Estimating Risk and Defining Controls
Transcript of Estimating Risk and Defining Controls
Estimating Risk and Defining Controls
Product Liability - Module 3
Our risk control service is advisory only. We assume no responsibility for management or control of customer safety activities nor implementation of recommended corrective measures. The illustrations, instructions and principles contained in the material are general in scope and, to the best of our knowledge, current at the time of publication. No attempt has been made to interpret any referenced codes, standards, or regulations. Please refer to the appropriate code-, standard-, or regulation-making authority for interpretation or clarification. Only your policy or contract can give actual terms, conditions and exclusions.
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Our Session Objectives:
Explain the unique
comparisons and uses for common risk
estimation techniques used for product design and safety
Recognize the role of consensus
standards and where/how they affect
liability defense positions
Explain the role of good
document retention and quality controls affecting overall P/L
risk
Identify ways to carefully
examine your current product line(s) for
related risk factors and develop a risk control
strategy
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Your Quest-
Ultimately, your quest is to reduce risk, to:– the number of preventable incidents,– your vulnerability to liability,– ‘acceptable’ and tolerable levels by estimating risk,– increase profit potential, and, – create defensibility.
What is RISK and how do you ‘estimate’ it?
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Session ‘Rules of Conduct’
Any liability risk strategy involves legal matters that are often intricate.
– This is NOT legal advice- we are NOT attorneys.– Subject to Statute, Case Law, Interpretation– Subject to Jurisdictional nuances: of your supply chain players, service
providers, and that of your customersFocus on “Best Practices” and concepts
ALWAYS consult your attorney!!!
Product Liability is ALL about winning YOUR case!
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A Comprehensive Product Safety Management System
Management Directive
Policy
Responsibility, Accountability,
Authority
Financial and Technical
Resources and Support
Product Safety Management
System Reviews and Audits
Design
Product Safety Team
Design Hazard Review
Design Standards
Reliability Testing
Manufacturing
Supply Chain Mgmt. -
Contracts
Quality Control
Document Control, Record
Retention
Marketing & Sales
Product Communications, Instructions, and Warnings
Distribution Chain Mgmt. -
Contracts
Marketing Guidelines and Sales Training
Post-Sale
Customer Service, Returns,
Triaging Complaints
Warranty Mgmt.
I idIncident Response, Defense, Evidence
Preservation
Recall, Field Modification
Plan and Mgmt.
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Estimating Loss Potential from Product Risk
The actual design of a product is one of the most important criteria by which product safety is judged.
Design functions have greatest control BUT also greatest risk!– Initial Design– Design Review– Modifications, Changes, Updates– QA/QC – Testing and Inspections– Post Sale Response Actions(?)
Foreign outsourcing of design does not reduce the liability of the U.S. based producer / seller…– Unless the manufacturer has U.S. based assets.
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Product Safety Design Considerations
Ensure product design with:– Applicable laws & regulations (CPSC, OSHA, etc.). – Current consensus standards (ANSI, ASME, ASTM, etc)
• Perform a literature search for safety/quality standards that may apply Be aware of what your competitors are doing!Examine the environment in which the product will be used:
– Remember foreseeability, abuse/misuse and intended uses– Consider intended product users & unintended users or
bystanders.– Analyze instructions, warnings, maintenance & sales materials– And impact of product at end of its useful life
Use time-tested risk assessment techniques.– Examples - Checklists, What-If, R3, FMEA, HAZOP, Fault Tree,
etc.– Consider Human Error - not only product hazards!!
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It’s Your Turn
Does your organization use some form of risk assessment technique?
A. Yes, we have a formal programB. Yes, but not consistentlyC. No
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Some Common Examples of AcceptedRisk Assessment Techniques
Checklist– Purpose; inventory of items to examine by each team member, used as a
‘think sheet’ where it can amended or items removed each time used.What If?...
– Purpose; asks a series of causation and possible outcomes from contemplated scenarios of expected loss, very sequentially based
R3
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Some Common Examples of AcceptedRisk Assessment Techniques
Others often used to dive deeper into multiple causation with more diverse and complex uses-FMEAHAZOPFault Tree
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Defining Vulnerabilities: What To Contemplate Using Risk Assessment Techniques
What is the product function? What is it designed to do?– Control something– Direct or communicate, transmit data, automate, etc.?
Are there other services or extensions of the product of concern?What are implications of failure modes?
– Who will be the exposed population or property?– Catastrophic vs. F/L/S models?
