copyright © 2010 dupont. all rights reserved. the dupont oval logo, dupont™, and the miracles of...

Copyright © 2010 DuPont. All rights reserved. The DuPont Oval Logo, DuPont™, and The miracles of science™ are registered trademarks or trademarks of DuPont or its affiliates.

Managing Operational Risk to Ensure Business Continuity

Managing Operational Risk to Ensure Business Continuity

DuPont Sustainable Solutions

July, 2011


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Objective

To provide an understanding of the DuPont Process Safety Management System and why the system works for successful companies

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Defining Risk

• Risk is the potential for loss, calculated by combining possible or foreseeable consequences with realistic probability (or frequency) of occurrence.

• Operational risk is a portion of a business’s total risk profile, specifically the operations or process related aspects—potential losses resulting directly from the business’s operations.

• Risk is the potential for loss, calculated by combining possible or foreseeable consequences with realistic probability (or frequency) of occurrence.

• Operational risk is a portion of a business’s total risk profile, specifically the operations or process related aspects—potential losses resulting directly from the business’s operations.

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Unsafe Acts and Conditions

First Aid Incidents

Major Incident

Fatality

Quasi incidente

Catastrofe

Incidente con grosse perdite

Incidente con perdite minori

Unsafe Acts and Conditions

First Aid Incidents

Major Incident

Fatality

Near Miss

Catastrophic Incident

Major Technical Incident

Minor Loss Incident

Beha

viou

ral I

ncid

ent P

yram

id

Technical Incident Pyramid

Operational Risks


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1. Management Leadership & Commitment

How DuPont Manages Safety and Risk - Step 1

• Establish Policy

• Commit Resources

• Provide for and Encourage

Employee Involvement

• Establish Clear Accountability

• Verify Compliance

• Participate Personally

Management Leadership and Commitment - Responsibilities


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2. Build a Safety Culture



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3. Implement PSM Program


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4. Operational Discipline


3. Implement PSM Program

Leadership by Example

Functioning Capability/Sufficient

Resources

Employee Involvement

Active Lines of Communication

Strong Teamwork

Common Shared Values

Up to date Documentation

Practice Consistent with

Procedures

Absence of Shortcuts

Excellent Housekeeping

Pride in the Organization

Operational Discipline Characteristics


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Typical Operational Risks

• Employee / Public Health and Safety

• Environmental Damage

• Physical Assets

• Business Interruption

• Employee / Public Health and Safety

• Environmental Damage

• Physical Assets

• Business Interruption

• Regulatory Compliance

• Reputation, Public Support and Right to Operate

• Employee Retention / Morale

• Product Liability

• Business Value / Market Capitalization

• Community Economic Impact

• Regulatory Compliance

• Reputation, Public Support and Right to Operate

• Employee Retention / Morale

• Product Liability

• Business Value / Market Capitalization

• Community Economic Impact


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Top Operational Risk Factors

• Inadequate identification / evaluation of operational risks

• Integrity of facilities

• Competing priorities, i.e., production, quality, costs

• Insufficient resources, both quantity and capabilities

• Poor training of employees and contractors

• Inadequate management of change

• Weak compliance-to-procedures culture

• Failure to manage process safety risks differently from workplace safety

• Weak audit function

• Ineffective leadership

• Inadequate identification / evaluation of operational risks

• Integrity of facilities

• Competing priorities, i.e., production, quality, costs

• Insufficient resources, both quantity and capabilities

• Poor training of employees and contractors

• Inadequate management of change

• Weak compliance-to-procedures culture

• Failure to manage process safety risks differently from workplace safety

• Weak audit function

• Ineffective leadership


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What Is Operational Risk Management?

An integrated management system that identifies, evaluates, and controls a manufacturing process’ operational risks in a way that catastrophic incidents are prevented that could impact:

People – the public, employees and contractors

The Environment – local community / work sites

Business – lost assets, business opportunities, loss of customers, loss of shareholders


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DuPont Process Safety Management Model


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Why the model works for Successful Companies

Management Leadership and Commitment is in the center of the wheel

“Safety is a line management responsibility. If we can’t do it

safely - we won’t do it at all”

E.I. DuPont (circa 1817)

“Management must demonstrate their commitment by articulating a clear message on the importance of process safety and matching that message both with the policies they adopt and the actions they take.”

