Season 4 Wrap: Due Diligence as a Governance Process, Dam Safety & the Relevance of Due Diligence

In the final episode of Season 4 of Risk! Engineers Talk Governance, due diligence engineers Richard Robinson and Gaye Francis wrap up the key theme of the season of due diligence as a governance process. They also provide another industry example in Dam Safety, and discuss the relevance of WHS/OHS legislation and the state of prosecutions.

Key take-aways include:

•  The due diligence process is a governance process that focuses on high consequence, low likelihood events rather than risk management.
• Dam safety highlights how regulators focus on the worst-case scenario of a dam failure rather than likelihood.
• The due diligence process involves four key tasks: completeness checks, identifying critical issues, determining reasonable controls, and implementing a quality assurance system. 
• WHS/OHS legislations must be integrated across safety decisions. 
• WHS prosecutions seem to be more prevalent in jurisdictions where it’s been in place a while, with regulators more likely to prosecute smaller to medium-sized organisations due to the increased likelihood of winning.

For further information on Richard and Gaye’s consulting work with R2A, head to https://www.r2a.com.au.

Gaye is also founder of women’s safety workwear company Apto PPE if you’d like to check out the garments at https://www.aptoppe.com.au 

Look out for Season 5 coming soon!

Transcript

Megan (Producer) (00:01):

Welcome to Risk! Engineers Talk Governance. In this episode, the last for Season 4, due diligence engineers, Richard Robinson and Gaye Francis chat about the season's overall theme of due diligence as a governance process across industries. They also provide another example in Dam Safety and discuss the relevance of WHS/OHS in legislation and prosecutions.

(00:30):

If you enjoy listening to our podcast, please give us a rating and also don't forget to subscribe on your favourite podcast platform. If you'd like more information on R2A's work or have any feedback or topic ideas, head to www.r2a.com.au. We'll be back for season five in 2025!

Gaye Francis (00:52):

Hi Richard. Welcome to the wrap up of season four. Forty episodes down, can you believe it?

Richard Robinson (00:58):

It's very hard to believe, Gaye, now that you mentioned it.

Gaye Francis (01:02):

Season four we focused on some industry-based case studies or examples of which we've applied the due diligence process to. And I think one of the outcomes is that the due diligence process is a governance process. It's focused at the...

Richard Robinson (01:23):

High consequence, low likelihood things. That is, not at risk.

Gaye Francis (01:27):

Not at risk.

Richard Robinson (01:28):

And therefore does not follow the risk management standard.

Gaye Francis (01:31):

And when we use the word risk, we mean the appreciation of consequence.

Richard Robinson (01:36):

Simultaneous appreciation of likelihood and consequence.

Gaye Francis (01:38):

Okay. Thank you for finishing my sentences. <laughs> We've been doing a lot of these, haven't we? So I guess the way to bring it all together in this particular episode, and we've got a couple of other observations that we've had over the last few months or so, is maybe to use Dam Safety as an example.

Richard Robinson (01:57):

Indeed.

Gaye Francis (01:58):

And the due diligence process, the four key areas that we look at. The four key tasks are: Completeness check, what are the credible critical issues? What are the controls you can put in place in the circumstances? Which ones are reasonable? And then a QA system to make sure that the ones that you agree to are sustained.

Richard Robinson (02:17):

And the Dam Safety people are pretty clear on this. Dam breaks is the (issue) that motivates them the most. And so they look at the worst case flood that could result from a total dam break. And they don't really care about likelihood. They're just saying, if that happened, how bad could it be?

Gaye Francis (02:30):

And that takes into account a whole lot of different things, doesn't it? And we probably touched on it in the bushfire episode that we did, and it's really about the vulnerability.

Richard Robinson (02:40):

Correct.

Gaye Francis (02:40):

Are there people exposed to the potential flood from this dam?

Richard Robinson (02:44):

And then in that case, what are your options and what's available to you and in the circumstances, what's reasonable? And that's where the mechanisms by which these things could happen become particularly important.

Gaye Francis (02:55):

And ANCOLD (Australian National Committee on Large Dams), I think interestingly, although they still use the term ALARP, I think, which we've had many discussions with the Dam Safety people, but what they have done is they've sort of got a graph, but it's got an upper limit to where it becomes prohibitively dangerous, I guess. But what they've done is they've taken away that lower limit. There's no lower limit to risk.

Richard Robinson (03:16):

Correct. So they actually basically stopped using target levels of risk and safety for the most part. I mean, if you conclude something's prohibitly dangerous, you've got to stop it. Now, precisely how you come to that view is an interesting question. But if you've got any doubts about the dam, basically if you've got doubts about a dam, you pretty much start draining the dam if there is things and people at risk.

Gaye Francis (03:34):

And I think that was one of the questions we had. We had one of the regulators come in and there was a dam above a community and it was higher than the houses.

Richard Robinson (03:42):

The water level was higher than the roof of the houses down immediately below the dam. And the dam safety regulator turned up and was looking at it and looking at what the policemen looking at that saying, how the hell do those houses get there? What planning scheme let that happen?

Gaye Francis (03:56):

Which we have touched on again in this season. Bushfire again, and also major hazard facilities and that planning. So like everything, the due diligence approach, it's not a cookie cutter approach. You can apply a similar process, but it's about actually thinking the things through that are actually relevant to your particular circumstances.

(04:22):

I gave a talk at a Co-op Federation leadership conference or workshop recently in the last month. And they were mainly co-op retail facilities, but they also provided services like crop dusting and water haulage and things like that. So they had a whole range of things that were potential issues for them. But one of the chairs came up to me after the session and said, okay, I get it now. It's all about the process. And documenting the process in a diligent manner to say that we've actually thought through the things that we could be exposed to, the things that we can do, and then making sure that we put those in place.

