Risk Assessment

1. Risk Assessment 1 Key To Process Improvement (Safety) EFFORT

2. Risk Assessment • risk • noun • Definition of RISK • 1 • something that may cause injury or harm <mountain climbing is a risk, but the thrill and challenge are worth it> Synonymshazard, imminence, menace, peril, pitfall, risk, threat, trouble • Related Wordssnare, trap; booby trap • Near Antonymsguard, protection, safeguard, shield, ward; asylum, harbor, haven, refuge, retreat, shelter • 2 • the state of not being protected from injury, harm, or evil <children living in poverty are considered at risk for a number of medical and developmental problems> Synonymsdistress, endangerment, harm's way, imperilment, jeopardy, peril, risk, trouble • Related Wordsexposure, liability, openness, vulnerability; precariousness, threat; susceptibility, susceptibleness; defenselessness, helplessness, weakness • Near Antonymspreservation, salvation; defense, protection; exemption, immunity, impunity, inviolability, invulnerability • Antonymssafeness, safety, secureness, security • The Oxford English Dictionary cites the earliest use of the word in English (in the spelling of risque) as from 1621, and the spelling as risk from 1655. It defines risk as: • (Exposure to) the possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such a possibility.[7] • http://en.wikipedia.org/wiki/Risk

3. Risk Assessment • Risk versus uncertainty[edit] • In his seminal work Risk, Uncertainty, and Profit, Frank Knight (1921) established the distinction between risk and uncertainty. • ... Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated. The term "risk," as loosely used in everyday speech and in economic discussion, really covers two things which, functionally at least, in their causal relations to the phenomena of economic organization, are categorically different. ... The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomenon depending on which of the two is really present and operating. ... It will appear that a measurable uncertainty, or "risk" proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all. We ... accordingly restrict the term "uncertainty" to cases of the non-quantitive type.:[53] • Thus, Knightian uncertainty is immeasurable, not possible to calculate, while in the Knightian sense risk is measurable. • Another distinction between risk and uncertainty is proposed in How to Measure Anything: Finding the Value of Intangibles in Business and The Failure of Risk Management: Why It's Broken and How to Fix It by Doug Hubbard:[54][55] • Uncertainty: The lack of complete certainty, that is, the existence of more than one possibility. The "true" outcome/state/result/value is not known. Measurement of uncertainty: A set of probabilities assigned to a set of possibilities. Example: "There is a 60% chance this market will double in five years" Risk: A state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome. Measurement of risk: A set of possibilities each with quantified probabilities and quantified losses. Example: "There is a 40% chance the proposed oil well will be dry with a loss of $12 million in exploratory drilling costs". In this sense, Hubbard uses the terms so that one may have uncertainty without risk but not risk without uncertainty. We can be uncertain about the winner of a contest, but unless we have some personal stake in it, we have no risk. If we bet money on the outcome of the contest, then we have a risk. In both cases there are more than one outcome. The measure of uncertainty refers only to the probabilities assigned to outcomes, while the measure of risk requires both probabilities for outcomes and losses quantified for outcomes.

4. Risk Assessment • Risk attitude, appetite and tolerance • The terms attitude, appetite and tolerance are often used similarly to describe an organization's or individual's attitude towards risk taking. Risk averse, risk neutral and risk seeking are examples of the terms that may be used to describe a risk attitude. 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 deviations that are within a risk appetite.

5. Risk Assessment Risk = Likelihood x Vulnerability x Intensity x Consequence Likelihood=Probability=Chance=Possibility=Plausibility=Feasibility =Potentiality=Viability=Reasonability Anecdotes: Likelihood is often substituted for RISK ex. “That probably won’t happen” ex. “Will probably be okay” Interesting Facts: The FAA’s Art of Aeronautical Decision Making includes the following: “A good rule of thumb for the processing phase: if you find yourself saying that it will “probably” be okay, it is definitely time for a solid reality check.” http://www.faasafety.gov/files/gslac/courses/content/28/216/The%20Art%20of%20Aeronautical%20Decision.pdf

6. Risk Assessment • 5 Key Human Errors • Highlights high interactive complexity and tight coupling of deepwater drilling activities

7. Risk Assessment • Michael Davis assessment of the one common thing about the BP operation at Macondo? • LACK OF, SHAME IN, and ABSOLUTE DISDAIN FOR: • EFFORT • Why? ( later!)

