Risk Tolerance Factor # 9 Potential Profit or Gain from Actions Strategies for Understanding and Addressing Risk Tolerance Factor # 9 Potential Profit or Gain from Actions This presentation is 1 of 10 supporting packages for Lowering Risk Tolerance. This and the other 9 packages can be used at safety meetings, special meetings, group discussions etc. to communicate the details on how to address this influencing factor for risk tolerance. The ‘General’ presentation on Risk Tolerance should have already been provided before these individual modules are delivered. This factor deals with how Potential Profit or Gain from Actions can increase acceptance of risk.

Potential Profit & Gain from Actions 10 Factors That Influence Risk Tolerance Overestimating Capability/Experience Familiarity with the Task Seriousness of Outcome Voluntary Actions and Being in Control Personal Experience with an Outcome Cost of Non-Compliance Confidence in the Equipment Confidence in Protection and Rescue Potential Profit & Gain from Actions Role Models Accepting Risk A person (or corporation) will accept a higher level of risk if there is substantial profit or personal gain from the risky action. This risk tolerance factor stems from the desire for profit, gain, and even recognition. This can occur at an individual level where a person may profit from their own action or it can occur at the corporate level where a company or business can profit from taking higher risks.

Potential Profit and Gain from Actions Corporate Profits Companies are prepared to take more risks when there is more profit to be made. US Highway Study: Deaths on highways tracks directly with the health of the economy. More to gain, more chances taken. Alberta Workplace Health and Safety: Fatalities and lost time injuries increase and decrease with the price of oil. Companies and corporations (management) are prepared to take more risks when there is more to gain. If a company can make more profit by having more equipment in the field, selling more product, and getting more clients, most companies will be willing to do what ever it takes to take advantage of that. This could mean using equipment that has not been maintained, send out workers who have not been trained and stretching their capabilities to safely deliver their products and services. For Example: Studies of the deaths on US Highways have shown that the fatality rates on the highways tracks directly with the health of the economy. When there is more to gain from a robust economy, transportation companies have been seen to use more less experienced drivers, get trucks on the road that may have deficiencies and bypass time consuming maintenance in order to get the load through. Similar observations have been made in the oil and gas industry by Alberta Workplace Health and Safety. As the price of oil rises and there is more money to be made, Alberta WHS reported that the fatality and lost time rates increase. They have attributed this to companies putting equipment into service that may not be ready or inspected, assembling crews of new workers who may not have the training or experience to safely operate the equipment and to the demands on schedule ‘to get it done’. WHS also noted that the incident rates increase at a rate that is higher than the rate of activity increase.

Potential Profit and Gain from Actions Corporate cost cutting decisions can also impact the acceptance of higher risks. Management and supervisors may respond to this demand to reduce costs by: Saving money on site or equipment preparation Finding ‘creative’ ways of getting the job done that will save money. Cheap but higher risk Lower risk but at a cost Companies and corporations (management) can view cost cutting as a gain or contribution to profits. These measures need to be balanced so that the decisions on cost cutting do not explicitly or inadvertently send a message that higher levels of risk are acceptable. The decisions by managers and supervisors need to be assessed against the risk introduced. The top example shows lease conditions as an example of this. A risk based decision needs to be made on the site preparation. Given the nature of the work, is it acceptable to leave the lease as it is in the left picture? Left in this condition, will it present an unacceptable level of risk for the workers on this site? Could the workers prevent slips, trips or traction incidents through procedures and ‘being careful’ or are additional measures needed? The photo on the left shows a lease where rig mats have been placed to reduce the hazards presented by the muddy conditions, a solution that had a cost associated with it. Creative ways of doing work and reducing costs can be acceptable but each decision needs to be made based on the level of acceptable risk. There are situations where creative solutions or the lack of the right equipment may introduce significant risks. If this becomes a pervasive and continual approach, a culture of high risk tolerance is created and the higher levels of risk become the work place norm. .

