Answer

Operational Risks Management and Safety for Cranes

Describe the Scenario

Every business operation is faced with a risk. As a result it is important that the management considers undertaking deliberate efforts to safeguard the organization from such risks. Risks vary in nature and intensity, thus, the risk can be mitigated appropriately by evaluating its severity on the organization. This will enable the firm to take adequate risk management and safety precautions to protect the firm and other stakeholders from loses. This paper creates a scenario in which a business, specialized in constructing buildings and other engineering works is faced with an imminent risk arising from the use of cranes. Over the past years, Australia has reported an increase in the number of crane accidents. This includes the Crane accident in Sydney where three people were injured and others evacuated from their apartment blocks. Another case was reported in Adelaide where a crane accident led to the death of one person. Another accident was reported in 2016 in North Sydney where a mechanical fault was cited as the cause of failure leading to injury of several workers on the site.

Safe Work Australia, a government agency charged with reporting on work related fatalities sites that crane accidents have led to the death of 3, 207 workers between 2003 and 2015. This is a high number of deaths considering that measures could have been taken to prevent such fatalities. As much as the rate of fatalities has been reducing since 2003, there is still more than can be done in managing such risks. As a result of these risks, organizations have lost contracts due to cancellation for negligence and risk of employees’ lives and in some cases, the organizations have lost lots of money in compensation. Crane accidents not only lead to loses of resources, but on the loss of time and reputation of the firm. A case in point being the crane accident that happened at the University of Sydney on November, 2012. The accident was reported on a construction site in Sydney where a crane caught fire during a construction process. The crane then collapsed on adjacent streets and buildings leading to damages.

The Land Lease Construction Company which was the official firm contracted to construct the building not only incurred losses but also lost its reputation. This was after several structural engineers from government agencies had warned of a potential accident arising from a leakage in the cranes cabin. The cabin which was constructed by Favelle Favco Tower Crane Company is reported to have burst into a flame which quickly spread to the luffing ropes supporting the jib and other compartments leading to its collapse. He jib fell on another construction site while the elongated tower collapsed on the neighbouring Broadway Street. An investigation was launched into the issue as stipulated under Australian Construction laws, Sec 81(2). This example points at the degree of risk posed by such accidents, not only on the contracted firms but also on the people involved. This case points at operational risks facing organizations in the construction and engineering sector and thus, outlines a strategic process towards managing risks and ensuring safety of the people involved.

In order to properly manage these risks, the Joint Australian New Zealand Standards on construction and engineering processes become applicable as elaborated under AS/NZS ISO 31000:2009. These standards provide a guide on best practices in engineering and construction that could help avert risks and also provide a framework for ensuring safety in organizations when conducting projects.

2. Overview of Organization

This section provides details on the Titan Cranes and Rigging Pty Limited which is among the most renowned and the biggest crane companies in Australia. The firm is specialized in providing services requiring the use of tower cranes, construction hoists, rigging and mobile cranes. These functions are achieved through the use of a number of equipment including the hammerhead crane, luffing crane, hoists, and heavy haulage machinery among other machinery that support construction and engineering processes. A look at the firm’s website indicates that the management of the firm, through continuous investment in new technologies and process improvement through total quality management has managed to take the customers sites to new heights. This is achieved by providing specialized labour and state of the art lifting equipment to facilitate construction of building projects around Australia. Titan Cranes and Rigging Pty Ltd has enjoyed positive publicity from the print media where it was described as a “Titan by name and Titan by nature” by one of the local publications in the country.

The company serves a range of clients, including private contractors, mining agencies, government, residential, infrastructure, and commercial sectors. The management has a vision of expanding these services to reach out to more business segments and niche markets interested in using the firms cost effective and differentiated products and services. The firm has invested in the improvement of its supply chain and value chain in order to achieve cost saving that translates to reliable and affordable services not only in its areas of specialization, but also in providing support to heavy haulage transport services for logistics industry. This is an industry that has shown a lot of potential and thus, the management is considering adding this service portfolio to its current service list. This follows the fact that since 2001, Titan Cranes has solidified its brand name and reputation as a leading material handling company not only in Australia but the wider Australasia region. The firm has managed to achieve such an enviable position by committing itself to high quality services through its highly integrated value chain system. As a result, the firm has been known to; exceed expectations, surpass prevailing safety standards as stipulated under AS/NZS ISO 31000:2009, operate with integrity while still balancing between speed and flexibility in the delivery of its services.

