In the wake of the Royal Commission findings on the Pike River disaster, what should small business owners be doing to ensure they're meeting their health and safety responsibilities?
What the commission points out is that health and safety is a collective responsibility shared by employers, workers and government as the regulator. However, for employers, as well as being responsible for developing compliant health and safety workplace practices, it is essential they run a business that encourages a culture of best practice health and safety.
At Pike River, the report states that the directors of the company were distracted by financial and production pressures and failed in their governance duties. They neither verified that risk management was effective nor properly held man-agement to account. Rather, they assumed managers would draw the board's attention to any major operational problems. In short, the board failed to provide effective health and safety leadership and protect the workforce from harm.
The lesson here is, irrespective of size or sector, it's essential to create a culture of health and safety best practice and that owners and manager give these risks equal attention as they would to other risks facing the company. This needs to be backed by regular reviewing and monitoring of compliance with health and safety law and best practice.
What can small business owners, most of whom won't have independent directors, do to ensure the right questions are being asked for effective risk management?
A good start is to seek consultation and advice from the experts. All SMEs will have at least an accountant, a banker and an insurance broker who can help them ask the right questions to fully understand risk and good risk management. Get together with them as an advisory group, ask them to help identify different sources of risk across the business and arrange regular consultation and review.
This doesn't need to be a costly or time-consuming process. For example, a business of four people can arrange a risk management review with their accountant as part of the regular annual catch-up. For SMEs in high-risk HSE industries such as cleaning, hospitality, construction and even hairdressing, expert input can be sought from other sources such as the Department of Labour. And, in keeping with the report recommendations, it's essential directors or those in equivalent positions such as advisory groups, regularly review and monitor the organisation's compliance with health and safety law and best practice.
Health and safety is also a very practical issue so it's a good idea to gather staff together to discuss and identify risks and ways to mitigate them, a process which will help reinforce a culture of best practice HSE.
At what stage should a business consider taking on an independent director to fulfil the governance role?
There's a significant value add, no matter what size, but particularly where a business is experiencing major change including planning for growth. In this situation, the owner may become immersed in daily operations - focused on production at the expense of crucial management and strategic issues such as risk and succession planning. It's about getting the right mix of people with skills and enough knowledge about the relevant industry to ask the right questions, provide strategic leadership and consistently probe to ensure best practice and direction is being achieved.
Doug Haines is a BDO partner, chairman of its national standards committee and a member of the New Zealand Institute of Chartered Accountants' public practice advisory group.