Assessment of Catastrophe Risk and Potential Losses in Industry

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Paul Kleindorfer, Ulku Oktem, Ankur Pariyani, and Warren D. Seider

This paper describes the potential contribution of near-miss management systems to improving company profitability and reducing the frequency and severity of major industrial accidents. The near-miss concept has long been understood in different industries, as examples in this paper illustrate. However, what has been largely missing is the integration of near-miss management into the culture and day to day operations in a manner that underlines the critical connections between near-misses and behavior. Often, near-miss management has played an ex post forensic role in risk management rather than an alerting one, summarizing leading indicators and precursors of hazardous conditions. This paper describes several strands of recent research that aim to correct this and to make near-miss management an organic element of Enterprise Risk Management. In this respect, a new concept, “potential safety profit loss”, is introduced to calculate the potential monetary losses due to unexpected shutdowns and accidents.

Keywords: Near-Miss Reporting, Enterprise Risk Management, Safety Pyramid, Leading Risk Indicators, Potential Safety Losses