Risk Management and Decision Making

One of the apt examples of risk management can be the development and implementation of a documented safety management system. Risk may be defined as a combination of the probability, or frequency, of occurrence of a defined hazard and the magnitude of the consequences of the occurrence.

IMO defines risk as the combination of the frequency and the severity of the consequence.

So let us talk about a job that is seamanship based e.g painting over side. To determine the risk involved let us analyse the two areas viz:
1. the frequency of job; and
2. the severity of consequences

Thus, the frequency may be biannually. On the scale of frequency graded from 1 to 6, the grading may be 1. If the severity of consequences graded on scale from 1 to 6, considering the injury or death due accidental fall, as possible consequences, the grading may be say 4 or 5. The product of the two figure is 4 or 5. There would be some tasks for which the product would be 1 and some other tasks for which the product would be 36. If an attempt is made say in terms of using safety harness, lifeline, lifebuoy, etc. the process would be termed as applying controls to lower down the figure from 5.

A hazard is a substance (a chemical), situation (developed out of a cargo shift) or practice (reading the draft from a coolie ladder) that has the potential to cause harm.
What must be done?
• the identification of hazards, (various substances, tasks, situations, etc are identified).
• the assessment of the associated risks.
• the application of controls to reduce the risks.
• the monitoring of the effectiveness of the controls.

The controls may be applied to either side. Thus, the likelihood of occurrence may be reduced or the severity of the consequences may be curtailed. The risks generally relate to:
• the health and safety of all those who are directly or indirectly involved in the activity, or who may be otherwise affected;
• the property of the company and others; or
• the environment.

Paragraph of the ISM Code states, “Safety management objectives of the company should establish safeguards against all identified risks”.

Thus, in fulfilling the objectives of ISM Code, the ship owner must make an assessment of the risks to health and safety of crew arising in the normal course of their activities or duties. The idea being:
(a) Weighing the risks involved in doing the work.
(b) The measures to be taken to fulfill the owner’s responsibilities.

It is important to recognize that the company is responsible for identifying the risks associated with its particular ships, operations and trade. The compliance to class and statutory requirements may be considered as static in a way. The action tool of ISM Code is dynamic in the way it pursues continual improvement by applying the changes in work methods. This way, concept of even risk management is dynamic. The ISM Code does not specify any particular approach to the management of risk, and it is for the company to choose methods appropriate to its organizational structure. If assessment and response are to be complete and effective, the entire exercise should be documented. This will lead to the effective decision-making process.

Risk management may be defined as: “The process whereby decisions are made to accept a known or assessed risk. The required controls are exercised to reduce the consequences or probability of occurrence. Changes in controls is caused as and when required.” Different P&I Clubs have begun a year-long project to assist operators in incorporating a risk assessment ethos into their on board operating procedures. The Clubs have further identified some routine shipboard tasks which have given rise to avoidable claims in order to advise members on how to mitigate such claims. Many operators already have a formal risk assessment process in place. Several examples are generally provided for guidance purposes and will be of benefit to those who may not have the shore side management infrastructure in place. 

The identification of hazards is the first ever thing that must be done. It must be complete and accurate. Hazard identification though, is not easy. For this, the process must be systematic. Sufficient training and knowledge of subject is required so that it is conducted in a thorough and consistent manner. Additionally, the various terms such as incident accident, hazard, consequence, etc must be clearly understood.

The risk matrix may not be as shown above. It may be expanded to include more rows and columns. More numbers would define the categories in more detail. Instead of describing by terms like rare, low, high, etc numbers may be provided. Frequency plays an important role in deciding the priority to undertake a task. Thus, a “moderate” level of risk in a task that occurs every day should be given due priority. Whereas in a task with “substantial” risk, that will not be done in recent future, the application of efforts may be delayed a bit. This means, one may have to look into some more factors rather than being very rigid about the risk index figure.

Risk should be reduced to a level that is as low as is reasonably practicable (ALARP). The index or coefficient of risk must always be reduced particularly if the time or cost factor in applying the controls is low. 

Considerations in applying the controls
The kind of control provided may depend on the particular type of risk or a particular type of action or equipment that is needed. Thus a particular task may need extra monitoring, training, experience, etc. One may choose a different methodology, which will give same result. Inclusion of user friendly means or instructions in more languages may help in certain cases as effective controls. Enhancing the safety standards can be a very effective control in many cases. If new or enhanced controls have been identified, they must be implemented, by including them in the company’s documented procedures. Flexibility is also important because the infrastructure, the technology, tools, methods, the regulations, etc are all dynamic and are constantly changing. This means that even hazards also may be different. The controls therefore must be amended too. The people with knowledge of the activities and experience can play key role in doing a good risk assessment and suggesting the appropriate controls.

