Approaches to Risk Management - Report Example

Approaches to Risk Management Name Course Name and Code Instructor’s Name Date A systematic approach to the identification of risks requires that all possible types of risks be listed and means of identifying the circumstances in which they arise. Thus in the mining industry it would be expected that all possible risks be listed and means of identifying the circumstances in which they arise be listed alongside (Golub and Tilman, 2000). A means of risk analysis is also required to see where they might exist in the activities of the organization and in what ways injury/damages/loss could occur. Thus, one would expect that a mining company have a risk analysis plan in place. A systematic approach also requires identification of the identified risk controls and their evaluation to determine their acceptability (Ray, 2010). Such listing of risks enables a firm to manage risks in a proactive way rather than in a reactive way (Hubbard, 2009). Even though the mining organization in the case identified several risks such as existence of explosive gasses in mines and ways of detecting such risks, they are not clearly listed and enforced (Schroeck, 2002). On would expect that the firm lists such risks alongside the possible methods of detecting them in order to allow for proactive prevention of hazards but instead the firm seems to be interested in the mining activity and overlooks the safety of miners who also seems unconcerned about their safety. Proactive and systematic risk management has four aspects. The first aspect is the development and maintenance of inventory or register of risks, which is based on systematic identification of such risks. Thus, one would expect that a mining organization like the one in the case have a well developed and maintained inventory of risks (Banks, 2005). Even though the organization realizes that various risks are pertinent in their activity, they lack a well developed and maintained inventory or register. One would expect that such registers could provide detailed information about risks such as gas explosion, risks presented by electric appliances, cover drilling risks and many more (Golub and Tilman, 2000). However, the company does not keep such inventory of risks posed by its mining activities to both its workers and its properties. The second aspect of systematic risk management is periodic review of control measures in the listed risks. This requires that the standards against which the adequacy of risk controls is judged ought to change in tandem with time since regulations, standards, community expectations and technology change with time (Ray, 2010). Thus, one would expect that the mining company in the case could have installed electric equipments to comply with changing technology, which has resulted in development of electric equipments, which are explosion proof (Regester and Larkin, 2008). The company seems to be stagnated at old technology that could have contributed to the intensity of life losses experienced at the mines when an explosion occurred following a gas explosion. The third aspect of systematic risk management is the conscious recognition of organizational requirements for the maintenance of existing risk control measures such as skills of people, inspection and maintenance practices, contracting practices and equipment renewal policies (Golub and Tilman, 2000). Thus, one would expect that the mining company in the case could have policies, which help to enforce risk control measures such as no smoking in mines, replacement of non explosion proof electric equipment with ones, which are explosion proof, and availing methods for immediate plugging of gas emission that might occur during cover drilling. In addition, use of detection instruments, flushing of gas out of probes attached to gas detectors and testing all areas of the mines for possible gasses. This would ensure that risk control measures are being followed to the later to minimize risks of an accident taking place. The last aspect of systematic risk management is an overall system to ensure continuity of this comprehensive approach (Schroeck, 2002). Thus, one would expect that the mining company would assign certain people to help in the implementation and ensuring that the risk control measures are being followed on daily basis. Risk evaluation The way in which the risk is imposed This refers to how the risk is imposed on a person and whether the exposure to it is voluntary or involuntary (Hubbard, 2009). One might be imposed to a risk either exogenously or endogenously. In the case of miners, they are exposed explosion exogenously. This is because those who carried out draft drilling might not have been the ones affected by the explosion that killed 19 people and thus miners who were not concerned with cover drilling found themselves imposed to the explosion risk (Golub and Tilman, 2000). The risk exposure in this case might have been voluntary since miners carrying out mining activities exposed themselves to the explosion risk (Schroeck, 2002). Thus, I would perceive that the risk in this case of miners is exogenous voluntary risk. I would weigh this risk positively because miners are in need of work to support a family even though exposed to the risk of losing life or being injured if an explosion takes place. In addition, the miners in the case have the ability to make a risk benefit balance. The proximity of the consequence to the risk agent In the case of miners, it is a common experience that since they have seen miners affected by the explosions at the mines they are likely to be more concerned about the risk of explosion at the mines (Schroeck, 2002). It is possible that some of the miners lost their close relatives or even friends in such explosions and thus it is expected that the factor of personal proximity weigh heavily on them (Banks, 2005). The time since the consequence was last experienced It is argued that perception of risk is affected by the period that has elapsed since the consequences of the risk were last experienced or known about by a risk agent. It is also argued that the further into the future the consequence is likely to occur, the less concerned risk agents are (Ray, 2010). Even though psychologists argue that people discount the importance of serious incidents rapidly, typically within six to eight weeks, given the frequency of explosions, twelve times in six years, and adverse effects associated with them, I might not discount the risk of explosion in the mines as easily as such (Golub and Tilman, 2000). The lives lost in such explosion are many to for one to discount such a risk. Furthermore, given the fact that none of the electrical equipments in the mine is intrinsically safe it would be suicidal for me as a miner to discount the risk of an explosion within such a short span of say six weeks