunities Continued5. Induce Loss Control Community Functional
IntegrationObjectives: Build increasing cooperation and integration of the loss control community
6. Establish an ORM Management StructureObjectives: Provide the necessary leadership and staff resources to adequately guide the ORM process
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ORM Leadership Opportunities Continued
7. Resource ORM Activities
Objectives: Allocate resources to ORM (control-opportunity) at a level it can competitively justify.
8. Heat Shield Subordinates
Objectives: Protect subordinates who have taken prudent, mission supportive risks, but experienced severe losses, from negative consequences.
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ORM Leadership Opportunities Continued9. Detect & Correct Gambling
Objectives: Develop an organization in which risk “gambling” is deterred even when the gambler “wins”.
10. Use the Power of QuestionObjectives: Use pointed ORM questions to induce ORM activity and culture change.
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ORM Leadership Opportunities (Continued)11. Regularly Monitor ORM Progress
Objectives: Periodically assess a set of data that effectively monitors organization ORM status
12. Exploit the ORM Value of Major Mishap ReviewsObjectives: Consistently induce consideration of the ORM implications of mishaps
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Questions and Answers
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