Titan Cranes is a privately owned organization. It has been in operation for 50 years. Its survival has dependent on the collective input of its stakeholders who have worked collectively in ensuring that the firm is sustainable and profitable. It has offices in Queensland, Western Australia, South Australia, ACT and New South Wales. In addition to the offices, the firm has representatives and a network of experts in most major towns and cities in the country. As part of its sustainability plan, Titan Cranes invests in training and development of its employees. Prior to this, it ensures that it attracts and recruits high quality staff as a strategic measure aimed at standardizing operations and reducing rate of employee turnover. Combining these factors, has enabled the firm to be consistently innovative and creative. These attributes have enabled it to deliver reliable services while maintaining a focus on risk management and safety of its resources, including employees on site.

As a part of the risk management and safety plan, Titan Crane has invested in the purchase of world class machines to support the delivery of superior services. Most of the firm’s machines maintain a life span of less than five years. This ensures robustness, and reliability of the machines allowing for superior and safe services. This has been the source of core competencies leading to winning of tender, good reputation and consistency in the number of contractual agreements made by the firm. Among its notable projects around New Zealand and Australia include; the construction of Flinders Medical Centre in South Australia, Parramatta’s tallest building, health innovation building at the University of SA, Meriton in Sundale A1 (Queensland), Rundle Place Retail and Office Development, SAHMRI (South Australian Health and Medical Research Institute, Adelaide Oval Redevelopment, Herchel Street, Barangaroo, and the Perth’s New Children Hospital. As much as the firm has a reputation of good performance and delivery of quality projects, it is required to sustain its good name in order to retain its current customers and appeal to new ones. As a result, the firm needs a proper risk management and safety plan that should be reviewed regularly and updated in accordance with regulatory changes in the industry as well as other dynamics that will enhance the effectiveness and productivity of their crane services.

Bbb notes that the key stakeholders for Titan Crates include suppliers, founding resources or project sponsors, partners, staff, local authorities, local residents and environmental agencies. All these stakeholders have vested interests in the firm and its construction and engineering processes and thus, the firm has to treat them with utmost respect. For instance, the staff and local authorities have to be managed closely because they hold the most power and high interest in the projects. The suppliers, partners and sponsors (funding resources) have high power and low interest in the project because they are not the primary beneficiary of the project as a result, the firm has to keep them satisfied. Environmental agencies, which mostly are government agencies in charge of monitoring and assessing the impact of a project on the environment have high interest in construction projects thus, they have to be informed on the processes and progress of the projects in relation to environmental concerns. The last key segment of stakeholders are the local residents in the areas where the projects involving cranes are being undertaken. These group has low power and low interest in the project. They are neither the primary beneficiaries not the project sponsors. However, they could jeopardize the chances of completing the project. Such a group of stakeholders has to be handled with care in order to avoid risks from attacks and lawsuits. They have to be monitored closely by the organization.

Risk Identification

Risk identification refers to a continuous and ongoing process that involves detecting and classifying risks based on their severity, consequence, occurrence and detectability. Risk identification is a part of the risk management process and it has to be conducted at all stages of the life cycle of any project. Risk identification can be done through engaging stakeholders in technical and programmatic meetings, risk analysis, reviews of old projects to gain understanding on risks and how they were managed, and benchmarking. Currently, there are databases on lessons learnt on projects which can be helpful in risk identification process. Such databases help technicians and engineers to identify potential threats and risks when undertaking projects. This makes it easier to identify risks that might be overlooked. The risk manager should also take note of emerging risks identified while conducting a given project and also update such databases as a way of contributing towards the growth of knowledge on risk identification.

