Criticality & Control and Pink Elephants

Season 8, Episode 1

In this first episode of Season 8, due diligence engineers Richard Robinson and Gaye Francis look at "criticality and control", starting with the pink elephant problem: Why organisations that successfully prevent bad outcomes often end up defunding the very risk functions responsible for that success. 

During their chat, they unpack the Port of Auckland conviction and what it reveals about the gap between Australian and New Zealand WHS enforcement, a local government case study on engineering versus insurance priorities, and why short-term commercial thinking clashes with the long timeframes in real risk management demands. They close with a preview of what's ahead this season, plus a few early thoughts on where AI does — and doesn't — belong in risk practice.

Timestamps:

• 00:36 – Season 8 introduction

• 01:07 – Port of Auckland conviction and NZ vs. Australia WHS enforcement

• 03:23 – Season 8 topics ahead

• 04:57 – The pink elephant story

• 07:47 – Local government case study

• 09:07 – Short-termism vs. long-term risk

• 09:41 – Bushfire risk and generational memory

• 12:01 – Closing thoughts on AI

If you’d like us to cover a specific topic or have any feedback we’d love to hear from you. Email admin@r2a.com.au.

For further information on Richard and Gaye’s consulting work with R2A, head to https://www.r2a.com.au, where you’ll also find their booklets (store) and a sign-up for their quarterly newsletter to keep informed of their latest news and events.

Episode transcript

Megan (Producer)  00:00

Welcome to Season 8 of Risk! Engineers Talk Governance. In this first episode of the season, due diligence engineers Richard Robinson and Gaye Francis discuss the season's theme of criticality and control and pink elephants. We hope you enjoy the chat. If you do, please support our work by giving us a rating and subscribing on your favourite podcast platform. And if you'd like more information on R2A, our newsletter and resources, or have any feedback or topic ideas, head to the website www.r2a.com.au.

Gaye Francis  00:36

Good morning, Richard. Welcome to episode on e, season eight.

Richard Robinson  00:38

It's a bit of a surprise, isn't it?

Gaye Francis  00:43

It is. It is. This season, we're going to talk about criticality and control. We've had a bit of a brain dump of some of the things that we might talk about, and so we'll just run through those today and do a little bit of an introduction on some of the topics. But we're going to focus on pink elephants today.

Richard Robinson  01:07

Well, that was an introductory sort of thing, just to explain. And this was part to do with the fact that it sort of puzzled us a bit. You know, we had that case in New Zealand, which has obviously got senior management a bit concerned, where the managing director of the ports got convicted.

Gaye Francis  01:22

Yeah, Port of Auckland.

Richard Robinson  01:23

Port of Auckland, and that conviction has been upheld on appeal, which has caused a fair bit of well concern in a legal sense. Even though somebody died, so obviously it's a pretty serious matter.

Gaye Francis  01:34

Yeah, I think the thing there is though that there was no criminal manslaughter provision, so he's been fined, and the individual's been fined. So there's been no jail time, though.

Richard Robinson  01:44

No, but I think that could have been done if they had so chosen. The judicial court had chosen to do so.

Gaye Francis  01:49

Right.

Richard Robinson  01:50

What what puzzles us a bit, the (New Zealand) started their legislation in 2015, and the way it works is that the Kiwis  they have a no-fault accident compensation system, and so they never have much case law with regards to common law for workers' comp claims and things like that. Where Australia had this huge amount of case law, and so I think we all had an expectation when the WHS legislation came into Australia, or most jurisdictions around 2012, we'd expected that there was a reasonable chance there would be some prosecutions, and it doesn't seem to have happened. And it's been a bit of surprise to us that a smaller jurisdiction-I mean, they're based in the size of Victorian economic terms-seems to follow through the implications of their WHS or WHSA legislation a lot more robustly than it seems in Australia. And and we were wondering whether that was because of the corporate veil that you had that conference you attended with all the lawyers.

Gaye Francis  02:45

Yeah, so you know it still seems to be that some of the prosecutions that are happening in Australia, isn't it, that they're small to medium sized businesses and they're of lesser charges rather than the the higher penalty charges.

Richard Robinson  02:59

No, well, there's people like not smaller organisation being convicted, but not the big ones. Not not like the CEO of the Port of Auckland or something like that, which was a national impact. And I've got to say, it does seem to me that there's a consequence. That's the reason why the Kiwis look at modifying their legislation to say, for example, that if you comply with the the code of practice for whatever it is, then you've satisfied your duty.

Gaye Francis  03:23

And we talked about that criticality focus in one of our last podcasts last season.

