Megan (Producer) (00:02):
Hi,; welcome to this edition of Risk! Engineers Talk Governance. My name's Megan, and I'm a producer of the podcast. In this episode, due diligence engineers, Richard Robinson and Gaye Francis talk about regulations and licence to trade, the difference between the two and the confusion and difficulty it's causing for organisations, especially those that work in major hazards.
(00:35):
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(00:49):
Enjoy the episode. If you have any feedback, we'd love to hear from you.
Gaye Francis (00:55):
Good morning, Richard, and welcome to another podcast.
Richard Robinson (00:58):
Morning Gaye. We're just rolling on from the previous one, which we've never done before.
Gaye Francis (01:03):
That's all right. We thought we'd talk about regulations and licence to trade and the difference between the two and some of the confusion and the difficulties that it's causing for organisations, especially in the major hazards facilities. And the difference between that. So I guess where do we start?
Richard Robinson (01:26):
Well, I guess I'll explain what the issue is. Particularly this flows from the WHS legislation and particularly since the WHS legislation is the enabling legislation for major hazards and high risk work generally. And an awful lot of regulation has been made around this. Now, the difficulty you have is that the WHS legislation basically has a hierarchy of two in its hierarchical controls. You've gotta eliminate risks to health and safety, and if you can't eliminate them, you've gotta reduce them all so far as reasonably practicable.
(01:55):
But then when you go and look at what the regulators are doing, they're all using this risk-based approach. And particularly, for example, if you consider the hierarchical controls of most jurisdictions, most of 'em have got six (hierarchy controls). They talk about elimination, which is obviously the highest one, but then they usually go through substitution, isolation, engineering, administration, and PPE. I think that's one that's about six.
(02:17):
Now, the difficulty there is that the legislation's clear the hierarchies too. Eliminate or minimise, yeah. When you act as an expert witness, the thing you find out fairly fast in which we've always done and all the barristers and all the expert witness cases before all the Supreme Courts, which we've done these cases before, it's broken into three. You eliminate, you prevent it from happening. And if it does happen, you then reduce the scale of the outcome.
Gaye Francis (02:42):
Which is mitigations.
Richard Robinson (02:44):
Which is mitigation. So there's crash-worthiness in the cars and airbags, whereas for elimination is let's not have have cars and road at all. And prevention would be Elon Musk's self-drive cars because you don't have to rely on people after that. We'll just keep you away from the accident althogether.
Gaye Francis (03:01):
I guess what Richard's trying to say is the engineering aspect of hierarchy controls can work in all of those three. It can eliminate the hazard, can prevent it from happening, and it can mitigate the consequences. So it never quite made sense to us that hierarchy control of six or seven, because engineering could fit into a number of places depending on what you were talking about and what the control was.
Richard Robinson (03:27):
Well, it always did. That was one thing. I've never; it's never made sense to me why engineering was deleted from those other ones. I could never figure out why that happened. But from the point of view of the judiciary, it's only in three categories anyway. Now, the only jurisdiction we're aware of that's sort of got three categories is Queensland. Victoria's got four. Western Australia and New South Wales prefer the six, as does Comcare (Federal Government). Although I have noticed in New South Wales, they've been looking at obviously the Queensland version of three. But even that doesn't quite line up with the...
Gaye Francis (03:59):
Because they've still got substitution isolation engineering in that middle box. That level two. And then they sort of put their admin and their PPE in the lower level of a level three control.
Richard Robinson (04:10):
But the real point about this, and this is from the point of view of being expert witnesses, what this means is that in order to get a license to trade, you've gotta satisfy your regulator. So your regulator says, I want you to do these things, or they ask you to do prepare safety cases in certain ways. So you do all these things. But if you are filing that hierarchy control, that's very likely to be not consistent with the hierarchy control as articulated by the legislation.
Gaye Francis (04:35):
And I think a lot of the regulators are actually specifying in some of those safety cases and in those requirements of boards that the process is actually in line with ISO 31000, the risk management standard. And so not only are the hierarchy controls at odds with the legislation,
Richard Robinson (04:54):
And the common law as interpreted by expert witnesses,
Gaye Francis (04:57):
But also the process is in contradiction. So you've got organisations spending a whole lot of extra time doing something to get a license to trade, which doesn't necessarily meet their legal and their legislative obligations.
Richard Robinson (05:12):
Obligations.
Gaye Francis (05:13):
<laugh>, thank you. I was a bit tongue tied there for a minute. Um, so it's creating a whole lot of extra work for these people for very, very little value.