Bbb notes that a typical risk identification procedure has to begin with the creation of a Risk Integrated Product team (ITP). The team will be responsible for engaging diverse sources of information including databases and engaging stakeholders at different levels in order to come up with probable risks that threaten a projects involving the use of cranes. The IPT team could adopt a variety of methods in identifying risks. This includes methods such as; subject matter experts (SME). This involves conducting extensive consultation meetings with experts in crane management in order to outline all the risks involved in conducting such projects. The second method would involve analysing lessons learnt either by the Titan Crane Company or other firms. This will enable the team to learn from past experiences of other contractors. In this case, Titan Crane could use the identified case of accidents around Australia and globally in order to gain new knowledge on risks that might be overlooked during the identification process. The third method for identifying risks is using experienced risk managers and risk integrated product teams.

Their experiences in risk management will make it easier to identify risks and manage them appropriately. The fourth procedure to identifying risks is the use of Technology Readiness Level (TRL) determination. This is a technological tool that determines the level of risk of a given process in a project. Other procedures involve using a work breakdown structure (WBS) to highlight the project life cycle thus making it easier to identity risks. The last approach is brain storming which involves engaging in critical thoughts on potential risks depending on the novelty of the project involved. This approach is mostly useful when dealing with a complex situation that has not been experienced before by other contractors or engineers.

1. Risk Identification at Titan Crane

A risk managers has various techniques to consider when identifying risks. Bbb emphasizes the need for Titan Cranes to brainstorm and make a checklist of possible risks. This approach will enable the manager to differentiate risks that are acceptable from those that are not acceptable. Acceptable risks should be noted and recorded in the checklist. This will facilitate ease of transfer into the risk register. Brainstorming and making of checklist will enable the manager and the IPT teams to base on use past experiences to create possible scenarios which will aid in the risk identification process. An example of a most suitable checklist for a crane project by Titan Cranes could be as shown in table 1 below.

Table 1: Risk Identification Checklist

1. Risk Scope

It is important for the risk manager to determine the scope of the risks faced by project. Setting a definite scope of risk facilitates the risk identification process because it sets the framework within which risks will be identified and mitigated. For instance, the scope of this project is limited to processes involving the use of cranes. This is an area of expertise by Titan Cranes and thus, the scope is confined to this area of competence. In addition, the risk scope is limited to covering for activities that risk the safety of the machines, safety of the public around the construction sites and the safety of employees using the machines.

1. Risk Register

As part of the risk identification process, it is important to make a risk register. This involves summarizing findings collected through the brainstorming process and analysis of the checklist. A risk register is important to the to the risk identification process because it enables for audit, update and constant review of the project risks throughout the life cycle. It also makes it easier for the risk manager to identity phases of the project that have been completed and eliminate the risks that had been outlined in the register. The risk register also includes sections detailing what might happen, how it might happen and the possible consequences to the firm, the people and other stakeholders. The register provides for rating of the risks based on probable consequence and likelihood. These figures are mostly based on estimations that could be identified through fuzzy logic, probability distribution, objective risks or subjective risks.

Table 2: Risk Register

The whole process of identifying risks by adopting checklists and brainstorming, as well as outlining of a risk scope and risk register is quintessential in the risk management process. According to bbb, risk identification enables a firm to achieve the following objectives. First, is to ensure that identified risks are properly controlled and mitigated. The choice of a mitigation approach is dependent on the consequence, severity and likelihood of the risk occurring in addition to other factors prioritized by the risk manager. Second, risk identification is important since it is a part of the risk assessment process. According to AS/NZS IS0 31000:2009, it is legally mandated that organizations prepare risk assessments and safety statement in order to safeguard their operations and ensure high levels of safety for the employees and the general public. Third, it is strategic for a firm to prepare a risk identification checklist and associated documents since it enables for accountability and audits. This is a part of the accountability and transparency process which could ensure effective management of resources and cost saving on the side of the organization.

bbb adds that it is both ethical and moral for an organization such as Titan Cranes to conduct risk identification in order to plan for and manage all the identified risks thus reducing the risk posed on employees and other stakeholders. It is believed that organizations, have the ethical obligation of safeguarding the lives of the communities and the employees as well as the public within their areas of operation. They are also mandated by certain government agencies to adhere to high standards of operations in order to safeguard the environment against pollution. Accidents mostly lead to pollution and thus should be avoided, for instance, leaking of fuels and other non-biodegradable substances could contribute towards environmental pollution. The same case is exhibited in cases of fire or collapse of machinery which could be annoying to the people around the site.

