The Benefits Of Implementing Effective Hse Policies Commerce Essay

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This report highlights the benefits of effective health and safety policies and practises. It presents a case study company that outlines the importance of implementing a good and effective HSE policy which can be initiated in other small to medium sized oil companies.

The major result of the case study is that the case study company believed that improving health and safety was vital to operational risk management and business growth and as such went further to implement it. The key motivator for this initiative was the cost incurred by the company involving an oil spill incident in 2004.

It was also discovered that the case study company did not keep a systematic nor comprehensive record of the costs or benefits of the company's operations prior to the 2004 incident. This prompted a change of HSE policy that benefited the company in terms of increased productivity and reduction of employee absence.

2005

2006

2007

2008

2009

Personnel absent due to ill health and injuries %

35.00

32

28

20

10

Hospital bills incurred by company $

55,000

50,000

42,000

30,000

20,000

Company productivity%

55

58

62

69

74

The implementation and constant supervision of HSE practices within an organisation will always be of benefit to the management and stakeholders as seen in the case of the CNC Oil Company; the case study company for this report.

NOTE

The CNC Oil Company, which is the case study company in this report, DOES NOT EXIST. This company was made up to highlight the benefits of implementing an effective HSE policy, demonstrating that good HSE practices are essential to the growth and productivity of businesses involving small to medium sized oil companies.

ABBREVIATIONS

SMOCs - Small to Medium sized Oil Companies

HSE - Health, Safety and Environment

SMO - Small to Medium sized Oil

ASSUMPTIONS

ALL FIGURES AND TABLES IN THIS REPORT WERE ASSUMED FOR THE PURPOSE OF THIS REPORT.

1.0 INTRODUCTION

Operational risks are associated with our everyday business lives in the oil and gas industry. Sometimes we take risks knowingly and other times, unknowingly. The likelihood of operational harm and disasters are influenced by the attitude to risk taken by employers and employees alike.

BACKGROUND

This case study have been prepared to help promote the responsibility for health, safety of lives and environment within the small and medium-sized oil companies (SMOC). The report will be taking a look at some of the positives that result from good and effective management of health and safety in the workplace.

This report cuts across-

The necessity to raise a case for health and safety improvements in order for the present day SMO companies around the world to become aware of the benefits in putting in place good and effective health and safety management

Reaching a whole lot of other small to medium-sized oil companies, making them aware that health and safety is infact good for business.

It is as important to see and plan for accidents, work related ill health and environmental hazards and destruction, as well as enjoy the benefit of effective health and safety management. Many oil and gas companies classified as small to medium sized fail to see this because they think it is too high leveled and are mainly concerned about the cost of risk management and prevention. Owing to this factor, there is a tendency to see a handful of fully worked up examples of cost and benefits of health and safety within the small to medium sized oil or gas companies.

AIMS AND SCOPE OF THIS REPORT

The aim of this report is to produce a case study that emphasizes the benefits of implementing health and safety policies and practices to small and medium sized oil and gas companies. A persuasive case study is subsequently put in place to highlight the management of specific risks and improved employee involvement in SMOCs.

2.0 DISCUSSION

It is extremely important to establish a business case for managing health and safety standards both for policy and practical purposes. Publishing clear business cases would very much make other companies try to implement and keep up safe and desirable working conditions. Looking at most major accidents occurring with the small to medium sized oil companies (SMOC) it is visible that these accidents happen due to ignorance of HSE policies and procedures and due to the low priority given to health and safety issues in these SMOCs. In Nigeria, the major cause for alarm is the increasing rate of poor occupational health and environmental hazards. These companies tend to neglect the importance of preserving the environment and turn their eyes from the effect this will have on the health of personnel and locals alike.

Highlighting the oil spill in a village called Oloibiri, in the Niger Delta region which occurred in June 2004 spilling approximately 20,000barrels of crude it shows clearly how much importance is given to this sector. The village of Oloibiri and its surrounding neighborhood have yet to recover from this spill which was actually an abandoned project of a major oil company but subcontracted to CDC oil company; a smaller contractor oil company for well shut-in (name of major oil company with-held for security reasons). The CNC Oil Company had failed to make use of standard shut in equipments and they had failed to carry out maintenance on their project neglecting simple HSE practices thereby subjecting this entire village and its surrounding neighborhood to this catastrophic condition. During investigation into the cause of the spillage, it was discovered that the subcontractors failed to use standard piping materials and also failed to carry out regular maintenance on the operation.

The Niger Delta region is constantly under incessant oil spill threat resulting from rusty sub-standard pipes that are being used by the contractor companies all in order to make more profit while neglecting their responsibilities in the department of health and safety and the June 2004 incident highlights this.

While the negative impact caused by CNC Oil Company's lack of responsibility is very visible, it is important to take note that there was not a committee that kept the company in check. It is either they did not exist or their Authority and power was perhaps, greatly undermined.

Operational and industrial accidents create a lot of distress and grief to all parties involved, from huge financial costs to negative publicity to which the subcontractor company can testify to. The suppliers, managers, local residents, shareholders employees and all other stakeholders are all interested and concerned when these industrial accidents occur since the oil company has to strike a balance between the different interests of these stakeholders.

Lessons are sometimes learnt the hard way. It may take a lot of reduction in employee work rate, increase in recorded absentees from work, reduction in clients, and bad publications to ring the wakeup call for the implementation of effective HSE policies which was the case with the subcontractor company.