Baker Panel Report (January 2007)

Management Leadership and Commitment is in the center of the wheel

“Safety is a line management responsibility. If we can’t do it

safely - we won’t do it at all”

E.I. DuPont (circa 1817)

“Management must demonstrate their commitment by articulating a clear message on the importance of process safety and matching that message both with the policies they adopt and the actions they take.”



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Leadership Responsibilities

• Leaders must have a clear vision of the ultimate goal of the

company’s process safety management efforts

• Leaders must set the goals and strategic objectives

• Leaders must insure sufficient, quality resources are dedicated to

PSM system requirements

• Leaders must hold their line organization accountable for PSM

implementation and results.

• Leaders must recognize and reward PSM accomplishments

• Leaders must drive continuous improvement through the use of

metrics and audits

• Leaders must lead…felt leadership


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Leadership Accountability

• Leaders must have a clear vision of the ultimate goal of the

company’s operational risk management efforts

• Leaders must set the goals and strategic objectives

• Leaders delegate specific responsibilities and tasks to individuals

in the organization

• Leaders must hold their line organization accountable for

implementation and results

• Leaders must recognize and reward accomplishments


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Operational Discipline encircles all the technical elements

Everyone doing the job right…every time

A strong culture of following procedures

Operational Discipline encircles all the technical elements

Everyone doing the job right…every time

A strong culture of following procedures


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Operational Discipline Characteristics

OPERATIONALOPERATIONALEXCELLENCEEXCELLENCE

LeadershipLeadershipby Exampleby Example

ExcellentExcellentHousekeepingHousekeeping

EmployeeEmployeeInvolvementInvolvement

PSRMPSRMResourcesResources

OrganizationalOrganizationalPridePride

NoNoShortcutsShortcutsActiveActive

CommunicationsCommunications

PracticesPractices==

ProceduresProcedures

Up-To-DateUp-To-DateDocumentationDocumentation

StrongStrongTeamworkTeamwork

SharedSharedValuesValues


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Performance is a function of the Management Systems and the Level of Execution

=

Management Standards

Operational Discipline

Operational Effectiveness

x

State of Implementation

State of Operational

Effectiveness

State of Safety

Standards

60%60%

30%30%

18%18%


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A single governance process A single governance process

Common corporate metrics

Common risk classification protocol

Common audit protocol

Common corporate metrics

Common risk classification protocol

Common audit protocol

Common incident investigation / classification approach

Continuously upgraded via global networks

A common goal of Operational Incidents

Common incident investigation / classification approach

Continuously upgraded via global networks

A common goal of Operational Incidents


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PSM Metrics

PRINCIPLE

What you don’t measure, will not improve. What you don’t audit, will not be sustained

● Metrics need to developed at all levels

Strategic / Corporate

Leadership / Site

By Element

● Metrics should be tracked/reviewed at least monthly

● Leaders must establish what is acceptable performance and how it will respond when it is or is not acceptable

● Metrics drive Continuous Improvement


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DuPont Metrics ApproachAll operating units report Quarterly to Corporate 10 PSM Metrics

1. # of Process Safety Incidents, including severity

2. # of open and overdue Incident Recommendations

3. # of scheduled, open and overdue PHA’s

4. # of open and overdue PHA Recommendations

5. # of open and overdue 1st Party PSM Audit Recommendations

6. # of open and overdue 2nd Party PSM Audit Recommendations

7. # of OP’s and SWP’s (Procedures) overdue for review/revision

8. # of overdue MI Tests/Inspections for PSM critical components

9. # of scheduled, open and completed Emergency Drills

10. # of Approved Extensions to PSM Action Items


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Integrated into all business processes Integrated into all business processes Resource allocation /

prioritization

Capital projects planning and execution

Personnel succession planning

Performance management

Training and development

Contractor selection / retention

Acquisition due diligence

Resource allocation / prioritization

Capital projects planning and execution

Personnel succession planning

Performance management

Training and development

Contractor selection / retention

Acquisition due diligence


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Flexible and adaptable to many industries Flexible and adaptable to many industries Currently in use in industries as diverse as Chemicals, Upstream and Downstream Oil & Gas, Power Generation, Food Processing, Mining (Surface and Sub-surface), Metals Processing (Alumina, Steel, Gold, Nickel, Coal) and Pipelines/Storage.