Richard Robinson  03:29

Anyway.

Gaye Francis  03:29

This season focus on criticality and control, and I think bringing it back to those key parameters or those key focuses, and what people have to have to focus on, as I said. (Topics) we've got: Defense is cooperative competition is aggressive. Being is simple, thinking is complex, and change is hard - and we've definitely had some experience with that one. Again, hazard versus risk. I know we revisit this every time during each of our seasons of podcasts, but I think there's still some confusion creeping in, and that tendency to want to go down the risk characterisation and risk matrix type path of that's the way that you do risk assessment.

Richard Robinson  04:15

That's right, and you know for small day-to-day matters, where I don't think it's got any particular difficulty with that, but it's when you get the critical ones that you discount. You discount the the

Gaye Francis  04:26

likelihood.

Richard Robinson  04:26

You discount the likelihood so much that that you just say, well, we don't have to worry about it anymore.

Gaye Francis  04:31

Ethics and quality assurance. I think there's some really interesting observations around that. And today we might touch on just briefly the elimination option and the hierarchic controls within the elimination option. We've also got a thing about AI there. Richard's got a little bit of a bee in his bonnet about AI and his interest in that. My interest not so much, but I'm guessing I need to be educated on that.

Richard Robinson  04:57

Well, I mean, there are a number of aspects. They're giant inference engines rather than AI, I think, presently. I mean, I muttered I did that brief course the University of Helsinki got on it, and then I read that book from Tom Griffiths, The Laws of Thought which comes after George Boole and Boolean logic and all those sorts of good stuff. So, Gaye, we might have an enlightenment. If anybody cares, we did have a sort of very stimulating conversation just prior to this podcast, we gave us sort of expressing certain concerns about what was being said. But anyway. Now the point about the pink elephants was this popped up. It came from a long time ago now. One of the large electrical distributors. For a little while, there was this little theory that what you should do is you should you should actually get consultants in, and you should share with the consultants the savings that the consultants might achieve by giving advice. So, for example, there were consultants giving advice on maintenance, and the theory was that if the maintenance bill could be reduced and the availability could be increased, then the incentive for the consultant, rather than just being paid a fee, was to actually take a share of the of that savings.

Gaye Francis  06:00

Yep

Richard Robinson  06:00

Then we got a letter from one of these electrical people wanting to do the same thing for electrical safety of the network. Obviously, I'm not a super commercial person because I promptly wrote back and said, guys, we would be delighted as a consulting firm to take on a sharing arrangement for your risk management. Basically, what we'll do is we know you've had a program to this point, and that that will have kept some of the bad things that could happen away. And so, what we'll do is we'll go on your program for three years, and we'll spend absolutely nothing on risk management. We'll sack everybody who does any kind of risk function there, and we'll keep half the money. And the end of that three years, we'll walk, and we'll leave you with whatever degraded state your system is in, and that's the point at which the big bad things will start to happen, because that's the way the world works. Smallish things start to happen, and then after a little while, those smaller things build up.

Gaye Francis  06:53

Turn into the bigger things.

Richard Robinson  06:54

Remember we talked about the ideal risk curve (Season 7), and that that is if it's a hyperbola, and that you know if you didn't do risk management, and it's the the integral of a hyperbola is the natural logarithm that that likely things starting to go wrong probably is going to grow as a natural growth curve. That's certainly mathematically correct. Whether the reality follows, I don't know. Anyway, I wrote this often, and the guy wrote back and said, thanks, we agree with your assessment. If that's what we did, we'd have a degraded network at the end of three years and cost us a lot. But this actually gives rise to the pink elephant syndrome, which we've come across quite a few times, right? And this is where it's you know they haven't had a bad event happen for quite a while, right? As an organisation, so say we're doing really well. At which point they choose to reduce their risk management function.

Gaye Francis  07:47

Yeah.

Richard Robinson  07:47

The classic case I saw on this was with local government a long time ago. Did a lot of work with local government in New South Wales, and basically you've got the preventative people, which is usually the engineers and the engineering department and so forth, and then you've got the insurance people, which are typically the admin people used to be when they had shire engineers and and town clerks and so forth. Now the town clerks are always responsible for the insurance side of things. So what happens if things are going badly, your insurance claims start rocketing up, and then you know insurance premiums start rocketing up, and then that side of the system gets really cranky. It says, right, all the what's going on? Let's get some preventative people in and stop these things from happening in the first place. But what happens if you do a good job over there? Then all the insurance premiums decline, and then after a while, everybody says, why are you spending all this money on these preventative systems, because we're not having the claims.

Gaye Francis  08:34

And I think the question was, what's your job? And the response was...