Risk Analysis and Quantification

As noted, the occurrence of a risk poses adverse effects on the cot, timely completion, scope and quality of construction and engineering projects. It is therefore important to quantify the identified risks and analyse them in order to determine the probability of occurring, consequence, and the probability of the consequence in the event that the risk occurs. The process of analysing risks and quantifying is dependent on various tools and methods. The most effective and applicable method of risk analysis in this case is the simple qualitative risk assessment matrix (bbb). This technique is important in not only analysing but also quantifying risks. The matrix guides the risk manager into rating project risks based on their likelihood, and consequence which are weighted on a 5 point scale as shown in table 3 below.

Table 3: Qualitative Risk Assessment Matrix

It was important necessary to use the qualitative risk assessment matrix since it enables the risk manager and the other stakeholders to identity the consequence of a risk based on its risk level, consequence and likelihood. The following interpretation is helpful in interpreting the matrix above.

Table 4: Description of Risk Levels, Consequences and Likelihood

A qualitative risk assessment matrix can be applied directly in managing operational risks associated with the use of cranes at Titan Cranes. The risk checklist and risk register presents many potential risks that could affect projects involving the use of cranes. These risks include the risk of leakage of fuels and lubricate from the crane cabin, risk of fire on the crane due to leakage, risk of equipment failure, risk of operators falling from the crane cabin or while climbing the tower, risk of the plant rolling over or collapsing, risk of objects falling from the crane or the rigs and hurting people underneath the construction project, other risks to be quantified using the matrix method is improper material handling leading to accidents, Semi-skilled employees being injured by work tools and collapsing rig hurting people nearby the construction site because of the elongated nature of the rigs. These risks can be quantified using the matrix, based on the likelihood of occurring and possible consequence. Using the description table will enable the risk manager to properly quantify risks and place them into matrixes as follows.

Table 5: Quantified Risks

Reasons for Quantifying Risks

It is important for the risk manager at Titan Crane to quantify risk associated with crane projects. The first reason for quantifying risks is to comply with regulations. AS/NZS IS0 31000:2009 stipulates that risks have to be quantified and included in the risk management plan. Failure to comply with these laws could lead to non-compliance which attracts fines and revocation of business certificate. International standards highlight that risk quantification can be semi-qualitative, qualitative or quantitative depending on organizational policies or the circumstances under which risks have to be quantified. It is also important to quantify risks for precision purposes. It is easier to manage risks that have been quantified than managing risks that are listed randomly on a checklist. This makes it hard for the risk manager to assume some risks that could be rare yet catastrophic.

Risk Response Planning

Bbb notes that risk response planning is a strategic process that involves determining methods of eliminating or reducing risks and threats posed to a project. Planning enables risk managers to reduce the impact of a risk. It is important that project managers identify strategic approaches of responding to risks before they occur. The project manager on the other hand, is mandated to work with the risk manager in order to decrease the possibility and probability of a risk, and in the event that a risk happens, then its impact has to be negligible or manageable. Reducing risks by undertaking risk response planning is important to the organization because it enables it to proactively prepare and manage risks. This will enable the risk manager together with the project manager to normalize catastrophic risks thus safeguarding the organization and other stakeholders against any possible threats. Assuming that organizations failed to plan on suitable responses to risks, then they would be faced with the costly process of restructuring the firm or compensating the people affected.

Basically, risk response planning has to be in line with the risk assessment, analysis or quantification process. According to bbb, the risk response planning process is divided into three main phases; process input, tools and techniques and output.  The input phase includes creating a risk management plan, identifying the project type and project status, identifying risks and scales of impact or probability of occurring. Information collected at this phase is important in guiding the risk manager into identifying opportunities, threats and risks facing the project. The second phase of risk response planning is known as tools and techniques. It details the manner in which risks can be handled by the firm. This ranges from avoidance, acceptance, transference and mitigation. Bbb notes that avoidance means changing the management plan of the project in order to eliminate the cause of the threat or the threat itself. The option to transfer the risk does not involve eliminating the risk but rather directing it to a third party such as an insurance firm, gaining guarantees or even focusing on warranties. The option to mitigate a risk focuses on reducing the probability of the risk occurring and in the event that it occurs, then the risk has to be reduced to a manageable or acceptable threshold. Mitigation is usually an option adopted in the event that the risk cannot be fully eliminated.

