One Thing You Must Know About Risk in an Ailing Economy

What you are about to read may upset what you have always accepted as the truth, without asking questions.

 

If you have a job in risk management, you would have heard the phrase ‘reasonable practicable’. This is the term that risk professionals use to describe the need to balance the resources (time, money and effort) with achieving a reduction of the level of RISK. In risk speak, that is another way of saying, ‘don’t kill a fly with a sledge hammer’ or make sure that your response to risk is ‘cost effective’.

 

If the cost of dealing with a risk is so much more than the actual size of the risk; you would say that it is not reasonable practicable to deal with that risk. In that case, employers would provide a cost benefit analysis and not take any more action on the risk.

 

So there are two parts to reasonable practicable-COST and RISK. We all know what cost is-money, effort and time. Risk on the other hand just answers the questions-what can go wrong, how likely and how serious?

 

The big question is this, if reasonable practicable is about risk and cost, does the balance between these two factors depend on the economic situation?

Before I answer that question, let me tell you about some changes I have noticed in the way managers have dealt with risk in the last seven or so years of the recession.

 

First, managers are putting more emphasis on evidence and rightly so. Senior managers will now ask for evidence that risks are as serious as the competent advisers say they are and not just take what a safety adviser says on trust. They might ask for RIDDOR-Reporting of Injuries, Diseases and Dangerous Occurrences Regulations stats, absence records, claims data or some other indicator to prove the level of risk. This is a general trend in health and social care, which is the industry where I work.

 

Secondly, managers are suddenly waking up and doing something they should have been doing -focusing on outcomes not just activity. It is not about how many people I take through health and safety training but how many are competent. And, does their competence translate into fewer losses on accidents and better productivity. It does not matter if I train staff every 10 years or every 10 months, what counts is-can I prove competence?

 

The law, at least in the area of risk where I work, does not prescribe the frequency of training, only competency of staff.

 

Now, back to my question- does the balance between RISK and COST depend on the economic situation?

 

Surely you won’t argue with this-cost is an economic factor. Now, I am going to be very blunt and controversial and argue that what is reasonable practicable in a good economy may not be so reasonable practicable in a recession.

 

There is less money circulating in a recession

Since half of the principle of reasonable practicable is based on money, surely the balance between risk and cost is redefined in a bad economy because there is less money available. That means the little money available is worth more. In that case, the cost of any remedial measures carries more weighting relative to a given amount of risk.

 

In my view, that is a reason to define reasonable practicable differently in a bad economy. Now, that may make your blood boil, but I am just saying what many people are thinking but not saying. More than that, I am saying what many people are doing but not admitting.

 

Organisations all around us have acted out this principle since 2008; but just not saying it! How else can you explain this-an healthcare provider changes the frequency of moving and handling training ( a specialty of health and safety) from once every year to once every three years because of the recession. It would not be such an issue, if this was a one off but I have seen this scenario repeat itself, time and again in the last several years.

 

Another reason is that healthcare providers particularly, larger National Health Service (NHS) Trusts have struggled to physically get through the numbers of staff needing training to meet mandatory targets-including the NHS Litigation Authority (NHSLA) targets for Statutory and Mandatory training.

 

Conclusion

Make no mistake; I am not against annual training, and in some cases that is necessary. I am just advocating that we put the balance between risk and the cost of mitigating it into the context of economic realities. This means focusing not just on risk but also the relative cost of dealing with it-relative to the size of the risk and to the prevailing economic climate.

 

 

 

 

 

 

 

 

 

 

Posted in Training Blogs and tagged , , , .