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Using a Checklist –Some Common Topics and Questions
• AccidentalAcceleration• UnintendedChemical Reactions • Shorts, unexpected exposure, waterElectrical Systems• What about contact with other products.Explosives• At unexpected temperaturesFlammability• Even if user opens, controls failHeat & Temperature• Jammed valves, high heat, sudden releasePressure• Do cell phones cause brain cancer?Radiation• Even when crushed, disassembled?Toxic Materials• Extended exposure and use?Vibration & Noise• Looking for potential misuse and abuseMiscellaneous
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Example *Checklist Questions –For Mechanical Hazards, Consider…
Sharp edges, points, etc.?Unguarded pinch points, rotating / moving gears, belts?Critical fasteners secured?Safe limit stops provided to prevent over-travel?Handles where frequent lifting required?Equipment labeled with rated load capacities?Good stability designed, will not fall or collapse?
*2nd Edition, Product Safety Management- Willie Hammer, ASSE Publications
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Checklist Questions: A Close Parallel to “What If”?
A Case in Point:– Operator killed when fall into quench
bath trying to free stuck part.What failed to control?
– Consider mechanical failures, human error or judgment
– Effects that can be severe, what is the probability?
– Establish some feasible control recommendations
Consider ‘What If’ scenarios-– interlock fails or the gate
malfunctions?– part cannot be removed remotely?– someone circumvents
safeguards in place?
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Consider Software and Control Systems
What is being controlled? • e.g., machine operation, fluid power flow rates,
pressure, temperature, navigation, etc.– What redundancy and related safety features
have been designed to control risk?
Designs collaborate with OEM & manufacturing processes?
Any software applications not readily apparent?
Cyber-physical risk exposure?
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Residual Risk Assessment (R3TM)
Frequency of ExposureLikelihood of IncidentSeverity Potential
Using the step x step process here, apply the FLS ‘rating scale’ to quantify each hazard-
R3_GL Risk Rating Scale; Chainsaw Manufacturing Example
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Using R3 on a Product Risk Assessment
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Risk Assessment Assistance - Outside Liberty:
FMEA (forms, examples, methods)– Example completion and NASA presentation
FTA (Fault Tree Analysis)
HAZOP Study and elaboration on applications, trainer’s guide
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Selecting Options for Solutions and Controls:
When the assessments conclude, you’ll need a plan to address:Brainstorming ideasApplication of the hierarchy of controlsUsing engineering, product safety AND legal oversightCompiling all data and analysis to support your
conclusionsEstablish a working plan that details corrective actions,
upgrades, and decisions made on product safety
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Now Moving On To…Isolating Critical Aspects that will Improve Your Plan
Setting the barQA/QC and other ‘quality’ systemsOutsourcing the supply chainPost sale communicationsDocument managementRetail and service (product extensions of risk)Legal oversightOngoing self assessments
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Establishing Baseline Performance Criteria
When / how do you know your product is ‘safe’?– When others tell you…
• Social media and survey inputs from focus groups• Using third party audits specializing in product safety
– AIB, UL, ISO, other NRTLs or private specialists
– When comparing against others…• Competitors, like products, evolution in design and use, etc.• Consensus standards applicable to your product and/or materials used
– When your own data tells you…• Legal oversight in regular QA and PS meetings, etc.• Simulating ‘mock’ recalls and regular practice of crisis management• Performing and benchmarking self audits• To what extent your risk assessments give you a real perspective of PS• How responsive are customer complaints or real problems acted on?• What changes have been undertaken to improve user safety? Does it?
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Quality Assurance / Quality Control
Is NOT a safety process…– BUT effective QC essential for sound product safety.
Written methods dictates roles, responsibilities & means…– QC reports to the product safety committee for review & action– Product defects, warranty claims, repairs, customer complaints, returns
Include a strict method for selecting/qualifying service providers…
– Evaluate vendor’s capability to consistently meet required standards– Review supplier’s QC records & materials to verify conformance
Service providers and suppliers plan should contemplate…– Actions for discrepant materials or services.– Suspend non-conforming material from re-entering normal production– An inventory of critical components, parts, materials.– Inspect & record incoming material’s spec/standard conformance– Inform suppliers of intended use of their materials/services in your final
product and document responses.
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Foreign vs. Domestic Parts & Services
Ability to recover from overseas supplier is VERY difficult:
– Some European countries, but few– Requires a US based entity to pursue
• e.g., manufacturer’s repStandards differences require special protocol:
– Vendor qualification programs– QC verification of supplies and services– Backup vendors to assure reputable products– Testing and inspections before and after introduction into
the production processSpecify replacement parts and need for authorized
dealers or repair services.
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Post-Sale Service: Installation, Setup, Field Crews, Complaints, etc.
Document service rendered is consistent with safety and approved with user.
– Notify customer in writing if any unsafe conditions are observed
– Have customer sign document & keep copy
Provide customer with instructions/warnings where needed.
