The EOI Engineering, Safety and Validation Times

Calculating Risk – Let Data Drive Decisions

February 2018

Company mission statements. Pointed job interview questions. The lean six sigma approach to problem solving. What do these three things loosely have in common?

THE UNDERLYING IDEA OF DATA BASED DECISION MAKING.

Think about it for a second.

How does your organization’s mission statement incorporate date? It probably establishes Key Performance Indicators or Objectives and Targets to measure against. Some even include a written statement detailing the expectation for employees and leaders to look at data during problem solving.

Similarly, many job interview scenario based questions look for a prospective employee’s ability to reference and analyze data prior to making their hypothetical decision.

Those practiced in Lean and Six Sigma Principals will also note the key theme of measuring and analyzing in problem solving.

These three items are common to many businesses and many different professionals. A measure that us far less common – errr, even far less utilized dare I say – is risk.

Measuring risk — of safety failures, of quality impacts, of business continuity concerns and of product defects — are all data points which can and should drive business decisions.

Safety Risk assessments

As a safety professional, the key data point I am concerned with is the risk associated with a hazard. I need to know the potential for a hazard to lead to an event in order to put in the proper mitigation controls, prioritize capital expenses, communicate hazards to employees and generally drive my EHS Program focus areas.

I have seen this risk displayed a number of ways with the most common being visually or categorically via a risk mapping system or numerically calculated via an RPN or PFMEA tool. Both have their advantages and disadvantages, but both also have the same potential issue:

Establishing a truly objective risk scoring system.

 

Risk Priority Number (RPN) and objective scoring

A RPN number or score is not a new concept. A Risk Priority Number establishes the risk score through a simple calculation:

Probability x Severity x Detectability = RPN

This is basic math – it should inherently be objective right? Wrong!

Because the inputs for probability, severity and detectabiltiy are often user defined ranges, there is room for discussion and disagreement in score. One person’s RPN score of a task might be different than the next person simply due to large ranges for categories.  Review Example 1 below to better understand how a small range of categories can create a more objective measure.

The second reason for subjective measuring is due to accounting for controls.  During the initial RPN exercise, a task or instrument or process, should be evaluated as a “raw” score without additional controls in place.  It is easy for the risk assessor to look at a task in its current controlled state and –without true measure –decrease the RPN score based on their perception of controls.

Controls should be measured – absolutely –but they should be measured and factored in as an additional multiplier. this will decrease the chance of adding control factors into the raw RPN score. EOI Consulting Group has some solid ways of factoring in controls using defined values – find out more about control factors below.

For the Non-Safety Professional

But what if you’re not looking at a safety risk? what if you’re trying to prioritize projects, reduce impacts or even establish schedules for equipment? Risk assessments are a great way to use data to establish the business decisions around those needs. Using excel programming and clearly defined scores makes making risk value based decisions easy and tracking the change in risk over time shows clear process improvements which are likely tied to your KPIs.

How can EOI help?

Whether you need a full risk assessment process and inventory for your safety program or you’re trying to manage risk priority in other ways, EOI Consulting Group can help. Visit us at eoiconsultinggroup.com today to learn more, subscribe to our newsletter and contact us for questions.