Managing the Corporate Beast

Elevating the Management of Safety to the Corporate Level Through Enterprise Risk Management

David T.Deveau, P.Eng., M.B.A., B.E.D.S. 2013 International Aviation Safety Summit

Washington, DC - October 29-31, 2013

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Presentation

• The presentation will– Examine gaps that continue to limit organizational

integration of safety– Emphasize the importance of elevating safety to

the highest levels of the organization– Offer a framework to help safety take its rightful

place alongside other company priorities

• Content– Problem Statement– The Evolution of Safety Management– Safety in the Risk Pantheon– Cautions, Challenges & Conclusions

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Jazz & Presenter

Jazz• Fleet of 127 aircraft• Bombardier DHC8 100/300, Q400, and CRJ705• 78 USA and Canadian destinations with

800 flights and 30,000 pax a day• Bases in YHZ (HQ)/YUL/YYZ/YYC/YVR • 5,000 employees• Contract flying for Air Canada, Jazz Charters, Jazz Safety Solutions

& Other Services (Ground Handling, etc.)• Previously operated 757 a/c for Thomas Cook Canada

David Deveau• VP, Safety Quality & Environment• Professional Engineer/MBA• Chair Safety Subcommittee of National Airlines

Council of Canada (NACC) and Member of Safety Council of Regional Airline Association (RAA)

• Principle: Jazz Safety Solutions

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PROBLEM STATEMENT

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Good News

There is a lot of good news for safety

• The profile of safety in aviation has grown over time• Safety management is more sophisticated than ever

due to safety management systems (SMS)• There is increasing recognition that safety issues can

be organizational in nature, and that safety itself needs to be managed at the organization level

• This provides a much better basis for advancing safety governance than existed when safety was considered a purely operational consideration

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The Problem

If good news…So what is the problem? • Safety still struggles to compete for status, attention

and resources along side other corporate priorities (financial performance, commercial, etc.)

• This is not because safety isn’t seen as important• For many at the top of organizations (outside the

safety role), safety remains an operational enigma– Safety related risks just are not understood– Safety and business functions often don’t

speak the same language– Top decision makers can find it a

challenge to compare safety priorities with other business needs

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The Problem

What the Problem Looks Like

Financial Business Case

Safety Business Case

Return on

Investment

Expense versus

Revenue

Reduced financial

exposure

Incremental Risk

Reduction

Cost

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HOW DID WEGET HERE?

THE EVOLUTION OF SAFETY MANAGEMENT

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Evolution

• Safety has evolved from reacting to accidents to proactively identifying and mitigating risks

TIME AND MATURITY

AccidentInvestigation

ImprovesMachine

Design

InvestigativeTechniquesand TrainingIncorporate

Understandingof Human

Factors

IncreasedSophistication

in Trending and Analysis

(HeinrichRatio)

MaximumProactive Approach

and WholeOrganizationSafety Culture

ImprovementsLike Safety

Reporting (ASAP)FOQA, etc.

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Proactivity

• Like other management systems, safety has evolved from being random to more predictive in nature (recently, SMS has helped with this evolution)

Random

Reactive

ProactivePredictive

SMS

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Integration

• At the same time, safety silos are being replaced by integrated, cross-functional systems

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System Evolution

• Although safety is more organizationally integrated than ever, it still hasn’t been integrated into organizational culture and governance as much as other management systems (finance, HR, etc.)

Disconnected• Isolated

business processes in place

Common•Process consistency

is evident with common goals

Unified• Inter-related processes

interact in sophisticated ways

Systemic•Highly functional,

coordinated processes work across multiple business unit

Embedded•Highly evolved system

that permeates all aspects of the organization

SafetyManagement

FinancialManagement

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Hierarchy

• A sure sign of how fundamental something is to an organizations success – and how valued it is in the organization’s culture – is how deeply it penetrates every aspect of how business is conducted

• How would we recognize if safety “…penetrates every aspect of how business is conducted”??– Safety can be found at EVERY level of an organization– Safety is treated the same way by senior leaders than

other company priorities are– Safety has status in the organizational structure, in the

business plan and on every agenda– Safety exists throughout the hierarchy of the organization

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Hierarchy

How far in the organization’s hierarchy does safety go?

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Shareholders

Board

Executive Management

Senior Management

Non-Management

Gap?

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HOW DO YOU KNOWIF YOU HAVE A GAP AT THE

CORPORATE LEVEL?

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Challenges

• Is safety leadership buried too deeply in the organizational structure for significant influence?

• Are safety objectives and targets overshadowed by other business priorities in company strategic plans?

• Is it a struggle to secure financial or other resources for safety improvements as soon as senior decision-makers become involved?

• Is there over-reliance on regulatory non-compliance fear, bad press, scare tactics or other “safety cards” to get support for safety?

• Do executives and the Board struggle to understand and compare the relative importance of safety investments compared to other business cases?

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Strategy

How do we address these challenges?

• Put safety leadership at the executive level• Make safety a formal strategic priority, which ensures

it gets its own objectives, targets, etc.• Create a common framework based on risk so that

safety can be compared to other business issues on a relative basis (apples to apples)

SafetyFinance Operations

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SAFETY IN THE RISK LANDSCAPE

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Corporate Risk

• Organizations must consider many varieties of risk• Financial and business risks are generally high on the

executive and Board agenda and well understood• Safety is normally on the agenda, but not always at

the same level as other topics– Buried or invisible (subcategory of other topics)– Only escalated to high levels when there are very serious

issues, regulatory concerns, audits, etc.– Not understood outside safety and operational functions

What can we do to fix this?

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ERM

• Enterprise Risk Management (ERM) can be used to translate safety into a language that is understood by the exec/Board…so that they can compare risk topics

• What is ERM?– A common framework to define, categorize and manage

risks…regardless what type of risk– Provides a common risk language that can be understood

by the exec/Board…regardless what type of risk– Creates a bridge between safety and business leaders

• What does ERM include?– Risk taxonomy (structure describing risk areas)– Methodology to assess, and classify risks– A consistent way to report on the organizations risk profile

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Financial

Safety

Human Resource

Business

Geo-Political

ERM

What does a risk hierarchy look like?

Flight Safety

Ground Safety

Security

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ERM Components

ERM Components• Risk definitions• Risk assessment tools• Risk tolerance policies• Risk Reporting Templates• Risk classifications

Severe

High

Moderate

Low

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Part of Agenda

• Safety can then take its place alongside other priorities at the highest levels of the organization

Financial• Risk a• Risk b• Risk c

Safety• Risk a• Risk b• Risk c

Human Resource• Risk a• Risk b• Risk c

Business• Risk a• Risk b• Risk c

Geo-Political• Risk a• Risk b• Risk c

HIGH LOW Moderate ModerateSEVERE

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CAUTIONSCHALLENGES &CONCLUSIONS

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Cautions

Be Prepared• Many (most?) executives and Boards are not familiar

with enterprise risk management – if they do not “buy in”, there is no value in implementing ERM (educate)

• ERM systems will take expertise and work to design for your organization (get help if you need it)

• With more profile at the executive and Board comes more interest and more expectations!

• Be prepared for the truth – sometimes safety priorities are not going to be the most important (and that is OK)

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Conclusions

• Safety management is in better shape than ever!• However, there is still more to do for safety to be – properly understood at executive/Board levels– treated the same as other corporate priorities

• One way to help push safety up the organizational hierarchy is to create a common risk management system for all risks (including safety)

• Be prepared for the journey to the top!

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Thank YouQuestions?

David.Deveau@Flyjazz.cahttp://ca.linkedin.com/in/daviddeveaupeng/