Page 12 - CCPS Monograph - Business Decisions

Process Safety and Financial Decisions

“There’s an old saying that if you think safety is expensive, try an accident. Accidents cost a
lot of money. And, not only in damage to plant and in claims for injury, but also in the loss
of the company’s reputation.”

Trevor Kletz

Fellow of the Royal Academy of Engineering, Royal Society of Chemistry, Institution of

Chemical Engineers, and the American Institute of Chemical Engineers

Challenges when including process safety in financial decisions

A number of challenges in making and implementing financial decisions that impact process safety
are discussed below.

Loss avoided. Process safety incident impact is measured
as losses: loss of life, loss of property, loss of environment, loss One of the challenges in
business decisions is how
of market share, loss of production, loss of reputation, loss of to include a “loss avoided”
the license to operate, financial loss or even loss of the business in financial calculations.
itself.

Financial decisions tend to look at return on investment or the bottom-line impact of
expenditures over a time horizon of a number of quarters or a few years. Process safety, as was
stated earlier, focuses on the prevention of high consequence / low frequency events. The time
horizon for these events is frequently expressed in terms of occurring once in the lifetime of an
operating facility or once in a given type of facility across all of industry. Also, process safety
initiative costs and benefits include an inherent challenge in that the costs are defined as the

money spent to make a change, and the benefits are estimated on the probability of a reduced
impact. It is challenging to link financial decisions with the process safety impacts of those
decisions, in both the time horizon and the certainty.

Normalization of deviance, an increased tolerance of a nonconformance, leads to an
increased likelihood of a process safety incident. For example, an organization may normalize
making decisions to reduce maintenance budgets, staffing, and training as well as the resulting
impacts of these decisions. With normalization, it becomes increasingly more difficult for the
organization to alter course and address the underlying risk concerns. This pattern was observed
in the 2021 Texas power grid crisis where cost-reduction decisions were made over a number of
years that ultimately reduced the integrity of the Texas power grid and its resilience during
emergencies. Then, when an abnormal event occurred, the system’s weaknesses were exposed,
and the impact far exceeded the estimated costs of avoidance. (FERC, 2011) Figure 6 (page 12,
Asset Integrity), also illustrates the normalization of reduced training, inspection, and
maintenance in the upstream oil industry resulting in process safety incidents.

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How Business Financial Decisions Impact Process Safety Performance
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