When operating a company that manages high risk or major accident hazard sites, there’s a requirement that due diligence has been performed to minimise risks from occurring – so far as is reasonably practicable (SFARP).

Typically applied retrospectively by regulators and courts determining what is reasonable for an individual or entity to have done to prevent an incident from occurring, SFARP has now replaced – in Australia and New Zealand – ALARP, meaning as low as reasonably practicable.

Yet not a lot sets them apart. While there was a perception that ALARP encouraged organisations to meet a lower target threshold; there’s still confusion around how to satisfy SFARP beyond a once-off demonstration that the cost of further risk reduction is prohibitive.

SFARP encourages organisations to keep going with their risk reduction until it’s no longer reasonable or it becomes impractical for them to do more, legislation still refers to both.

While SFARP can be liberating for organisations in that they don’t have to meet a target as such, they do have to keep going in their risk reduction activities until it’s no longer reasonable to do anything further to reduce the risk. But what defines what is reasonable?

Industry sectors have largely been left to their own devices in how best to demonstrate risk reduction due diligence, with government agencies and regulators providing little, if any guidance around how to meet these requirements.

But the purpose of the SFARP process, apart from preventing accidents and fatalities, is to see if organisations have enough risk controls in place to adequately say they have enough layers of protection – or defences. Yet when do we have enough layers in place to say we’ve reasonably reduced the risk?

While cost-benefit analysis (CBA) is one aspect in determining reasonability, CBA alone and meeting a threshold target isn’t enough to demonstrate risk reduction due diligence. Here are steps to guide you and some of the factors that need to be considered.

Demonstrating due diligence in reducing risk SFARP involves the following steps:

  1. Evaluate the current risk or more specifically, the adequacy and sufficiency of any existing controls. Seek appropriate levels of input from peers, specialists, senior leaders, HSE risk experts and technical and operational disciplines, and take all relevant aspects into account, such as individual and society, reputation and commercial.
  2. Identify additional, practicable controls that could reduce the risk further and determine whether it is reasonable to implement the additional, practicable controls (see below).
  3. Implement the reasonably practicable controls and document the justification for any controls that were determined to be unreasonable to implement.
  4. Re-evaluate the residual risk – including all reasonably practicable controls – and document whether societal concerns are met and any unresolved aspects relating to risk to personnel or the environment and any conflict between these (e.g. trade offs).

How do I evaluate whether controls are reasonable to implement?

The process of identifying the reasonability of risk reductions can be distilled into several tests. Here are the factors to determine whether the cost, time or trouble of further controls is grossly disproportionate to the risk reduction benefit.

  1. Will the proposed control provide a demonstrable risk reduction? Can the proposed control’s effectiveness and reliability be verified throughout the life of the control?
  2. Is this control recognised and generally accepted good practice? Is the control readily available or applied within similar operations or analogous industries? Will the control be consistent with industry standards?
  3. Will the proposed control introduce untenable risk in other aspects of operations? Will there be potential for additional adverse, unacceptable impacts to safety, operations or maintenance if the control was to be implemented?
  4. Will physical or economic constraints posed by retrospective asset modifications result in the cost of the proposed control being disproportionate to the risk reduction that could be achieved?
  5. Has sound judgement been applied, in the context of the potential for adverse reputational and other socio-technical impacts, to override technical and economic factors in the decision to implement the proposed control?
  6. Has the Precautionary Principle been considered when it comes to uncertainty around risk levels? (see below)

The cost of uncertainty

The Precautionary Principle is particularly important in the context of providing further risk reduction.

If the assessment of a risk, taking into account all available scientific and practical evidence, remains insufficient, uncertain or inconclusive, then the Precautionary Principle should be adopted in the hazard management process.

This means that uncertain analysis and evaluation is then replaced with conservative assumptions, which will increase the likelihood that risk reduction is required – even if the cost appears to be grossly disproportionate to the risk reduction benefit.

Infamously, such application of the precautionary principle did not occur with the NASA Columbia Space Shuttle resulting in disastrous consequences.

In these types of circumstances, the uncertainty associated with the risk assessment means that the risk associated with non-implementation of new controls cannot be shown to have been reduced SFARP with sufficient certainty.

The continuous investment in safety risk controls is the cost of being in business, safely.