8. Risk Assessment Risk = Likelihood x Vulnerability x Intensity x Consequence Vulnerability = Exposure or susceptibility to a hazard =Proneness=Sensitivity=Weakness=Liability=Openness=Predisposition =Gullibility=Naivete=Penetrability Anecdotes: Vulnerability is often substituted for exposure in health care in regards to exposure to a dose ex. Potassium Chloride is a great salt substitute yet our vulnerability is to death in high doses as Dr. Kevorkian knows. ex. We are more susceptible to errors at moments of lower capacity during ie“sensory overload”, or “split attention effect” of “cognitive load theory”. ex. When drilling with low margin we are more vulnerable to worse consequences from kicks. Interesting Facts: The reason new hires wear yellow hats because they are vulnerable to errors and cognitive dissonance as well as increasing the cognitive load of others with their questions and wanderings.

9. Risk Assessment Risk = Likelihood x Vulnerability x Intensity x Consequence Intensity=Size=Volume=Dose=Density=Temperature=Pressure =Emotion=Enthusiasm=Fervency=Fervor=Passion=Vehemence=Zeal=Histrionics=Melodrama=Eagerness=Excitement=Keenness Anecdotes: ex. Water can kill people that drink too much volume. ex. When drilling with low margins we are more vulnerable to higher intensity kicks; meaning volume. ex. Intense thought can prevent us from hearing someone addressing us. Interesting Facts: Most modern casing designs utilize kick tolerance measured in kick volume, completely neglecting kick intensity and this is hazardous in many situations as risk increases subsequently.

10. Risk Assessment Risk = Likelihood x Vulnerability x Intensity x Consequence Consequence=Result=Outcome=Product=Sum=Aftereffect=Issue=Ramification =Aftermath =Conclusion=Denouement=Implication=Repercussion=Side effect Anecdotes: Keeping consequences in mind can improve decisions. ex. The Outcome Bias is judging behavior based on its outcome and ignoring the risk. This is one of the greatest contributors to poor risk assessment when luck is attributed as “success” and prudent behavior. ex. Assuming high unlikelihood is an entitlement to ignore consequences of risk altogether becomes a socialization of risk if the consequence exceed the operators valuation. Interesting Facts: Consequentialism is a theory in philosophy in which the morality of an act is determined by its effects. An unintended consequence is the result of encountering the unexpected or unplanned for uncertainty. Punishment, is an imposed consequence. In music, a consequent is the second half of a period.

11. Risk Assessment The Goal Is To Avert Blowouts and Worst Case Accidents

12. Risk Assessment • Risk comes from not knowing what you're doing.Warren BuffettEvery man has the right to risk his own life in order to preserve it. Has it ever been said that a man who throws himself out the window to escape from a fire is guilty of suicide? – Jean-Jacques Rousseau • Because if you’re prepared and you know what it takes, it’s not a risk. You just have to figure out how to get there. There is always a way to get there. – Mark Cuban • Yes, risk taking is inherently failure-prone. Otherwise, it would be called sure-thing-taking. – Jim McMahon • People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year. – Peter F. Drucker • One hour of life, crowded to the full with glorious action and filled with noble risks, is worth whole years of those mean observances of paltry decorum. – Sir Walter Scott • Security is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure or nothing. – Helen Keller • The dangers of life are infinite, and among them is safety. – Goethe • To be a good human being is to have a kind of openness to the world—an ability to trust uncertain things beyond your own control—that can lead you to be shattered in very extreme circumstances for which you were not to blame. That says something very important about the condition of the ethical life: that it is based on a trust in the uncertain and on a willingness to be exposed; it’s based on being more like a plant than like a jewel—something rather fragile, but whose very particular beauty is inseparable from that fragility. – Martha Nussbaum • The young do not know enough to be prudent, and therefore they attempt the impossible—and achieve it, generation after generation. – Pearl S. Buck • http://www.youtube.com/watch?v=0ZhL7P7w3as Addicted to Risk 2:28 – 4:44, 7:05 – 13:36 (8 min 47 sec) • Fixed Trait(unwilling to affect learning)/Overconfidence/Recklessness/Addiction to Risk/View of Limitlessness and Resilience of Systems We Risk Destroying • http://geert-hofstede.com/ • Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did. So throw off the bowlines, sail away from the safe harbor, catch the trade winds in your sails. Explore. Dream. Discover. – Mark Twain • “It is better to be careful 100 times than to get killed once.” – Mark Twain • “A ship is always safe at the shore – but that in NOT what it is built for.” - Einstein • DICHOTOMY OF DIALOGUE ON RISK • One hand we applaud risk and credit it with progress, innovation, courage and success • On the other hand we condemn risk and destroying pristine beauty and as the result of psychopathic addiction to risk