Richard Robinson (05:23):
But it's more problematic than that. You see if, and particularly in major hazards who've been using the quantified risk assessment approach. We're, we're about to, we're giving some pro bono advice to somebody at Melbourne, for major hazards, and the fact that, I think they, the major hazard regulated Victoria suddenly lifted their game and realised that it's all about consequence and the SFAIRP obligations, because remember, major hazards is enabled by WHS legislation. And so you get this silly situation that it really is bizarre. You're gonna have to spend all this money to get a license to trade, and then you have to do all again in order to make sure you satisfy your legal obligations under the common law and the WHS legislation or in Victoria, the OSH Act.
Gaye Francis (06:05):
And I'm not sure that the board and the senior executive understand that those two processes contradict each other.
Richard Robinson (06:12):
But they only understand when... Remember I told you about that... we were there for that rail operator. He was fretting about locos on Code Red days, diesel locos starting bushfires from the cinders from the stacks. And remember we had the lawyer on one side, the risk manager on the other side, and us from the middle, and we finished our little presentation and the GM looked to his lawyer and said, is what these two just said, right?
(06:38):
And the lawyer said, yes. That's the point at which he told us we were under privilege, and he turned to the risk manager and said: "Fix it".
Gaye Francis (06:46):
So from a top down viewpoint, and as risk advisors, I guess we always tell our clients to make sure that you satisfy your requirements of the legislation first...
Richard Robinson (06:54):
And get your lawyer standing with you once you're doing it.
Gaye Francis (06:57):
...to make sure that they agree with that. And then you do the extra parts, you know, by exception, that's required in the license to trade aspect.
Richard Robinson (07:06):
Correct. And you in that order.
Gaye Francis (07:08):
You do it in that order. And that sort of still brings you workload down, but if you do it the other way around or is two separate processes, you're potentially setting yourself up for a fall because you can come up with two very, very different results.
Richard Robinson (07:21):
Ah, but it's actually worse than that because if you've actually got yourself a risk manager, so-called who's taken responsibility for this thing, and therefore the decision maker, it actually creates a blockage to that understanding to the board. And that's been our experience of briefing the boards.
Gaye Francis (07:35):
Yes. That they don't have an understanding that there's two different requirements.
Richard Robinson (07:39):
You might recall we were just doing it for the very large international miner of which there were two on the planet from an Australian perspective, and we weren't allowed to speak to the board or senior management until the lawyer confirmed that what we were saying was the way to do it.
Gaye Francis (07:53):
Mm-hmm. <affirmative>. So getting in engineers...
Richard Robinson (07:56):
We did 13 briefing sessions, I think, didn't we?
Gaye Francis (07:58):
We did end up doing a lot of briefing sessions for him, so he was obviously happy with what we were saying and happy for his troops to do it.
(08:07):
But coming back to that, you know, I think there is a misunderstanding or a lack of understanding between the two processes and the requirements of that. And engineers, and I guess the risk advisors in organisations have that responsibility to bump it up to the people that can make the decisions. We understand that organisations have to work within their regulatory framework, but it can't contradict the requirements of the legislation either.
Richard Robinson (08:34):
And that happens more often than you might believe. So it's back to the original purpose of this. You need to do two things. You need to satisfy your duties, your governance duties under environmental, corporations law, WHS legislation, the mind of the corporation via the CEO
Gaye Francis (08:55):
And the board
Richard Robinson (08:56):
and whatever the organisation is. And in addition to that, you need to satisfy your regulator in order to get a license to trade. As it's been pointed out in the past, you know, being a board member and being in jail is not a good result.
Gaye Francis (09:12):
No. So we hope you found that chat. Interesting. We've got a few more chats that we will roll out over the next couple of weeks. And if you've got any comments or questions and other ideas, we're happy to hear.
Richard Robinson (09:27):
One of the points we're just having this chat, obviously, and we hadn't particularly planned this because it had been our experience that Gaye and I have these conversations and this office about various points sometimes to Gaye's surprise...
Gaye Francis (09:39):
Some random discussions, yes, do happen to in our office, Richard.
Richard Robinson (09:42):
Yes. But it actually is directed at critical issues that in governance terms that organisations have to live with.
Gaye Francis (09:51):
And you have to deal with both of 'em. You can't just satisfy you know, you need both, don't you? You need to be able have your legislative requirements met, but you also have to have your license to trade. So managing and balancing those two things in an effective and efficient way is a big battle for organisations.
Richard Robinson (10:11):
And I have to say, it's been our experience too, when you're working with clients where they've just been trying to satisfy the regulator, ignoring the legal stuff, it actually doesn't work long term. You just run into a wall.
Gaye Francis (10:21):
Mm-hmm.
Richard Robinson (10:21):
But anyway.
Gaye Francis (10:23):
All right. Thanks for joining us. Have a great afternoon.
Richard Robinson (10:26):
Thank you.