for instance if I lost a close friend or a family member in such explosions (Hubbard, 2009). I believe unless all predisposing factors that contributed to such explosions have been adequately addressed by say the management it will not be easy to discount the possibility of an explosion within such a short period. Focus on extreme values of consequences Studies have indicated that people or groups of people will often focus their concerns either on the multitude of minor consequences or on the potential for major catastrophic consequences (Banks, 2005). The case of mining industry if I am one of the miners I believe my focus will be mainly be on the potential for a major catastrophic consequence such as death resulting from explosion. This is because of the high number of registered deaths in previous explosions (Ray, 2010). The probability of an explosion taking place in mines seems to be very high given the predisposing factors such as lack of explosion proof electric appliances and policies to instil risk control measures (Schroeck, 2002). This will prompt me to be preoccupied mainly by the risk of explosion rather low risk associated with mine collapse that have been rarely been reported in the recent past. However, as a group after such catastrophic experiences that resulted in losses of life we would advocate for safer working conditions. Other factors These includes dread factor, the unknown factor and factor which represents the number of people exposed and the extent of personal exposure to the risk. The dread factor refers to the extent of fear evoked by the risks at hand. In the case of miners the risk of explosion is dreadful and I belief it would score highly. The unknown factor refers to responses evoked in relation to the perception of the state of knowledge of the risks (Golub and Tilman, 2000). This risk facto would also score highly among miners given the high frequency of occurrence of explosions at the mines one would expect that most miners know much about the risk of explosion at the mines and predisposing factors. In the case of the number of people exposed, both miners and experts working in the tunnels are exposed and those working nearby since the case say that explosions could affect areas, which do not have the flammable gases (Banks, 2005). The extent of personal exposure to the risk of explosion among miners is also very high. Public management of risk The public sector is unique in nature. Public acceptability of risk has become elusive in recent past and the public demands for more involvement in the decision making process. Experts have however argued that the public and individual acceptance of risks is often based on biased value judgments and on opinions, which are publicized by the media, and not on logical analyses (Schroeck, 2002). Thus, it has been suggested that rather than relying on individual biases, only professional judgments based on expert knowledge ought to be used as a basis for accepting risks and that the public should be excluded from such important decisions (Ray, 2010). This argument has been the centre of criticism since it is viewed as a question of both democratic values and social values. Some authors have thus suggested preferences identified via interviews and questionnaires or revealed preferences identified via observation should be used to determine acceptability of risks among the relevant public (Hubbard, 2009). This has also raised issues in relation to identification of relevant public especially for technologies such as biotechnology and nuclear power plants, which may benefit or put several nations at risk. In spite the controversies surrounding the acceptability of risk among the public, studies have indicated that views of the public are much more similar to the expert judgments. For instance, biotechnology has been touted as one of the technologies that are likely to lead to the next revolution. The benefits of biotechnology are many and include environmental, social to economic benefits. However, the speed at which biotechnology has advanced it has raised intense debate (Ishikawa and Tsujimoto, 2009). The main controversy about biotechnology has been the neglect of the needs, interests and concerns of the public. The limited knowledge among the public and the salience nature of biotechnology has been touted as the sources of the debate. Studies have indicated that acceptability of biotechnology is mainly conditional and dependent on many factors (Golub and Tilman, 2000). A wide gap exists between how scientist and risk experts think about, define and evaluate risks compared to the public (Asante-Duah, 2002). The experts have argued that the public reaction to biotechnology risk assessments as ignorance and irrational but researchers have shown that the public understanding of risk is driven by factors not taken into account by experts. It has been argued that the public pays limited attention to the hazardous nature of risks whereas experts completely ignore those factors, which fuel consumer unrest (Schroeck, 2002). Thus, the risk acceptability in biotechnology among the public illustrates the fact that the public is demanding increased involvement in decision making process. From this discussion, it is apparent that decisions are usually done for the public without their involvement and this could be the reason why it is often not easy for newer technologies to be accepted. This discussion is in line with the information provided in the subject notes in Topic 2 of Module 4. The subject notes give the view that the public is often passive player in the acceptable risk and that most decisions in relation to risk acceptability is based on the expert analysis. This contrary to the increasing public demand for more involvement and increased rejection of new technologies due to lack of incorporating the needs, interests and concerns while analyzing the acceptability of risks among the public. Reference Asante-Duah, D. 2002. Public health risk assessment for human exposure to chemicals. New York: Springer. Banks, E. 2005. Catastrophic risk: analysis and management. London: John Wiley & Sons. Golub, B., and Tilman, L. 2000. Risk management: approaches for fixed income markets. New York: John Wiley and Sons. Hubbard, D. 2009. The failure of risk management: why it's broken and how to fix it. London: John Wiley and Sons. Ishikawa, A., and Tsujimoto, A. 2009. Risk and Crisis Management: 101 Cases. Sydney: World Scientific Ray, C. 2010. Extreme Risk Management: Revolutionary Approaches to Evaluating and Measuring Risk. London: McGraw-Hill Prof Med/Tech. Regester, M., and Larkin, J. 2008. Risk Issues and Crisis Management in Public Relations: A Casebook of Best Practice, 4th Ed. London: Kogan Page Publishers Schroeck, G. 2002. Risk management and value creation in financial institutions. London: John Wiley and Sons Read More