13. Risk Assessment • First the BIG PICTURE • How risky is it? • Perhaps the even BIGGER PICTURE is how is risk TRENDING

14. Risk Assessment

15. Risk Assessment • http://www.drillscience.com/DPS/Deepwater%20GOM%20Oil%20Bubble%20Point%20Graph.jpg • http://www.drillscience.com/DPS/Deepwater%20Kick%20Stats%2097-99.docx • http://www.drillscience.com/DPS/Deepwater%20Trending%20Increased%20Complexity%20and%20Tighter%20Coupling.jpg • http://www.drillscience.com/DPS/DeepwatervsShallowWaterBlowoutTrend.jpg

17. Risk Assessment • Link to Article cited on previous slide

18. Risk Assessment • Enactment • Weick (1988) describes the term enactment as representing the notion that when people act they bring structures and events into existence and set them in action. The process of enactment involves two steps. First, preconceptions are used to set aside portions of the field of experience for further attention, that is, perception is focused on predetermined stimuli. Second, people act within the context of these portions of experience guided by preconceptions in such a way as to reinforce these preconceptions. Hence, attention to certain stimuli will guide subsequent action so that those stimuli are confirmed as important. The result of the process of enactment is the enacted environment (Weick, 1988). This enacted environment comprises "real" objects but the significance, meaning and content of these objects will vary. These objects are not significant unless they are acted upon and incorporated into events, situations and explanations. In this way the enacted environment is a direct result of the preconceptions held by the social actor. An enacted environment is internalised by social actors as the way in which actions have led to certain consequences; it is therefore analogous to the concept of schema and is the source of expectations for future action (Weick, 1988) . An enacted environment is "a map of if-then assertions in which actions are related outcomes" that in turn serve as expectations for future action and focus perception in such way that these preconceived relationships will be supported. • The importance of the notion of enactment is that it provides a direct link between individual cognitive processes and environments. By showing how preconceptions can shape the nature of the environment this concept allows one to argue the importance of schema in the sensemaking process. Schema guide both perception and inference (Fiske & Taylor, 1991) and so will 'enact' environment by assigning significance, meaning and content to objects perceived in the environment.

19. Risk Assessment • Enacting Sensemaking as THE MITIGATION • Link to Weick's "Enacted Sensemaking"

21. Risk Assessment • HROs are in essence the best at risk assessment and containment of unexpected events • http://www.mydrivingseat.com/the-blog/booklink-22/ • Capacity to Anticipate Unexpected Problems • Preoccupation with failure • Reluctance to simplify • Sensitivity to Operations • Capacity to Contain Unexpected Problems • Commitment to Resilience • Deference to Expertise

22. Risk Assessment • This last statement in Carl Weick’s article “Enacted Sensemaking” tells me what I’ve know all along; engineers shy away from acknowledging risk in risk registers, peer reviews, in the open, etc, that they do not open know how to mitigate. • What personality or mentality promotes this error? • First we must have a low UAI • Second we must have a low desire to withstand the humility of learning and competency improvement. “If I don’t understand it the last people I want to know are my peers that may judge me.” “I won’t look good.” • Third we must not have the experience that might have taught us the lesson the hard way even with the first two condition. • Fourth with an attitude towards risk perhaps: “If I don’t do this they will find someone else that will.” "But, who cares, it's done, end of story, will probably be fine.” In other words, “STOP WORRYING” contrary to the first principle of high reliability • Fifth • So what we end up with is a person that has low aversion to uncertainty, no desire to diligently endeavour to reduce the uncertainty with a low experience level. • This is scary!!!!!! • http://www.depts.ttu.edu/cehrop/Weick.php

23. Risk Assessment • HRO Principle 1: Preoccupation with Failure  They treat any lapse as a symptom that something may be wrong with the system, something that could have severe consequences if several separate small errors happened to coincide. They also make a continuing effort to articulate mistakes they don’t want to make and assess the likelihood that strategies increase the risk of triggering these mistakes. In essence Responding Strongly to Weak Signals and Worry.

