Within 40 days of the Deepwater Horizon oil spill disaster, BP’s share price had dropped by 51%.
Within 1 business day of the Brumadinho mine disaster in Brazil, Vale’s stock dropped by 24%.
Railroad stock prices drop dramatically if employee behavior or illegal activities result in rail disasters.
A 2010 study of explosions in chemical plants and refineries shows that stock prices decline 1.3% in 2 days and then a further 12% over the next 6 months.
Do you want that on your watch?
Not in those industries? Think about it – disasters and accidents can happen anywhere.
Society’s tolerance is shrinking when it comes to wrong-doing in cases of industrial accidents, particularly when they harm people or the environment. Profits do not matter more than people and our plant, yet companies don’t always behave that way. Increasingly more industrial incidents are resulting in criminal charges and conviction of executives and managers who were involved. That “involvement” includes negligence – failing to act when warmed or failing to take steps to even check on conditions, failing to provide the right training so accidents can be avoided … and more.
Proactive Steps vs Catastrophic Losses:
Man-made, avoidable disasters keep occurring and they usually involve equipment failing to perform its functions:
- Jan 2023 – TEPCO executives acquitted in Tokyo court 12 years after 2011 Fukushima nuclear disaster.
- Sept 2022 – Two Vancouver executives found guilty of involuntary manslaughter in West African Mine Disaster.
- Jan 2020 – Ex-Vale CEO charged with homicide for Jan 2019 Brumadinho mine disaster that killed over 250 in Brazil.
- July 2018 – Mining executives convicted for roles in the May 2014 Soma mining disaster in Turkey that killed 301 people. The longest sentence was for the mine manager, 22 years.
- April 2016 – Former CEO of a US mining company sentenced to prison after 2010 mining disaster that killed 29.
- July 2010 – Eight former Union Carbide executives guilty in 1984 chemical leak in Bhopal India that killed 3,000 immediately, and affected upward of 578,000. The company paid a settlement of $470 million
If you do a quick online search, you’ll find many other examples. Indeed, many of these involve mining operations and chemicals but there have been disasters that killed people in many other circumstances: Dam and electrical grid failures, train derailments, overpass collapses, natural gas leaks, oil spills, refinery fires, paint plant explosions, poisoning in food plants and their products, are all examples of equipment and systems failures, where poor operating and / or maintenance practices were factors in those failures.
Maintenance is not there just to fix things. It is there as a mechanism to eliminate, reduce or at least manage the consequences of failures bringing them to levels that are tolerable.
Most equipment and system failures can be identified before they occur. Some can be prevented, many can be predicted, and in protective systems they can be detected before they are needed to act. Yet they keep occurring due to one or more of three causes that we control: inadequate design, operational practices, or maintenance.
High performing companies avoid failures by managing proactively, foreseeing potential problems and avoiding either the failures or their consequences by deciding what to do about them in advance. The cost of doing that is low and should be a “no brainer”. In most industries, proactive maintenance is a small percentage of operating costs. In contrast, the cost of failures can be huge. Consider the damage to assets, the costs to repair, the added costs of parts and deliveries for items being rushed in, and don’t omit the opportunity costs which can easily dwarf the direct maintenance costs. What’s the value of production and revenue lost in downtime, the value of harm to reputation with customers and even your own employees. What about the increased risks to safety and environmental compliance and their attendant fines and legal costs, when failures occur and consequences are serious?
Here are a few links for more information or discussion:
Our books on RCM, Basic Reliability Management, and Maintenance Management
