Effective Process Safety Auditing: An essential part of good corporate governance for the high hazard process industries
In 2016 approximately £73 billion worth of oil and gas related goods and services were traded between the UK and the rest of the world, approximately 5% of the UK’s total trade footprint. In the same year 76% of the UK’s primary energy came from oil and gas, 60% of which was satisfied from indigenous production, making an estimated contribution of £17 billion to the UK’s balance of trade (Oil & Gas UK, 2017). According to the Department for Business, Energy and Industrial Strategy, oil and gas is still expected to provide two-thirds of total primary energy by 2035.
Although the industry has seen a downturn in recent years, with supported employment falling by approximately 140,000 from 2013, latest estimates show that it continues to support over 300,000 jobs in the UK through direct employment, indirect employment and jobs that are induced by the sector’s wider economic contribution. But with indigenous oil and gas production expected to continue to fall much faster than demand to 2035, the UK Oil and Gas Authority is now looking to promote development of skills and technology as a way of increasing overall value added (Vision 2035).
The chemical and pharmaceutical industries also represent a substantial part of the UK economy in terms of turnover, employment and trade. Employing directly and indirectly an estimated 230,000 skilled managers, engineers, technicians, operatives and support staff, the combined output accounts for some 20% of all manufactured exports, worth around £50 billion per year. Even so, the Chemistry Growth Partnership is committed to improving this by delivering a 50% increase in the UK economic contribution of the industries by 2030.
Corporate governance in process safety
In a climate where there is increasing pressure to do more with less, achieving good corporate governance of process safety can be difficult – downsizing and reorganisations are commonplace, loss of corporate knowledge is a reality, and society has an ever-decreasing appetite for risk.
There are multiple reasons why major accidents occur. Although the immediate causes might lie in equipment malfunctions or errors made by frontline staff, investigations into recent incidents have shown that the underlying causes are usually rooted in poor policy, leading to gaps in essential knowledge and the practices and procedures that underpin safety.
Company board members must ensure adequate internal controls are in place to manage all risks and maximise the return for shareholders, responding to changing market conditions as they arise. The UK Corporate Governance Code provides guidance on the control and reporting functions of company boards and on the role of auditors in looking after the interests of shareholders. The Code advocates the following definition of corporate governance:
“Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting.”
Fortunately, for process safety professionals, the industries, industry bodies and regulators have been active in developing and publishing technical guidance and sharing knowledge. The CCPS Guidelines for Risk Based Process Safety are particularly helpful in this respect, laying out a clear framework and recommendations for development of internal controls (key risk control systems) for process safety management.
Auditing and assessing key Risk Control Systems
HFL Consulting’s knowledge and experience in development of process safety management systems led to the development of our own auditing and assessment tool, INSIGHT Lifecycle®. This allows us to compare practices and procedures in place and assess them against recognised good practice guidance to see exactly where and how improvements can best be made. Assessments are carried out as a collaborative exercise, involving those concerned with carrying out and managing related activities, to ensure findings fully capture the reality and not just the intent. As our case studies show, the process has been used on sites in the UK and overseas to identify common problems, share experience, and build foundations for a more unified approach to PSM.
Our process safety audits and assessments can cover all 20 elements listed in the CCPS Guidelines for Risk Based Process Safety, and have delivered substantial benefits to experienced operators of COMAH sites and those new to the COMAH regime.
Contact HFL Consulting today and learn more about our PSM auditing services here.