Managing Risk in Complex Operating Environments: Applying Lessons from High-Reliability Organizations (HROs)

The world has changed dramatically over the past two decades. Email, the Internet, and now social media have dramatically increased the interconnectedness of the world. Globalization has led to increased competition, forcing companies to expand product portfolios and design increasingly complex manufacturing processes and supply chains. Government regulation has become progressively more active, forcing companies to create new organizations and processes to ensure compliance. All of these changes have dramatically increased the complexity of the environment in which companies operate, and the pace of change continues to accelerate.

Complex systems have several characteristics that make them especially susceptible to high consequence/low probability events. First, complex systems have many interdependent variables that do not necessarily act in linear or predictable ways. Second, they have feedback loops that act to amplify or dampen reactions. As these interdependent variables are amplified or dampened by feedback loops, complex systems often exhibit emerging properties causing them to behave in ways that are virtually impossible to predict.

Traditional approaches to risk management are not well suited to preventing the high consequence/low probability events that arise from complexity. First, traditional approaches rest on the ability to predict potential failure modes so that actions to prevent or mitigate the risk may be put in place. The emerging properties exhibited by complex systems make this virtually impossible. Second, the feedback loops present in complex systems often cause circumstances to change so fast that there is not adequate time to identify the risk. Finally, these events happen so infrequently, and with so little notice, that there is not ample opportunity to study and learn from them.

Unfortunately, recent history is evidence of this trend. High consequence/low probability events are becoming more and more frequent. Disasters of the scale of BP’s Deepwater Horizon, Fukushima Daiichi, and the West fertilizer plant are becoming all too common. However, a select few organizations have been able to defy this trend. These high-reliability organizations (HROs) have been able to demonstrate extraordinary levels of performance even in highly complex operating environments.

This presentation will examine high-reliability organizations, and the key differences in the way they manage risk that enable them to achieve extraordinary levels of process safety over sustained periods of time, despite performing inherently hazardous tasks in complex operating environments.