There are situations where a risk could lead to opportunities. In such scenarios, the risk manager could decide to; exploit, enhance or share the opportunities. Exploiting means changing the project in order to exploit the perceived positive effects. Sharing refers to the process of allocating the benefits and opportunities with a third party while enhancing denotes the process of increasing or maximizing the probabilities of getting a positive impact from given risk event. Bbb identifies a third situation associated with strategizing for both opportunities and threats through acceptance. This is a situation that cannot be changed and thus the management accepts that they will carry the burden associated with the risk. An organization can decide on either passive acceptance or active acceptance. Whereas passive acceptance completely leaves the risk to fate, active acceptance involves making contingency plans to avert the risk after it has occurred. This is achieved through allocation of cost and time reserves to cater for the resultant impact arising from the risk. The decision to accept a risk is so critical to the organization, and thus, it must be communicated to all the stakeholder groups. All these tools and techniques are part of a contingent response strategy which combines various tools in order to come up with a risk response that is most favourable to the firm.

The third phase of risk response planning is the output process. It is associated with making of an overall risk rank, accompanied with a list of prioritized tasks or a list of risks for additional analysis and management. Output also involves analysing the trend of results made through the risk response plan. The output phase also entails adding, removing and assigning resources to different response plans. The risk response planning process has to be accompanied by a risk register updates. This involves classifying risks into groups namely; residual risks which are risks that remain after because they are acceptable and contingency plans have been developed to cover them in case they arise. The update process will also include making of contingency plans. These are specific actions taken in the event that specific threats or opportunities arise during the project.

Third, the risk register updates could consider assigning risks to risk response owners. These are individuals specialized in developing risk responses for specific situations in order to maximize on opportunities and reduce risks. The register will further be updated with secondary risks. These are risks arising from the implementation of the prepared and current risk response plan. There register update will have to include risk triggers. These are events that trigger or motivate a given contingency response. Contracts can also be issues when third parties are involved as in the case of risk transfer to insurance firms. The register has to contain a fall-back plan which is a contingency plan that could be undertaken in the event that the original plan fails to succeed. Risk managers also need to update the register with reserves in the event of a risk, then there is need for time and cost reserves to cater for risks marked as active acceptance.

In the context of Titan Crane, recommended risk response plans will be included in the Failure Mode Effects Analysis (FMEA), which is a strategic tool applied in risk control. The FMEA analysis will be attached as part of the risk tracking, monitoring and control (TMC) system. Among the probable approaches to managing risks at Titan Crane will include recruiting highly competent employees, training employees and other stakeholders mostly the public on workplace safety and site safety respectively, the plant will have controlled supervisions on a routine basis, material certification, warranties for the machinery purchased, insurance cover for the general public that could be involved in the accident and a medical and work safety cover for the employees. There is also need to ensure safety induction, and routine maintenance of machines. Bbb adds that crane companies need to ensure that they inspect the site and ensure that the ground on which they are setting the crane is stable before installing, in addition, it is important to provide basic instrument such as fire extinguishers in the event of fire emergencies.

Risk Plan Implementation

The implementation process at Titan Cranes will involve classifying risks as identified in table 5 under quantified risks. The table below will be matched to the qualitative risk assessment matrix in order to consider the risk level of a given risk. This will enable the risk manager to identify a suitable risk response plan against identified risks.

1. Develop an appropriate risk tracking, monitoring and control (TMC) system.

Failure Mode Effects Analysis (FMEA)

6. Identify an incident that has occurred either in one of your identified risks, or related to all your risks, and describe the nature and extent of change that has taken place.
7. Elaborate on the (in) effectiveness of your TMC in handling and dealing with the incident occurred in the above point.
8. Give a summary of key issues in the scenario.

In responding to the above tasks, it is expected that you will be demonstrating your capabilities in: 

• Dealing with various Stakeholders having different attitudes towards identified risk(s)
• Using both objective and subjective risks via probability distribution and fuzzy logic
• Referring to national or international risk standards (e.g. AS/NZS IS0 31000:2009)
• Making decisions under risk (one example) & under uncertainty (one example)
• Applying one or more of the risk management tools and techniques to deal with ONLY ONE of the following