Also, is being incorporated in Major Projects processes that construct these same facilities

Currently in use in industries as diverse as Chemicals, Upstream and Downstream Oil & Gas, Power Generation, Food Processing, Mining (Surface and Sub-surface), Metals Processing (Alumina, Steel, Gold, Nickel, Coal) and Pipelines/Storage.

Also, is being incorporated in Major Projects processes that construct these same facilities


The DuPont Approach to Improving Process Safety

Performance

The DuPont Approach to Improving Process Safety

Performance


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To assist clients to achieve sustainable results, we use a structured approach for culture and process change

Plan Transition

Plan Transition

Assess Current State

Assess Current State

Implement Changes

Implement Changes

Envision Future State

Envision Future State

Develop the change planDevelop the change plan• What must be done?• When must it be done?• By whom?• How?• Assign accountability

Develop the change planDevelop the change plan• What must be done?• When must it be done?• By whom?• How?• Assign accountability

Make the changesMake the changes• Guide process teams in

design and development• Craft appropriate training• Rollout changes• Train staff• Measure Results

Make the changesMake the changes• Guide process teams in

design and development• Craft appropriate training• Rollout changes• Train staff• Measure Results

Get management commitment to Get management commitment to changechange• Understand current state and performance reasons• Gain a common perspective of what

change is necessary• Prioritize change actions• Mobilize the organization

Get management commitment to Get management commitment to changechange• Understand current state and performance reasons• Gain a common perspective of what

change is necessary• Prioritize change actions• Mobilize the organization

Examine culture and safety Examine culture and safety processes & systemsprocesses & systems• Perception • Organization & Structure• Policies & Processes• Performance analysis• How work gets done - Execution

Examine culture and safety Examine culture and safety processes & systemsprocesses & systems• Perception • Organization & Structure• Policies & Processes• Performance analysis• How work gets done - Execution

Sustain Changes

Sustain Changes

Sustain the change Sustain the change Keep it current• Audit to maintain progress• Create a learning and development curriculum

Sustain the change Sustain the change Keep it current• Audit to maintain progress• Create a learning and development curriculum

3-5 years


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About assessment of current state

What?

● A broad-based, data and hypothesis-driven, process-oriented assessment of the client based on 22 elements, looks at how client currently does things and what opportunities exist for us to help them improve.

How?

● Follow a rigorous method to gather information from data and safety perception surveys and form (several) initial hypotheses1 about the client, then

● Gather more detailed information in the field to prove, disprove, revise, and/or create new hypotheses, then

● Pull all that information together to identify and prioritize their issues/problems, then

● Develop recommendations to solve the “critical few” problem(s), and finally

● Present the business case to implement these changes with DuPont assistance

Outputs

● Assessment report that identifies strengths, opportunities and recommendations

● Element wise benchmarking against world class

● Safety perception survey results


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Example of PSM Assessment Results

Based on PSM elements for a mining and chemical company

0

1

2

3

4

5

Lead

ersh

ip

PSIPHA

MO

C-PM

CO-T

,F QA

Trai

ning

PSSR MI

EPRIN

C INV

Auditin

gO

P&SWP

CSM

Fundamentals

Awareness

Skills

Excellence

World Class

Low Site Score

Composite Score

High Site Score

NOTE: Multiple sites were involved. The range and average of the results are shown.


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Envision future state

What?

● Facilitate leadership aligned thinking on desired future state that can be clearly and visually articulated to the broader organization

How?

● Interact one-one with top management to gain individual insights and expectations

● Collate and analyze the leadership expectations versus current state as established from the assessment

● Prepare and facilitate a workshop that includes brainstorming with the top management including the board if possible.

● Contents of the workshop will include where are now? Why? Where do we want to be? By When?

Outputs

● Leadership that understands current state

● Aligned leadership on future vision and direction

● Communication package that can be used consistently articulate leadership vision


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Plan the transition

What?

● Developing a phased roll out plan that is practical in achieving the desired future state as articulated by top management.

How?

● Form a cross functional team

● Develop an overall roadmap to move from current state to the desired future state

● Quantify the resources required to move from current state to the desired future state in terms of financial, human and technological resources

● Gain alignment and commitment on resourcing the plan

● Communicate to the broader organization

Outputs

● Roadmap that represents a phased plan to achieve desired state in the time-frame that has been agreed by the top management


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Implementing the plan

What?

● Facilitating the execution of the transition plan through continuous support from consultants who have hands-on operational experience to achieve desired state of safety culture and performance.

