Torqued: The business case for SMS

 - January 24, 2007, 9:12 AM

Last month this column looked at safety management systems (SMS) and considered why the industry is embracing them. This month focus shifts to the key elements of such systems and their contribution to the industry’s livelihood.

An SMS is essentially a risk-management system. The basic premise of SMS is that there are many indicators, or precursors, for every accident that happens. The goal is to recognize these precursors and to preempt the accident.

Risk is the expected loss that can be caused by an undesired event and the probability of the risk’s occurring. Risk management is the process of measuring risk and developing strategies to manage it.

These strategies can include transferring the risk (to insurance carriers, for example); avoiding the risk; reducing the negative effect of the risk; and accepting the consequences of the risk.

Choosing one of the strategies does not preclude you from employing another. In fact, often these strategies will be combined to varying degrees. Moreover, the individual strategies are not an all-or-nothing proposition and therefore are often partially deployed. Finally, risk-management decisions must be made by the organization’s leadership.

Risk is evaluated in the context of production (the product or service that is the objective of the organization) versus protection. Because there are hazards in aviation, a safety risk is inherent in production. This risk necessitates the creation of a protection system for users and stakeholders, which is a responsibility of the aviation service provider (most directly) and the regulating authorities. This system is fundamentally an SMS.

The management of an organization must strike the often fragile balance between production and protection: too much production can compromise safety and too much safety can compromise financial performance.

The purpose of a risk-management process is to identify and reduce hazards and risk associated with those goals. A widely used process, and one espoused in the FAA’s AC 120-92, includes an analysis of the system and tasks, identification of hazards, a risk analysis and assessment, analysis of the severity and likelihood of criteria, risk acceptance, causal analysis and implementation of risk-control procedures and a hierarchy of controls, assessment of residual or substitute risk and system operation.
SMSs are based on the principles of quality-management systems (QMS). One of the primary organizations that promotes quality is the International Organization for Standardization (ISO), a nongovernmental, international standards-setting body.

ISO-defined QMS principles include customer focus, leadership, involvement of people, process approach, systems approach to management, continual improvement, factual approach to decision making and mutually beneficial supplier relations.

Also at the heart of an effective SMS is culture, the values and norms shared by a group of people that influence the way they behave. Organizational/corporate culture sets boundaries for acceptable behavior and provides a framework for decision making within an organization. It is within this environment that a safety culture evolves.

The Four Pillars of SMS
As described in the FAA Advisory Circular, SMS is structured upon four components of safety management: policy, safety risk management, safety assurance and safety promotion.

Policy–Every type of management system must define policies, procedures and organizational structures to accomplish its goals. An SMS must have policies and procedures in place that explicitly describe responsibility, authority, accountability and expectations. Most important, safety must be a core value for the organization.

Risk Management–A formal system of risk identification and management is key to controlling risk to acceptable levels. A well designed risk management system describes operational processes across departmental and agency boundaries, identifies key performance indicators and regularly measures them, methodically assesses risk, and exercises controls to mitigate that risk.

Safety Assurance–Once policies, processes, measures, assessments and controls are in place, the organization must incorporate regular management review to ensure that safety goals are being achieved.

Safety Promotion–The organization must promote safety as a core value with practices that support a sound safety culture. This is achieved through training, communication and continuous improvement.

Aviation safety has improved much in its short history, but in recent years it has seemingly reached a plateau. The industry therefore needs to embrace new methods to further reduce the accident rate.

The purpose of SMS is to prevent accidents because accidents cost money in terms of insurance, lawsuits and replacement of equipment and assets. It is bad business to tolerate accidents. Crashes also have a cost in terms of public confidence. To be sustainable, any business must have the confidence of the public. That confidence would erode if the industry fails to maintain a level of safety that the public deems acceptable.