IABFM Articles

IABFM Articles > > Risk Management > The Dimensions of Risk Management - May 1999

The Dimensions of Risk Management - May 1999

By Michael Vincent

28 December, 2006

Does statutory compliance satisfy due diligence within the coal mining industry?    An interesting question that is at the heart of risk management not only within the coal mining industry but also in all industries that have a statutory obligation linked to performance.

Bill Davis of the Mines Rescue Service in New South Wales examined this area as part of the requirements for his risk management qualification.  The project enabled Bill to confirm a long held belief that the performance of statutory inspections is as much an attitudinal obligation as it is a physical obligation.  Additionally has the industry developed to the point where it can utilise due diligence as a defence against prosecutions.  A very extensive questionnaire was developed and analysed to give a detailed verification of the research aim. .

It is not possible because of inherent hazards, complexity of mining machinery and equipment, associated systems, procedures and work methods to have a totally safe and secure workplace.   Regardless of how well mining methods or machinery are designed there will always be the potential for serious accidents; thus it is not possible for an external agency to ensure safety of an organisation involved in the coal mining industry.  Despite regulation and government control the principal responsibility for the safety of any particular mine, and the manner in which it is operated, rest squarely with the management of that mine.  This involves the application of due diligence principles as opposed to fulfilling statutory requirements.

Statutory inspection by definition implies that any action to look at or examine any place, item or procedure, which is imposed or required by any rule, act or law, is in fact a statutory inspection.   This is further defined and amplified under regulation.

Due diligence is the requirement for organisations and their management to prevent foreseeable harm or hazards to their work environment and to their people.  Further due diligence means taking all reasonable care to protect the well being of employees and/or co-workers.  To meet the standard of due diligence, all reasonable precautions in the circumstances to carry out work, safety and health responsibilities must have been completed.

Any prosecution must prove that the accused committed a prohibited act.  To be acquitted, the accused must establish that on the balance of probabilities, all reasonable precautions were taken in the circumstances to comply with the regulations.

The fundamental conundrum faced by the industry is the recognition that there is a difference between compliance and showing due diligence.  Simple statutory compliance may keep a colliery management out of trouble with the authorities but can it be used as a complete defence against prosecution or in a judicial enquiry.  Showing due diligence may be used, as a defence against prosecution but to prove due diligence required much more of management than simple statutory compliance.  The findings of the report indicate that this is not well understood within the industry, an examination of a series of incidents within the industry demonstrated compliance to varying degrees in all events but due diligence in none.

The workplace environment of the coal mining industry has been described as "benevolently mechanistic, authoritarian and exceedingly systematised".  This has resulted in an interface between management and workers troubled with exploitation, conflict and withdrawal behavior creating an environment results in accidents, loafing and absenteeism.  The application of risk management principles and in particular due diligence rather than mere compliance would potentially create a different and functional environment.

In conclusion the report found that improving the quality of human management skills and aligning resources more closely with the risk management disciplines has the potential not only to deliver significant gains in safety and productivity in the industry but also assist with the development of due diligence as a significant tool.

The standard the courts apply to determine whether an employer has acted with due diligence is not absolute.  As an employer, you are not expected to anticipate and prevent every possible accident.  You must take all the precautions that a reasonable and prudent person would take in the circumstances.  The courts will recognise a defence of due diligence and may relief employers of monetary penalties for violation of regulations; if employers can establish that they were duly diligent.

Risk management is directly proportional to advances in development, progress and improvement.   Finally "due diligence is the opposite of negligence"

About the Authors

Senior Lecturer,

Department of Accounting and Finance