Potential Profit and Gain from Actions Individuals are prepared to take more risks when there can be personal benefit and gain from their actions. This could include: Working longer hours for the increased overtime and pay. Compromising on personal safety equipment (i.e. using a worn out pair of boots with no traction, using worn out tool). Working a second job on rest days. Short cutting to get the job done faster so that they can finish earlier. Responding to productivity bonuses. The previous two slides focused on the management and corporate decisions that allow higher levels of risk to be accepted. This slide focuses on the decisions by individual workers to accept higher levels of risk. A worker may be prepared to accept a higher level of risk when there is a reward or personal gain for doing so. This could be because of: Longer hours means more overtime and more pay. This may be done at the risk of being fatigued on the job. Their decision could be impacted by their personal need (i.e. mortgage, loans, life style, bills) or it may be impacted by the company’s need to get the work done ... Offering higher compensation for the additional work as an incentive. Situations have arisen where workers have compromised on the quality of their personal protective equipment because it meant money out of their pocket (i.e. not replacing a set of worn out safety boots because they were not due for their boot allowance or no allowance exits). Similar situations have been observed where workers are required to provide their own tools. Linked closely with #1, workers have been know to take second jobs when they are on days off or days of rest. The worker does not get adequate rest and the risk of an incident goes up. The gain of the additional income is viewed as outweighing the risks associated with fatigue. Finishing a task earlier and being allowed to go home when the task is done may be viewed as a reward for getting the job done faster. A short cut with an associated risk may be perceived as acceptable in this situation. A short cut with positive recognition from the supervisor will also be incentive for taking more risks. Root cause analysis factor # 3 Shorting Cutting Has been Accepted may be an indication of this risk factor. Productivity bonuses can generate a culture where risks are accepted in order to achieve the bonus. For example, a pay structure that pays by the load, ton or volume is an incentive to get more loads in. This will result in short cutting, speeding, skipping rest breaks and push the equipment to its limits thus raising the acceptable level of risk. As this becomes the norm, higher levels of risk are tolerated. The bottom photo is one such example. This is a re-enactment following a fatality involving a down hole perforating gun. The proper procedure for disarming this tool was to disarm it electrically (disconnect the wires) and disarm ballistically (remove the detonator). The industry was paying blasters by the shot and short cuts had been developed in order to get more shots in thus increase the individuals pay. It was discovered during this investigation that one of the short cuts that had become a norm was to only disarm electrically and leave the detonator in the gun. This allowed faster turn around on rearming the device. In this incident, this practice resulted in the detonation of the device on the surface and a well site supervisor was killed instantly ... a tragic result of a system that generated higher levels of acceptable or tolerable risks.

Potential Profit and Gain from Actions Strategies for reducing risk tolerance that is created by Potential Profit and Gain from Actions: Identify situations where the pay system may be rewarding at risk behaviours: Identify work where the pay is by the load, volume, or ton Identify contracts (either corporate or individual) that promote short cutting through the reimbursement method. Remove incentives for schedule Ensure reimbursement methods for personal safety equipment are not a barrier to replacing worn out clothing or tools. Reinforce the corporate priorities of: 1) Safety 2) Quality 3) Cost 4) Schedule Strategies for reducing risk tolerance situations that are created by Potential Profit and Gain from Actions include: Identify situations where the pay system may be rewarding at risk behaviours: Identify work where the pay is by the load, volume, or ton or any other pay method that rewards speed, short cutting, and non-conformance to procedures. Identify contracts (either corporate or individual) that promote short cutting through the reimbursement method. ‘Lump Sum’ contracts where there is a fixed cost for the end product can undermine safety prinicples. Remove incentives for schedule. The incentive could be something as simple as “if you finish early you can go home”. Ensure reimbursement methods for personal safety equipment are not a barrier to replacing worn out clothing or tools. Boot allowances, tool allowances, safety clothing allowances should be adequate for timely replacement or on an ‘as need basis’. Reinforce the corporate priorities of: Safety 2) Quality 3) Cost 4) Schedule Note that schedule is the last of the priorities and must never take precedence over the safety and quality. 1) Safety 2) Quality 3) Cost 4) Schedule

Exercise and Discussion on “Potential Profit and Gain from Actions” Are there tasks we do here where there are incentives for getting the job done: Faster? Cheaper? Are there situations in our work group where we have worked extended hours and fatigue may have created risks? Can you identify any examples from work or off the job where we can profit or have personal gain by not following the safety standards? Is an ‘adrenaline rush’ a personal gain? The intent of this slide is to generate a group discussion on very specific issues in this work place where the reward and incentive systems may create a culture of higher risk tolerance. The fourth question is to promote thought and discussion. The Risk Tolerance Working Group that have researched the concepts of risk tolerance have found that the reward or incentive of the internal and personal feeling of an ‘adrenaline rush’, ‘fun’, or ‘excitement’ could be a factor in risk tolerance. This question is not meant to come to any hard and face conclusions but rather just to get workers thinking about this internal and personal factor. Track and assign follow up responsibilities for actionable items. What are we going to do about these?

1) Safety 2) Quality Use Stop and Think ... 3) Cost 4) Schedule Use Stop and Think ... Am I gambling that there will be a profit or personal gain by taking this action? Is there a risk associate with this action? Is it acceptable? What is the potential loss?