TOPIC 3 (Continued)
What you really need to know to optimise your operation
It operates in a high-risk environment
Quite apart from the many challenges facing Road Freight Operators, risk management is surely an uppermost priority.
Risk aversion must feature as a priority in any road transport business, as the associated liabilities are enormous, to the extent that almost every aspect of the operation presents a risk threat, not only from huge Public Liability claims but also possible criminal charges in the event of a fatality due to negligence. Apart from operational activities in moving freight on a public road, there are countless risks associated with managing shareholders’ interests and it is for these reasons that we have chosen to address this in our Topics 3 series.
Here is an example of how quickly an incident can happen. This picture was taken of the N3 South bound lane during a major road upgrade. Normally the speed limit is 120 km/h for light vehicles and 80 km/h for vehicles above 3 500 kg GCM, but in this instance reduced to 90 km/h during finalization of road works. Traffic flow on this road is around 1 200 vehicles/hour.
Traffic speed on the available four lanes was estimated at around >70 km/h and slowing. Notice the emergency braking of the SUV in lane 2, to avoid tail-ending the truck. (hard braking is evident from the nose dipping). Thanks to cautious driving, the fuel tanker driver allowed enough lead space to avoid tail-ending the car.
The car in lane one (extreme left) also applied emergency braking but was very close to the rear end of the fuel tanker, with the only escape route being to the left of the acid tanker, failure to do so would have meant colliding with the acid tanker (56 000kg gross mass), which had just stopped to avoid possible collision. I viewed this incident through my camera lens standing on a bridge, which lasted around 10 to 15 seconds.
Let’s first consider what we mean by the term “Risk”. The Oxford English Dictionary defines risk as: (Exposure to) the possibility of loss, or other adverse or unwelcomed circumstance; a chance or situation involving such possibility.
Risk is an uncertain event or condition that, if it occurs, effects on at least one objective.
The probability of something happening multiplied by the resulting cost or benefit if it does. (This concept is more properly known as the 'Expectation Value' or 'Risk Factor' and is used to compare levels of risk)
The probability or threat of quantifiable damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through pre-emptive action.
The International Organization for Standardization publication ISO 31000 (2009) / ISO Guide 73:2002 definition of risk is: ‘the effect of uncertainty on objectives.' In this definition, uncertainties include events (which may or may not happen) and uncertainties caused by ambiguity or a lack of information. It also includes both negative and positive impacts on objectives. Many definitions of risk exist in common usage however this definition was developed by an international committee representing over 30 countries and is based on the input of several thousand subject matter experts.
OHSAS (Occupational Health & Safety Advisory Services) defines risk as ‘the combination of the probability of a hazard resulting in an adverse event, and the severity of the event.’
The concept of risk-based maintenance is an advanced form of Reliability Centred Maintenance (RCM). For instance, in the case of chemical industries, apart from probability of failure, the consequences of failure are also very important. Therefore, the selection of maintenance policies should be based on risk, instead of reliability. Risk-based maintenance methodology (RMM) acts as a tool for maintenance planning and decision making to reduce the probability of failure and its consequences. In risk-based maintenance decision making, the maintenance resources can be used optimally based on the risk class (high, medium, or low) of equipment or machines, to achieve tolerable risk criteria.
In the workplace, Incidental and Inherent risks exist. Incidental risks are those that occur naturally in the business but are not part of the core business. Inherent risks have a negative effect on the operating profit of the business.
In finance, risk is the chance that the return achieved on an investment will be different from that expected and takes the size of the difference into account. This includes the possibility of losing some or all the original investment.
The fundamental idea in finance is the relationship between risk and return. The greater the potential return one might seek, the greater the risk that one generally assumes. A free market reflects this principle in pricing: a strong demand drives its price higher, while weak demand drives it lower.
The terms risk attitude, appetite, and tolerance are often used similarly to describe an organisation's or individual's attitude towards risk-taking. One's attitude may be described as risk-averse, risk-neutral, or risk-seeking. Risk tolerance looks at acceptable/unacceptable deviations from what is expected. Risk appetite looks at how much risk one is willing to accept. There can still be more deviations that are within a risk appetite.
All decision-making under uncertainty must consider cognitive bias, cultural bias, and notational bias: No group of people assessing risk is immune to "groupthink": acceptance of obviously wrong answers simply because it is socially painful to disagree, where there are conflicts of interest.