Richard Robinson (05:06):

Well, we've discussed this many times. It's not about being right, it's about being diligent. And you can always be diligent, but you can't always be right. And that's the point.

Gaye Francis (05:14):

I think one of the other interesting things that has come out of this season, and we did another podcast of it, was the relevance of the WHS and OHS legislation.

Richard Robinson (05:24):

Yeah, it's driving everything. I mean, what I told you, we had, I think we mentioned in a previous podcast, but I had that discussion with a fellow doing a PhD on how security and fire integrated together. And we had a security guy and me and he was talking to both of us, and he asked the question at the end and both the security advisor and I looked at each other and said, it's got to be harmonised and it's all got to go, and it's all driven by the Work Health and Safety legislation. And this researcher was: You both agree on this point? Because we were from completely different backgrounds with completely different understandings. He was an ex-military fellow who'd gone into security. And I was a fire engineer, factory mutual trained HPR (high protective risk) engineer, and we were of one mind. And I think he (researcher) was really genuinely surprised.

Gaye Francis (06:06):

But even when we work with organisations, I don't think they sort of think that the WHS legislation's almost off to the side. Safety is still being thought about in a silo almost.

Richard Robinson (06:17):

So fire is protection. You may recall when we did Q1, perhaps I shouldn't say these things, but the fire engineers were so relieved when the due diligence engineers turned up and started speaking WHS.

Gaye Francis (06:27):

Yeah. So WHS and safety should be business as usual -- should be integrated into all of these aspects. And I think it does allow all of those things to be brought together in an integrated sense.

Richard Robinson (06:40):

Yeah. The other thing which we were going to talk about, which you were particularly going to focus on was what we discovered about prosecutions. Because a lot of WHS prosecutions arer going on, and it does seem that the longer the state has had the legislation in place the more likely they are to prosecute. So Victoria's got about 10 years on every other jurisdiction. We're about double the prosecutions from what I've seen on the various websites. But we sort of discovered this thing following from that conference you attended last year and talking to an ex regulator from Western Australia.

Gaye Francis (07:09):

And the information that came out of that, I guess, was that they're typically prosecuting small to medium sized organisations.

Richard Robinson (07:19):

Because it's more likely to be successful.

Gaye Francis (07:21):

Because more likely to be successful. And there's a couple of reasons for that. The distance between the board members and the senior executive management and the people that are working on the ground is a lot smaller, distance wise in smaller, medium sized organisations. Where it's quite large still in larger organisations. So the notion of the corporate veil is still working.

Richard Robinson (07:45):

The big organisations can hire bigger, better lawyers and presumably more expert witnesses. And it's just harder to get them.

Gaye Francis (07:54):

And we sort of tried this proposition, I guess, at one of our courses quite recently, and, you're right, there was an ex regulator from WA there, and they said, that's exactly what's happening. They said what they're trying to do is they're trying to make examples of organisations and it's easier to prosecute and successfully prosecute.

Richard Robinson (08:17):

And that flows onto the comment we made previously, and it's a source of frustration to us. There are two types of regulators, those who think that the number of successful prosecutions is a measure of success, and those who think the number of successful prosecutions are a measure of failure. And it does seem this decade has turned into the decade of the number of successful prosecutions are a measure of success.

Gaye Francis (08:37):

Which is really interesting. And there may be a couple of other reasons for that. Regulators seem to be having less technical expertise in their organisation.

Richard Robinson (08:45):

I don't think they can get the people. I don't know that that's by choice by the way,

Gaye Francis (08:50):

But that's another observation. And one of the ways that they can do it is by doing that sort of compliance audit.

Richard Robinson (08:58):

Yeah. If it doesn't compliance. We've got you.

Gaye Francis (09:01):

So as a full wrap up of this season, we've talked about a number of industries. We've talked about dam safety today and bush fires, major hazard facilities. We've talked about rail and we've talked in another episode, we talked about electricity industry. So the due diligence process is really, really useful for those high consequence, low likelihood events. And if you look at all the controls that could be put in place and determine what's reasonable in the circumstances, what else can you do? You've been diligent and Richard's line: You can't be right all the time. Which engineers like to be.

Richard Robinson (09:41):

Well, they try to be!

Gaye Francis (09:44):

But you can be diligent. And I think this governance and due diligence approach is asking people to think about the key issues of concern and make sure that they're being managed properly.

Richard Robinson (09:56):

Well, that was basically what I was retained to give that expert witness advice in the Cuddle Creek fire. And what I was asked basically: Was the process that the defendant undertook reasonable in the circumstances,

Gaye Francis (10:08):

And what else could you do?

Richard Robinson (10:09):

That's basic point.

Gaye Francis (10:11):

We've talked about a lot of other sessions that you're not going to stop all things going wrong.

Richard Robinson (10:17):

You're not going to stop all bushfires, it's not going to happen.

Gaye Francis (10:19):

No, but was there anything else you could do? And I think that's when people get cranky.

Richard Robinson (10:25):

Reasonably can do.

Gaye Francis (10:26):

Reasonably can do. When people get cranky, when there's something that could have been done, if it had been done, would've stopped it going wrong or would've mitigated the consequences in some way.

Richard Robinson (10:37):

Yep.

Gaye Francis (10:38):

So thank you for joining us for season four and we will be back with season five very soon. Thanks everyone. Thanks Richard.

Richard Robinson (10:45):

Thanks everyone. Season five, huh? <laughs>