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action to avoid or eliminate the hazard or reduce the associated risks. The solution must take into account
the local conditions, as “one size” does not fit all situations. Care must be taken that the solution does not
introduce new hazards. This is the process of risk management.
4.7.5 Once appropriate safety action has been implemented, performance must be monitored to
ensure that the desired outcome has been achieved, for example:
a) The hazard has been eliminated (or at least the associated risks have been reduced in probability or
severity).
b) The action taken permits coping satisfactorily with the hazard.
c) No new hazards have been introduced into the system.
4.7.6 If the outcome is unsatisfactory, the whole process must be repeated.
Risk
communication
Identify
hazard
Monitor
progress
Take
action
Control
options
Assess
risks
Safety
cycle
4-22 Safety Management Manual (SMM)
4.8 COST CONSIDERATIONS
4.8.1 Operating a profitable, yet safe airline or service provider requires a constant balancing act
between the need to fulfil production goals (such as departures that are on time) versus safety goals (such
as taking extra time to ensure that a door is properly secured). The aviation workplace is filled with
potentially unsafe conditions which will not all be eliminated; yet, operations must continue.
4.8.2 Some operations adopt a goal of “zero accidents” and state that “safety is their number one
priority”. The reality is that operators (and other commercial aviation organizations) need to generate a profit
to survive. Profit or loss is the immediate indicator of the company’s success in meeting its production goals.
However, safety is a prerequisite for a sustainable aviation business, as a company tempted to cut corners
will eventually realize. For most companies, safety can best be measured by the absence of accidental
losses. Companies may realize they have a safety problem following a major accident or loss, in part
because it will impact on the profit/loss statement. However, a company may operate for years with many
potentially unsafe conditions without adverse consequence. Without effective safety management to identify
and correct these unsafe conditions, the company may assume that it is meeting its safety objectives, as
evidenced by the “absence of losses”. In reality, it has been lucky.
4.8.3 Safety and profit are not mutually exclusive. Indeed, quality organizations realize that
expenditures on the correction of unsafe conditions are an investment towards long-term profitability. Losses
cost money. As money is spent on risk reduction measures, costly losses are reduced (as shown in
Figure 4-7). However, by spending more and more money on risk reduction, the gains made through
reduced losses may not be in proportion to the expenditures. Companies must balance the costs of losses
and expenditures on risk reduction measures. Some level of loss may be acceptable from a straight profit
and loss point of view; however, few organizations can survive the economic consequences of a major
accident. Hence, there is a strong economic case for an effective SMS to manage the risks.
Figure 4-7. Safety versus costs
Costs
Protection
Losses
Total costs
Risk
reduction
Chapter 4. Understanding Safety 4-23
Costs of accidents
4.8.4 There are two basic types of costs associated with an accident or a serious incident: direct and
indirect.
Direct costs
4.8.5 These are the obvious costs which are fairly easy to determine. They mostly relate to physical
damage and include rectifying, replacing or compensating for injuries, aircraft equipment and property
damage. The high costs of an accident can be reduced by insurance coverage. (Some large organizations
effectively self-insure by putting funds aside to cover their risks.)
Indirect costs
4.8.6 While insurance may cover specified accident costs, there are many uninsured costs. An
understanding of these uninsured costs (or indirect costs) is fundamental to understanding the economics of
safety.
4.8.7 Indirect costs include all those items that are not directly covered by insurance and usually total
much more than the direct costs resulting from an accident. Such costs are sometimes not obvious and are
often delayed. Some examples of uninsured costs that may accrue from an accident include:
a) Loss of business and damage to the reputation of the organization. Many organizations will not
allow their personnel to fly with an operator with a questionable safety record.
b) Loss of use of equipment. This equates to lost revenue. Replacement equipment may have to be
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