PPE and Enterprise Risk Management

By: Jason Bischoff

Electrical equipment can expose a business to risk, whether they own the equipment or service it for others. A company’s employees are vulnerable to injury and even death in the event of an arc flash. Protective personal equipment (PPE) can help protect workers from the most destructive effects of such incidents. For this reason, it’s worth considering PPE as part of an Enterprise Risk Management (ERM) program. 

What is Enterprise Risk Management?

ERM is a business discipline that seeks to manage risks to shareholder assets. If you’re a business manager, one of your roles is to protect shareholder assets (plant, equipment, cash, share price etc.) from losing value. Many risk facts threaten to harm shareholder assets. These include natural disasters, crime, financial exposure (e.g. interest rates), obsolescence and more. ERM involves identifying such risks, devising risk mitigation controls and then implementing them. 

Why is an electrical arc flash an enterprise risk factor?

An electric arc flash poses the risks of plant and equipment damage, fire and most importantly, serious worker injury. An arc flash occurs when electricity escapes from the safe pathways of its intended conductors (e.g. wiring) which results in an explosive surge of this electricity in air.

An arc flash on both high and low voltage equipment causes an explosion that can easily set regular non-arc rated clothing on fire and sends molten metal flying through the air. The temperature can reach 35,000 degrees! People more than 20 feet away can suffer second degree burns. For a worker standing in front of such a flash, the impact can be fatal. Or, the incident can cause hospitalization with costs exceeding $1,000,000 plus, in many cases, long-term disability costs. Worst of all, a person will be seriously (and perhaps permanently) injured.

An ERM professional might point out that the financial risks of an arc flash are already well-mitigated by existing insurance policies. This is true, up to a point. Yes, liability insurance, employee health insurance, workers compensation insurance, equipment manufacturers’ warrantees and so forth all provide the means to compensate the business for the direct financial losses associated with an arc flash. However, this point of view does not take into consideration a host of other negative effects on the company’s (and shareholder’s) assets resulting from the arc flash. These include:

• Employee morale and productivity impact due to poor safety conditions
• Reputation damage due to being perceived as an unsafe, uncaring employer
• Rising insurance premiums that occur after the loss from the initial incident
• Loss of productive capacity due to the incident
• Compliance risks, e.g. penalties from OSHA
• Litigation risk

These risks can add up. Without adequate safeguards in place, an arc flash can translate into an extremely costly loss. For this reason, even though insurance covers some of the financial impact, it’s a good practice to make arc flash risk part of your ERM risk assessment process. 

Putting PPE to work mitigating enterprise risks

An ERM program should address arc flash risk by mandating use of properly-rated PPE whenever workers are dealing with electrical equipment. There are three elements in this process. First, the company must make PPE a strict policy. The policy itself then has to be enforced and audited. Finally, there’s the matter of selecting the right PPE supplier.

From Programs to Culture: Developing an Electrical Safety Culture

It’s likely you have a safety program in place—well documented policies and procedures, personal protective equipment on hand, a training program that ensures employees are well informed about their rights and responsibilities, and penalties for not following the rules. However, programs only go so far, and too often, compliance starts to falter. If you are looking to go beyond programs and implement a true culture of electrical safety, we’ve written a guide that can help you. Developing a Culture of Electrical Safety explores the differences between a compliant program and a true culture of safety while offering tips that can make your people safer. Preview this guide below and download it here.