Risk assessments should be routinely carried out and be reviewed regularly and more frequently if the need is sensed. Risk assessments must be discussed well when giving a tool box talk prior to carrying out a task.

Decision Making
Problem analysis and decision-making are related. It is said that problem analysis must be done first, so that the information gathered in that process may be used towards decision-making.}
The decision-making is selection of a course plan, belief or a series of action among the many alternatives available. Decision-making is a trouble shooting activity terminated by a solution deemed to be optimal, or at least satisfactory. Decision-making identifies an alternative based on the: 

  • beliefs of the decision-maker;
  • benefits he has observed; and
  • drawbacks he has identified in alternative actions.

The original cause of different styles of decision making by an individual may be as follows:

  • Psychological: Contributing factors can be preferences and values the individual has or seeks. Thus, a college principal himself takes alcohol, normally, will have a diluted punishment for a student who created trouble after drinking.
  • Cognitive: The decision-making process is integrated in the interaction with the environment. Thus, while driving, to avoid a dog from getting crushed one may apply brake or turn the wheel off or run over, etc will depend from person to person.
  • Normative: The decision making depends on the logical analysis, considering the pros and cones.

Decision making may depend on situation, data, etc as follows:

  • Multiple criteria decision analysis (MCDA)
    Where one has several criteria with several alternatives available, . to find the best alternative is MCDA. Different individuals will get varying results, even if data is same.
  • Logical decision-making may be based on scientific data or statistical data, etc. This would be done by a doctor, engineer, etc.
  • The intuitive decision-making
    This method may be used in situations of high time pressure, high stakes, or increased ambiguities.
  • Situational decision making
    The decision-maker’s environment can play a part in the decision-making process. A decision can be influenced by the location. Complexity in a room may be a function of number of small objects present.

A few problems in decision making
Analysis paralysis
Analysis paralysis is the state of over-analyzing (or over-thinking) a situation so that a decision or action is never taken, in effect paralyzing the outcome. Sometimes, when you are too choosy about selecting your life partner, you may land up with the most unsuitable pair or sometimes, you are never able to take a decision.

Information overload
Where many alternatives are available the individual may get confused as to which alternative must be selected. Like as shown in picture a girl is given a choice to select 2 chocolates for herself. She is not able to decide.

Decision-making when a group is involved

  • Majority: It needs support from more than 50% of the members of the group.
  • Consensus decision making: After taking a count, If the minority opposes the course of action, consensus requires that the course of action be modified to remove objectionable features.
  • Plurity: In this, the largest block in a group decides, even if it falls short of a majority.
  • Range voting: Here, each member scores one or more of the available options. The option with the highest average is chosen.

An Individual when taking a decision may consider one or more of the following factors:

  • Listing pros and cons: listing the advantages and disadvantages of each option.
  • Choosing: the best: choosing the alternative with the highest probability.
  • Satisfying: examining alternatives only until the first acceptable one is found.
  • Optimizing: in which many or all alternatives are examined in order to find the best option.
  • Flipism: flipping a coin, cutting a deck of playing cards, etc
  • Decision support system: using decision making software.

A shipboard example of decision making
In execution of decision-making the objectives must first be established and placed in order of importance, developing the alternative actions at the same time.  An alternative that is able to achieve all the objectives is the tentative decision. The side effects or out comes, however must be evaluated.
Thus, while fixing of a charter the objectives could be:
To prepare the ship for sale by the year end with a certain amount having earned by then;
to get a good charter hire;
to get a charterer with good reputation;
to get a charter that will say, extend till dry-docking; and so on. Now, all these objectives can be placed according to the priority. An alternate action may be to drydock the ship prior to chartering and do a few voyages thereafter. A decision making will eventually be made as to what should the strategy be.

Following are some known processes of decision making:
In the 1980s, psychologist Leon Mann developed a decision-making process called GOFER. The process was based on extensive earlier research conducted with psychologist Irving Janis. GOFER is an acronym for five decision-making steps:

  1. Goals clarification: Survey values and objectives.
  2. Options generation: Consider a wide range of alternative actions.
  3. Facts-finding: Search for information.
  4. Consideration of Effects: Weigh the positive and negative consequences of the options.
  5. Review and implementation: Plan how to implement the options and implement them.

In 2008, Kristina Guo published the DECIDE model of decision-making, which has six parts:

  1. Define the problem
  2. Establish or Enumerate all the criteria (constraints)
  3. Consider or Collect all the alternatives
  4. Identify the best alternative
  5. Develop and implement a plan of action.
  6. Evaluate and monitor the solution and examine feedback when necessary.

(You may also visit my youtube videos @captsschaudhari.com)
Link: https://www.youtube.com/channel/UCYh54wYJs1URS9X5FBgpRaw/feature

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