Evaluate subcontractors safety performance and specification conformance.
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What is YOUR Role Within the Supply Chain?
Transporting or Storage
Product Manufacturer
Design Functions
Material Suppliers
.Engineering Spec Testing
Other Service Provider,
Vendor, etc..
Fabrication and
Assembly
Component Part Maker
Final Product
Application
Field Service and
Setup
Marketing and E-
Commerce
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Managing Supply Chain Relationships
Analyze player’s positions, criticality of service or material– Are they a single source or are there others as backups?– How ‘safety critical’ is their involvement?– What happens if your specs are not met or precisely enough?– What quality and safety oversight helps judge vendor compliance?
Where do firm contracts exist and what protection is afforded?– Balanced risk apportionment is paramount– Verify additional insured protection and D & I provisions– Pursue and manage evidence of insurance coverage
Utilize legal counsel for contract prep, coverage gaps, and consistent protectionManage all processes
– Contracts, coverage, quality verification, insurance provisions, etc.
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Document Management:
Retention schedule is paramount!Define cycles for purge and retention is based on-
– Expected life of the product, – Evolution of product design modifications,– Position in supply chain, – Past complaint or problem history,– Discovery of certain proprietary documents and communications,– Email and other means of electronic data capture, and– Legal oversight and approval is vital!
Have a specific function and role assigned to trained and competent ‘manager’ of document control.
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Retail/Wholesale/Service:
In product POS (point of sale), consider risk posed by:
– Renting or leasing products; proper training , user PPE, instructions, warnings
– Merchandise meets applicable standards & testing specs • Will YOU be held liable for OEM defects? Any contracts in place?• Overseas or non-US sources for suspect product safety?
– What happens with damaged, returned or liquidated merchandise?
– Informal procurement and purchasing guide that fails to judge ‘safety’.
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Legal Review: Essential in Key Areas
Contracts: proceduresProduct safety programPoliciesWarranties (expressed and implied)Disclaimers and HH agreementsProduct & advertising literaturePL risks with acquisitionsE-commerce, cyber and GL
Coverage B Personal and Advertising Injury Post sale communications and recall
criteriaSupply chain roles and foreign riskDocument retention and e-discovery
rulesRegulatory and consensus standard
conformance
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RC 5280 - Product Safety Self-Assessment
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Contractual Risk Transfer: Tool Applications
RC 5349 Contractual
Liability Reference Note
Answers the Question: How defensible is a
policyholder’s standard contract form or
protections afforded by an executed relationship?
Application: Policyholder self-audit. Consultant provides educational
support; explains criteria and helps rationalize significance
of findings from self-audit.
RC 5800 Contracts
Manager – Risk Transfer Audit
Answers the Question: How defensible is a
policyholder’s standard contract form or a
portfolio of executed relationships?
Application: Policyholder self-audit. Consultant
provides educational support; demonstrates tool
functionality, explains criteria and helps rationalize
significance of findings from self-audit.
RC 5613 Contract Management
Process Assessment
Answers the question: How effective is a
policyholder’s contract management process?
Application: Consultant facilitated assessment or
Policyholder self-assessment.
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A Sampling of LMI References
• Developing a Policy Statement for Product SafetyRC200
• Product Liability - Best Product Safety Practices for ManufacturersRC5313
• Product Safety Design ReviewsRC5513
• Reasonable Foreseeable MisuseRC5419
• Record RetentionRC291
• Developing a Recall ProgramRC278• Product Safety Program AuditRC286 • Performing a Product Safety
Self-AssessmentRC5280
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A Starting Point…
Apply your risk assessments and product safety plan to focus on continuous improvement and risk reduction with:
– Design and Manufacturing
– Warnings and Instructions
– Marketing and Advertising
– Post-Sale Duties
The key is to understand your risk of liability & vulnerability to loss!
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Take Action!
Assess how your company manages
product liability exposure
Create a plan for continuously
improving control effectiveness
Reach-out to your Agent/Broker,
Legal Counsel and Liberty Mutual Risk
Control Services for help!
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Take advantage of Liberty Mutual
SafetyNet™ to reduce risk in your operation
24/7!
SafetyNet™
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Risk Control Consulting Center
Speak directly to a consultantwho can:
Recommend practical ways to mitigate risks and identify exposures
Offer tools, resources, and training on specific topics related to your business
Use videos or photos to analyze exposures and help identify controls
Help you implement safety protocols
Assist with SafetyNet sign-up
Our consultants can answer your questions, such as how to reduce slips and falls, how to prepare for
natural disasters or about state specific requirements.
M-F 8am-8pm ET
CONSULTING CENTER
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Questions and Comments
Check our training schedule regularly so you don’t miss a learning opportunity