The team of Art Sullivan of Norwest and Tim Jackson from Peabody Energy created an effective consultant-operator synergy for a presentation on the topic at June’s Longwall USA 2007 show and conference in Pittsburgh, Pennsylvania. While the two shared the basics of applied risk management for an industry audience, a producer’s point of view provided a “proof in the pudding” example for all.

Risk management defined

Risk management, as the two defined it, includes factors such as processes, culture and structures that are focused towards a company’s “effective management of potential opportunities and adverse effects”. Risks need to be identified, analysed, evaluated, monitored and communicated.

The topic has really picked up interest since it became one of the significant recommendations put forth by the Mine Safety Technology and Training Commission, which released its report and findings last December.

“Every mine should employ a sound risk analysis process … conduct a risk analysis and … a management plan to address … significant hazards identified by the analysis; simple regulatory compliance alone may not be sufficient to mitigate significant risks,” the commission said.

Peabody, noted Jackson, has taken that to heart, having taken risk management principles to apply within its own corporate program that can aid every one of its mines in identifying and assessing hazards and risks.

“[It] provides an objective measure of identified hazards and facilitates the development and implementation of control procedures,” he noted.

Key to understanding and practising risk management is the fact that it requires a “proactive, systematic approach”; and application should be across the board looking at the entire life cycle of the mine – “exploration through to mine closure” – in order to be effective. This is because, the two pointed out, “risk assessment methodology offers systematic approaches that can assist with key decision making.”

Additionally, risk management also allows operations to analyse potential problem areas before something arises, as well as to predict the various outcomes from a decision or potential issue. People, equipment and procedures, the comprehensive circle of a mine’s inner workings, are always a part of those decisions and analysis.

There are multiple types of alternative risk management processes, according to Sullivan and Jackson, and Australia has actually played a large part in defining them so that the industry can both comprehend and apply their methods. The various processes include Workplace Risk Assessment and Control (WRAC), Fault Tree Analysis, Hazard and Operability Studies (HAZOP), Failure Mode and Effect Analysis (FMEA), and Potential Human Error Identification (PHEI).

Each method has its own benefits that operators can utilise in a specific situation; for example, the Fault Tree Analysis method is most helpful when a risk’s logical cause is unclear.

The HAZOP method, on the other hand, provides details of ways things could occur under abnormal circumstances. Mines using PHEI for their risk assessment can get the most from it when it is examining the people factor.

Peabody’s approach

The Missouri operator looks at five areas of concern in its company-wide application of risk management: people (its top priority), assets, business interruption, environment and community standing. As such, its approach is a combination of WRAC and the HAZOP processes.

To help provide a visual for those at Peabody who are evaluating risks, the operator uses a Risk Register to graphically quantify, identify and define risks for a given scenario. That is placed into its Risk Analysis Matrix, which includes:

• Hazard definition – What is the harm’s source?
• Hazard detailed description – In industry terms, what are the specifics?
• Hazard cause – What forces have created this hazard?
• Consequences – Measure of loss
• Probability – Measure of likelihood
• Risk rating – Measure of the risk

The final factor, the risk rating, is a numerical factor assigned to a risk that is a combination of its consequence, probability and exposure. The first is given a number between 0 and 100 while the other two are assigned a figure from 0 to 10, and a formula (of Exposure x Probability x Consequences = Rating to Risk) is also taken into account.

Those hazards that receive a total risk rating exceeding 200 are attended to immediately with controls defined and implemented for the specific situation.

“Risks are rated to objectively prioritise,” noted Jackson and Sullivan. “No organisation has the assets necessary to simultaneously optimise its risk controls.”

In Peabody’s case, those required controls are created by mine personnel and are given full corporate support.

For existing controls, it is important that a team perform them and that its members be made up of all hierarchical levels. In the end, having measures of effectiveness and compliance in a specific situation has much more benefit than the subjective opinions of individuals.

When looking at new controls, the two noted that four key factors should be considered: effectiveness, ease of implementation, timeliness of implementation and cost of implementation. Moreover, the credibility and sustainability of new controls are also vital to their success.

“Look beyond your mine, your region and your industry and be creative when developing controls,” Sullivan urged, noting as they are put into effect and the monitoring of their effectiveness starts, cost and accountability of implementation should be measured along with compliance.

Lastly, when reviewing risks and developing controls, it is important for mines to follow through, said Sullivan and Jackson. They recommended recording and assessing the results from controls that are put into place at the mine, then communicating those results with others. Share details and involve key individuals, they said.

“Risk management works at the mines,” Jackson said of Peabody’s successes with applied risk management. “[It] can be used by all employees.”