24. Risk Assessment • HRO Principle 2: Reluctance to Simplify  When they “recognize” an event as something they have experienced before and understood, that recognition is a source of concern rather than comfort. The concern is that superficial similarities between the present and the past mask deeper differences that could prove fatal.

25. Risk Assessment • HRO Principle 3: Sensitivity to Operations  They are attentive to the front line where the real work gets done. People who refuse to speak up out of fear undermine the system, which knows less than it needs to work effectively. It makes no difference whether information is withheld for reasons such as fear, ignorance or indifference. HIGH PDI causes “mitigated speech”.

26. Risk Assessment • HRO Principle 4:  Commitment to Resilience  HROs develop capabilities to detect, contain and bounce back from those inevitable errors that are part of an indeterminate world.  The hallmark of an HRO is not that it is error-free but that errors don’t disable it.  Resilience is a combination of keeping errors small and of improvising workarounds that allow the system to keep functioning.  Both these pathways to resilience demand deep knowledge of the technology, the system, one’s coworkers, and most of all, oneself. Example eColors.

27. Risk Assessment • HRO Principle 5:  Deference to Expertise  HROs push decision making down and around.  Decisions are made on the front line, and authority migrates to the people with the most expertise, regardless of their rank.  The decisions migrate around these organizations in search of a person who has specific knowledge of the event.

28. Risk Assessment • Input from Working Paper 7 Hopkins at DSC • Research best Risk Assessment Techniques and theory from web, etc.

29. Risk Assessment • Safety requires competence • The danger in culture and competence • How do we make our teams competent? • Geniuses! • How to spot a genius • Effortless Perfection! • No! Effortful Diligence

30. Risk Assessment • Requires admitting imperfection • How can we have both? • We cannot!

31. Risk Assessment

32. Risk Assessment • Being Perfect • Is it detrimental to risk assessment? • The Fixed mindset is proven to: • Cause adherents: • Interact in Risk Assessment Peer Reviews in a guarded fashion • to seek the easy button (see Dweck video) • to curate perfect image • To hide and see errors and setbacks as calamities not learning opportunities. • Detecting, processing, and correcting - 27:22 • To put forth less effort (Effortless Perfection => Good Luck!) • Who Cares? (Does this no embody both disdain for worry & effort?) • Avoid “dumb questions” • Nurture some of the worst Narcissistic traits to most susceptible. • Seek to only focus on things they do well already. Ignore things they do not understand, uncertainty, they have not mastered; ie. Mitigations to unlikely risks will be ignored unless they come very easy. Innovation suffers and fantasy thrives (Walruses & Seals)

33. Risk Assessment • Growth mindset • Process Praise = Process Improvement (Dweck “On Being Perfect” 24:30

34. Risk Assessment Types of Risk: • Normal Inherent Risk • Normal Situation • Situational Risk • Aberrant Situations • Anomalous Model (Interface between planned and actual) • Ergonomics (Interface between machine and man) • High Cognitive Loads • Decreased Cognitive Capacities

35. Risk Assessment • Many industry statistics are skewed because the risks are highly variable between different companies and projects mainly because the likelihoods and exposures vary respectively. • Exposure • Exposure is highly variable between different organizations depending on situations such as availability, capacity, capability of talent, finances, etc.

36. Risk Assessment

37. Risk Assessment • Other kinds of risks not ordinarily accounted for. • Increased Activity with decreased Cognitive Capacity • Unexpected events not reacted to with a strong response in increasing cognitive capacity in terms of numbers of people or perhaps lightening the duties of one area in deference to the highest risk/cognitive load activity. • This is an ergonomics risk or Human Factors based risk. • This type of risk is typically either: • Overlooked by the engineer • Or within the realm of the operations engineering team that isn’t involved concurrently in the engineer’s pre drill risk assessment. • This is a disconnect that needs to be remedied and has not been and was the biggest part of the Macondo disaster not addressed. • This highlights the need for a BROADCAST system

38. Risk Assessment 1 Key To Process Risk Assessments? EFFORT