How?

● Coaching leadership, managers and supervision in defining expectations, monitoring performance and demonstrating desired behaviours at corporate and site Levels (e.g. one-one coaching)

● Consulting in establishing/upgrading standards/procedures tools and processes for effective PSM management in critical areas (e.g. PSM Committee structure, PSM standards development)

● Training and skill building for leaders, managers and supervisors to managing PSM as an integral part of their daily routines (e.g. accountability for process safety, communication, etc)

● Implementation Assistance to ensure that established standards/procedures and tools are implemented successfully and effectively. (e.g. troubleshooting with respect to implementing work permit systems)

Outputs

● Depends on the scoping with the client


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Recommended Approach to Effective Implementation

Coaching Coaching Coaching

Practical Application

Client lead & Expert review


Expert lead

Content Finalization through task teams

Wo

rks

ho

p 1

Wo

rks

ho

p 2

Wo

rks

ho

p 3


Client lead & Expert support

Performance metrics to sustain change

Deliver

Top management involvement

Transformation

Practical Application: Skills transfer is tested and coaching is provided in the field

Experiential workshops: Formal classroom sessions focused on knowledge transfer & skill development related to skills needed to drive the change program. Sessions provide the conviction and motivation for the change program.

Performance metrics to sustain change: Selecting and implementing performance metrics with a focus on leading metrics to sustain the improvement initiatives.

Expert and Experiential coaching: On-the-job coaching to build capabilities and confidence to drive the change.

Content finalization through task teams: Development of best practice Management System content.


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Sustaining PSM Performance and Culture

What?

● To facilitate sustaining the gains from transition and ensure continual improvement.

How?

● Develop a process for auditing and driving continuous improvement

● Develop a learning and development curriculum to ensure that all levels of the organization have knowledge and skills that are current and relevant to perform their roles

● Benchmark with external agencies to maintain the momentum

Outputs

● Tools to facilitate sustenance of PSM performance and culture


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Features of a Well-Implemented PSM System

• PSM is integrated into the other business processes

• There is a full understanding of one’s process hazards

• Everyone’s roles and responsibilities are well defined and executed well

• Sufficient commitment of resources; people and money

• Facility is designed, operated, and maintained at a world-class level

• Continuous improvement is achieved via the use of metrics, audits and ever strengthening standards

• A goal of zero process incidents is pursued by all


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• Avoidance of catastrophic events that injure people, facilities, business and the environment

• Improved Sustainability

• Improved productivity and reduced downtime

• Improved quality and customer satisfaction

• Sustained “right to operate”

• Improved employee morale

• Improved credibility in the investment community

Business Benefits of PSM

CCPS Benchmarking Study

• 2 Qualitative Benefits

Corporate Responsibility

Business Flexibility

• 2 Quantitative Benefits

Risk Reduction

Sustained Value


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DuPont Process Incident PerformanceNumber of PSI's vs. % Audit Scores

0

20

40

60

80

100

120

140

160

180

200

# o

f P

SI's

50

55

60

65

70

75

80

85

90

95

100

% A

ud

it S

co

res

# of PSI's Audit Scores

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DuPont PSM Leadership Model

Trained , Knowledgeable, Capable People in all roles Adequate resources

Financial Support Knowledge Management

Cat A PSM Incidents

Cat C PSM Incidents/Near misses/ Key Learnings

Metrics & Recommendations from Incidents , PHA & Audits

Leadership Safety Culture, Commitment, Accountability, Resources, Involvement

Foundational

Cat B PSM IncidentsLagging

Indicators

Leading Metrics


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Conclusion

Successful leaders identify, evaluate and mitigate operational risks through:

• Implementing comprehensive, integrated management systems

• Fostering a positive, trusting and open culture

• Pursuing and achieving the goal of zero significant operational incidents

Successful leaders identify, evaluate and mitigate operational risks through:

• Implementing comprehensive, integrated management systems

• Fostering a positive, trusting and open culture

• Pursuing and achieving the goal of zero significant operational incidents

“It is imperative that leadership set the ‘tone at the top’ of the organization and establish appropriate expectations regarding process safety performance.”


“It is imperative that leadership set the ‘tone at the top’ of the organization and establish appropriate expectations regarding process safety performance.”



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copyright © 2010 dupont. all rights reserved. the dupont oval logo, dupont™, and the miracles of...

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