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1© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
by David Patrishkoff
www.CascadeEffects.com
Could ISO 31000 Risk Management Guidelines have Saved the Titanic?
The Tit
2© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
• Choose you objectives wisely
• The Titanic builder’s objectives were
to create a luxury liner at the lowest
costs, in the least amount of time,
and maybe even break the speed
record for an Atlantic crossing
• These were admirable goals but they
ultimately led to tragedy. The Titanic
followed ISO 31000, Section 5.5.1.b.,
by "taking or increasing the risk in
order to pursue an opportunity"
• They did so because they believed
their risks were not extraordinary and
could be controlled
• This is a common judgment error that
can end with unintended and
cascading consequences
ISO 31000 RISK MANAGEMENT GUIDELINES AND
THE TITANIC
The pursuit of blissful
objectives can end with
unintended negative
cascading consequences
3© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
• ISO 31000 (Risk Management) and
its supporting publications
encompass an impressive and useful
"to-do" list of risk management
guidelines to create and protect the
value of an organization.
• However, if an organization
selectively pursues some of the ISO
guidelines and ignore others, highly
undesirable events and tragedies
can occur.
• This is what happened with the
Titanic.
• ISO 31000, section 4.2, suggests we
align risk management efforts to our
objectives.
• White Star Lines, the Titanic
builders, fulfilled this requirement.
COULD ISO 31000 RISK MANAGEMENT
GUIDELINES HAVE SAVED THE TITANIC?
ISO 31000
Titanic Builders
4© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
The individual risk opportunities that Titanic pursued were not terribly
unusual, but collectively, they created an unforgiving perfect storm fueled by
three main linked cascading risks:
• Ship design shortcomings influenced by cost cutting efforts
• Rivet material quality flaws
• Vessel operation and evacuation mistakes.
THE PURSUIT OF OPPORTUNITIES SANK THE
TITANIC, NOT AN ICEBERG
5© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
ISO 31000 WARNS OF CASCADING AND
CUMULATIVE EFFECTS
• ISO 31000, Section 5.4.2, warns
us that "Risk identification
should include examination of
the knock-on effects of particular
consequences, including
cascade and cumulative
effects".
• Although, ISO lists thirty-one
potential risk assessment tools
to support risk assessment
efforts, their warning about
cascading cumulative risks is
stronger than their suggestions
of how to address these specific
challenges.
6© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
THE WORLD ECONOMIC FORUM WARNS OF
CASCADING RISKS
• The World Economic Forum,
in its 2014 Annual Global Risk
Report highlights cascading
and interconnected risks many
times as a serious threat.
• They also stated the need for
better efforts to deal with such
threats by supplementing
traditional risk management
tools with new concepts,
methods and tools.
7© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
WHAT ARE CASCADING RISKS?
• Cascades can be either
beneficial, neutral or destructive.
• We define Cascading Risks as a
series of interacting risks that
emanate from Leadership (Aces)
through the work culture (Kings)
and work processes (Queens)
that create bad performances
(Jacks) and negative feedback
loops (Jokers) back to
leadership.
• Leaders then either apply
learning's in creative ways or
ignore the cascade signals,
which can lead to failure and
disasters.
• Detailed Cascading Risk Analysis
can aid in minimizing such risks.
8© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
CASCADE #1 THAT THREATENED THE TITANIC -
INADAQAUTE DESIGN
• Titanic’s design was not unsinkable as was
widely publicized at the time.
• It had many so-called “watertight
compartments” but they were open at the
top, like an ice cube tray.
• It had far too few lifeboats, a result of cost
cutting efforts during the design phase. It
had a double bottom but it did not extend
up to the waterline, which would have
provided protection against a side-swiping
iceberg.
• This was a design flaw that was quickly
corrected on Titanic's sister-ship, Britannic,
which was still under construction at the
time of Titanic's sinking.
9© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
CASCADE #1 THAT THREATENED THE TITANIC -
INADAQAUTE DESIGN – cont’d
• Titanic's builders claimed that it
was constructed considerably in
excess of the Lloyds registry
safety requirements.
• Therefore they never saw the
need to seek Lloyd’s registry
approval.
• However, Lloyds disputed that
claim publically after Titanic
sank and made a statement that
the Titanic did not meet their
safety requirements.
10© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
CASCADE #2 THAT THREATENED THE TITANIC -
BAD QUALITY RIVETS
• Titanic required 3 million rivets to hold her together.
Archives tell us at that time there was a shortage of
riveters and the necessary materials to create high
quality wrought iron rivets.
• White Star’s competitors converted to 100% steel
rivets, which were much stronger than wrought iron
rivets.
• Titanic used steel rivets in the straight hull section
but not in the front hull sections, the area impacted
by the iceberg.
• Wrought iron rivets were easier to rivet by hand than
steel rivets in those sections.
• Recovery of Titanic's wreck from the sea floor
confirmed the low quality and brittleness of the rivets
in the impact areas.
• Higher quality rivets would have kept Titanic afloat
longer which would have saved more passengers.
11© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
THE FINAL CASCADE #3 THAT SANK THE TITANIC –
VESSEL OPERATION AND EVACUATION ERRORS
• Titanic was cruising near top speed, which was
very risky on a moonless night with no waves
through an area with active iceberg warnings.
• Just hours before the disaster, a Lifeboat drill was
cancelled by the Captain for no apparent reason.
• It was suspected that they were attempting to
break a cross-Atlantic speed record. That
recklessness and the collision with an iceberg
sealed Titanic’s fate.
• Her brittle rivets in the impact area popped off
and allowed water to rush in the hull at a very
high rate.
• The Titanic sank in less than 3 hours.
• 1,502 people perished after a disorganized
evacuation event filled the far too few lifeboats to
just 61% of their total capacity.
12© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
CONCLUSION
• Although, ISO 31000 attempts to protect us from ourselves
and the outside world, we cannot be selective in what we
implement.
• We need to follow all of the guidelines and even test areas
that we believe are safe. We must also heed ISO's challenge
to examine cascading and cumulative effects.
• Effective Risk Based Thinking must include Cascade Effect
Thinking.
• Over the last 11 years I have developed patent pending
Cascading Risk Management (CRM) techniques and tools that
can further contribute to this effort of identifying and mitigating
cascading and cumulative effect risks. Read more about Risk
Cascades at: www.CascadeEffects.com
13© Copyright 2014 - E3 Extreme Enterprise Efficiency® LLC – Patent Pending
AUTHOR BIOGRAPHY
• David Patrishkoff is President of E3 - Extreme Enterprise Efficiency® and
the Founder of The Institute for Cascade Effect Research®.
• He is a Lean Six Sigma Master Black Belt and the inventor of a Cascading
Risk Management Methodology (CRM), which has Patent Pending status.
• CRM can enable an organization to successfully achieve ISO 31000 Risk
Management compliance.
• CRM has many practical, analytical and gamified techniques that solicit
rigorous stakeholder inputs to help an organization build a common vision,
strategy and action plan for successful Enterprise Risk Management
implementations.
• David has helped clients from 60+ different industries, worldwide, to solve
their most serious strategic, profitability and risk issues that their own
experts could not solve.
• Prior to starting his consultancy in 2001, David held various worldwide
senior executive positions in the automotive and trucking industry.
• Author’s Websites: www.eeefficiency.com and www.CascadeEffects.com
• Author email: [email protected]