Richard Robinson  08:37

My job is to keep bad things from happening. I I keep the pink elephants away. The things you didn't want to have happen, and the bloke sort of looks at you and says, but there aren't any pink elephants around here. You sort of go: oh, hey, what a good job I'm doing. So, the problem is then you've got these preventative people, and you can't actually work out whether they're really...

Gaye Francis  08:38

Making a difference or not.

Richard Robinson  08:40

If they weren't there, you're pretty sure bad things would happen, but it's pretty hard to tell just how effective they are, and whether they're spinning the wheels or they're really achieving stuff.

Gaye Francis  09:07

Yeah, and I think that's where we are now. No one's taking that longer term. Everything's being looked at shorter and shorter terms, isn't it?

Richard Robinson  09:14

It's all about commercial quick returns.

Gaye Francis  09:16

And, you know, it's 12 months, 18 months, two years. But you know, when you're looking at some of these engineering projects and engineering organisations. You have to look 5, 10, 15 years.

Richard Robinson  09:26

And the big projects?

Gaye Francis  09:28

Are taking that long to do as well.

Richard Robinson  09:30

And I don't think there being any, shall I put it, the overrun on big projects doesn't seem to have improved in the last five or 10 years from our point of view or observation.

Gaye Francis  09:41

So it's really interesting that these things sort of go in peaks and troughs. You know, yes, there's a lot of effort put on it, and and I think probably we've seen that observing that in the WHS space as well. There was a lot of effort put in when the legislation first came out in 2012.

Richard Robinson  09:58

Yep.

Gaye Francis  09:59

And maybe until... I can almost say COVID that 2019/2020 and the last three to five years it started to lax a little bit and I'm just wondering you know is there going to be a big accident really soon?

Richard Robinson  10:16

Well, it may be the way the world actually works. I mean, maybe I'm getting more cynical as I get older, but you know, if a bad thing hasn't happened in a generation, we all forget.

Gaye Francis  10:25

We do,

Richard Robinson  10:26

And that's the case with bushfires in Victoria.

Gaye Francis  10:29

We were just talking about that, weren't we? The Black Saturday was 2009, so we're coming up to a generation - 17 years. h

Richard Robinson  10:35

So everybody's moved into the bush again. Now we have actually done a whole lot of things, and because we're on the Power Line Bushfire Safety Task Force, and you're on the committee, and those mechanisms pretty much disappeared. I mean, what I do find interesting every time one of these bad things happen, there's a particular mechanism, like the spreaders stopping conductors clashing. Well,  since that program went in I don't think fires from that mechanism happened.

Gaye Francis  11:00

But I think the reficials have only been installed in Victoria. It hasn't happened in any of the other eastern states.

Richard Robinson  11:05

Yeah, but fires from that source. But the problem with all this is that they're not the only thing to start bushfires. Kids with matches and hot bearings, you know, people trailing their trailer down the road, going wherever they're going, and they're pulling over while their bearings on fire. There are a lot of things that actually start fires, and unless you're actually not going to have bush that can burn, which I have to say seems difficult, then we're going to start fires. But they'll be less likely, and there's probably going to be a longer period between them.

Gaye Francis  11:34

Possibly, but the urban spread, you know, there seems to be more more people living in those urban spread on those fringes now.

Richard Robinson  11:40

We'll double the population of melbourne in what is it, 15 years or something astonishing?

Gaye Francis  11:45

Yes, they have to go somewhere.

Richard Robinson  11:47

Have to go somewhere.

Gaye Francis  11:48

Exactly. So that's sort of a quick overview of what we're going to talk about in season eight. I'm sure this will morph into other places as we go along during the season.

Richard Robinson  12:01

Judging on the prior conversation, AI is likely to pop up, and as I said, it's not really AI at the moment; it's something else. But you know, we're looking at putting small language models on our laptops and things like that.

Gaye Francis  12:11

Richard is looking at doing that. I am, but I've been

Richard Robinson  12:13

I'm slightly wary about it because loading a half a terabyte of something on your laptop, you've got to wonder who it could talk to and how it would do it, and when what you're actually trying to do is make it a secure system, so you don't have to keep talking to AI in the cloud.

Gaye Francis  12:27

Yeah, I think I'm a little bit more skeptical on how good this stuff is at the moment. So it is a tool in your toolkit, not the way to do it. But that's a personal opinion, and Richard and I'll have another discussion about that another time, but thanks for joining us. We hope you enjoy Season Eight, and look forward to seeing you next time. Thanks, Richard.

Richard Robinson  12:48

Thanks, Gaye.