3.0 LESSONS LEARNT AND CONSIDERATIONS FOR THE FUTURE

It is never enough to carry out extensive investigations on the safety records of most SMOCs. Many of these small to medium sized oil companies usually adopt general health and safety methods which can only be demonstrated by management systems but cannot be proven due to poor record keeping. They fail to review these general methods and tend not to improve their HSE policies as it affects their companies, or they may just choose to ignore safety standards like the case involving the CNC Oil Company in June 2004.

3.1 NATURE OF THE BUSINESS CASE

SMOCs do not generally do full quantitative cost - benefit analysis and it is therefore not clear if they need it to be convinced of the case in difficult financial terms (Antonelli, Baker, Mcmahon and wright, 2006). An interesting and significant point that unites the SMOCs and the larger oil and gas companies is that the smaller companies also take risk management very serious. They are motivated to improve the health and safety of their personnel when the benefits are presented before them but are not always in the position to invest heavily towards this.

The general key motivating issues are:

maintaining good reputation;

higher productivity - especially reduction in absence of personnel;

Containing cost of insurance;

Abiding by the HSE laws, hereby preventing the likelihood of local HSE organizations taking any kind of actions against them;

Meeting the demands of the clients;

Avoiding the cost of accidents and remedial approaches.

The case study company operates as a contractor company for larger oil companies. They provide services including well abandonment and shut-in operations. The perception of low health and safety risk in a company can drive clients to other companies with better track record in the HSE department to carry out their operations thereby increasing the need to implement good HSE policies in companies while bearing in mind that adequate time and finance is needed to achieve this in higher standards. The case study company in this report implemented new HSE policies which are regarded by organizations as an appropriate course of action to bring business benefits and health and safety improvement. (See appendix).

IDENTIFYING THE BENEFITS AND THE COSTS.

In any business, there is need to keep a sound record of company operations and HSE policies, as this is very essential to further improvements and growth of the company. The CNC Oil Company failed to keep this kind of record before the incident occurred in 2004 and were faced with the consequences. Many of the SMOCs in Nigeria do not have a predefined budget for health and safety in their initial stages because they did not feel the need to justify such information. This makes it difficult for them to track back how much have been spent or gained in relation to good and effective HSE practices and how to improve further their reputation in this aspect. The Table below depicts the record of CNC Oil Company after the 2004 accident.

2005

2006

2007

2008

2009

Personnel absent due to ill health and injuries %

35.00

32

28

20

10

Hospital bills incurred by company $

55,000

50,000

42,000

30,000

20,000

Company productivity%

55

58

62

69

74

Table 1. Summarised record of CNC Oil Company in 4years

As represented by the table above, CNC Oil Company benefited from the introduction of a new HSE policy and strict adherence to the policy by both the employers and the employees played a vital role in the success they have incurred as at 2009. Therefore, Presenting the financial benefits in terms of reduction in absence rates, business interruption by locals due to accidents and operations that impact negatively to the health and environmental safety of their lands and families, productivity, better reputation, more clients etc, may help alter the attitudes towards health and safety, showing that it is not simply a compliance or personnel welfare issue (Antonelli, Baker, Mcmahon and wright, 2006).

CONSIDERATIONS FOR THE FUTURE

HSE contractors and departments in various companies must emphasize the importance of improving the health and safety standards of employees and also work out policies to safeguard the surrounding environment in order to contribute to the growth of the company and the community where they are situated.

With this in mind, considerations can be given to the following in the future:

In the case of the Nigerian oil spill in the Niger delta region, a health, safety and environment governmental body should be put in place and given adequate tools and power to clamp down on companies that do not regard or follow health and safety rules and regulations in their operations inside the Nigerian border;

Small to medium sized oil companies should evaluate the impact of the case studies - who they work for, who they don't work for and, Baker, why (Antonelli Mcmahon and wright, 2006);

Educate and train staff and company contractors about the influence that good or effective and bad or in-effective health and safety practices may bring to the company;

Consider the potential for drawing on the extensive knowledge and experience of the health and safety inspectors to identify small to medium sized oil companies who manage health and safety well (Antonelli Mcmahon and wright, 2006);

Keep track of the costs or benefits that health and safety has on the operations of the company and try to improve the values from previous years;

It is essential that the communities where these companies carry out their operations are well taken care of. The livelihood of the locals usually depends on their environment and health; hence it is essential to take into consideration ways to improve the lives of the people while identifying possible hazards that may harm their lives.

4.0 CONCLUSION

SMOCs should operate effective HSE policies to help them meet safety objectives, productivity targets and improve business opportunities. Regular records should be kept to help identify areas of improvement in the company and provide a track record for clients and all shareholders. Investing in effective HSE policies should be one of the major businesses of SMOCs so that they can attain set standards and objectives, and enhance their reputation. There are lots of business benefits associated with implementing effective HSE policies and encouraging strict adherence to these policies. These benefits should be exploited by the SMOCS.

REFERENCE

A. Antonelli, M. Baker, A. Mcmahon, M. Wright - Six SME case studies that demonstrate the business benefit of effective management of Occupational health and safety. Crown, 2006.

BIBLIOGRAPHY

BOC - Operating an effective health, safety and environment policy. Further reading can be found at

http://businesscasestudies.co.uk/boc/operating-an-effective-safety-health-and-environmental-policy/conclusion.html#axzz2Cz7sRYST. (Website assessed 18/11/2012)

Frank W Bond, Paul E Flaxman, Sharon Loivette - A Business case for the management standards for stress. Crown, 2006.

H. Hoel, K. Sparks, C.L. Cooper. - The cost of violent/ stress at work and the benefits of a violence/stress- free working environment. Geneva: International Labour Organization 2006.

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