It is a truism that all organizations have to operate with limited resources. And this statement applies to process safety as much as it does to any other business activity. Management may declare that safety is the top priority and that they will do “whatever it takes” to achieve safety goals. But the reality is that the safety programs can command only so much money and take only such much of the time of senior personnel. Some method of prioritization is needed.
The traditional way of ranking hazards and recommendations has been to use a risk matrix. But, as noted in Safety Moment #51: Limitations of Risk Matrices, such matrices may not be as helpful in deciding on follow-up actions as might be thought. The reason for this is that most of the findings that need to be sorted and ranked wind up in the middle of the matrix with roughly the same risk rank.
Additional means of sorting out priorities are needed. Given that a hazards analysis can generate a very large number of hazards — each of which can have a large number of potential solutions or recommendations — where does a process safety professional start? Which lines of attack will yield the greatest benefit and which approaches are of very little value?
Process safety and risk management professionals spend considerable amounts of time and effort conducting hazards analyses and related activities, such as incident investigations. These activities typically generate a large number of findings and recommendations. Which of these are the “important few” and which are the “unimportant many”?
The Pareto Principle
The Pareto Principle — also known as the 80/20 rule — states that, for any particular event or outcome, approximately 80% of the effects come from 20% of the causes. The principle takes its name from that of the 19th century economist, Vilfredo Pareto, who observed that 80% of the land in Italy was owned by about 20% of the population.
The principle is observed in business. For example, the following generalizations often hold true.
- 80% of a company’s sales usually come from 20% of its customers.
- 80% of a company’s sales are made by 20% of its salesforce.
- 20% of the workers are involved in 80% of the accidents.
- 20% of the equipment items cause 80% of the facility shutdowns.
- 20% of a company’s products will account for 80% of the total product defects.
The Pareto Principle is empirical — the ratio 80:20 is not exact — indeed, the principle is also referred to as the 90/10 rule. Mathematically, it can be expressed by the following equation:
log n = c + ( m * log x )
where n is the number of items whose value is greater than x; c and m are constants.
One commonly-held misconception to do with the Pareto Principle is that 80% of the problems can be resolved with 20% of the resources. In fact, the Principle makes no statement at all as to how much effort is needed to address the contributing factors. This understanding is important when ranking findings and recommendations generated by hazards analyses. An item which has low ranking can still be addressed if doing so requires very little effort or investment. For example, if a hazard can be addressed by simply writing a short operating procedure or by painting a yellow line then it is not worth the bother or risk ranking — it is simpler just to take the necessary action.
Finding the Important Few
A method for identifying the “important few” when ranking hazards is fault tree analysis.
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