Risk Insider: Jack Hampton

Hoboken Train Crash: ‘We Have the Technology’

By: | October 4, 2016

John (Jack) Hampton was a Professor of Business at St. Peter’s University, a core faculty member at the International School of Management (Paris), and a Risk Insider at Risk and Insurance magazine where he was named a 2018 All Star. He was Executive Director of the Risk and Insurance Management Society (RIMS), dean of the schools of business at Seton Hall and Connecticut State universities, and provost of the College of Insurance and SUNY Maritime College in New York City.

Lee Majors played the astronaut Steve Austin in a 1970’s TV series titled, “The Six Million Dollar Man.” The character was severely injured in the crash of an experimental aircraft. He was called, “A man barely alive.”

The opening scene captured the American psyche with the catchy dialogue, “We can rebuild him. We have the technology. We can make him better than he was before. Better, stronger, faster.”

So it is with New Jersey Transit in the aftermath of the tragic crash in Hoboken.

A recurring quandary in risk management is how to allocate time and money. Do we make it “just in case,” “just in time,” or “can we can live with the consequences?”

NJ Transit is not alone.

General Motors hid data on faulty ignition switches. 124 fatalities, 274 injuries.

Takata ignored defective airbags provided to Honda and its other customers. 11 U.S. deaths. Hundreds of injuries worldwide. More than 12 million vehicles recalled.

Nobody cares about New Jersey Transit trains until they crash.

Volkswagen was caught with fraudulent emissions software on its vehicles. Big mistake. Billions of Euros down the drain from government penalties, extra costs, and lost sales.

Samsung had to fix exploding batteries in its Galaxy Note 7 phone. People catching on fire. Billions out the window.

Trains recently experienced two unnecessary crashes after slow to non-existent implementation of positive train control. Amtrak, eight deaths, 200 injured near Philadelphia. NJ Transit in Hoboken. One fatality so far, more than 100 injured.

Risk management is undertaken in the triangle of interest among the Board and C-suite, operating managers, and the risk manager. They have different interests.

C-suite officers and directors often watch from 30,000 feet and do not need trouble.

Operating managers have revenue and expense goals and try to meet them on often faulty risk assumptions and timetables.

The risk manager tries to sensitize everybody, but has no authority to fix faulty ignition switches, exploding batteries, or braking systems on trains.

Nobody cares about New Jersey Transit trains until they crash.

The government had inspected the NJ Transit operations and found serious safety problems. After the crash, officials say they were getting ready to do something. Why did they wait?

We can make the trains safer. But first we must acknowledge that severity trumps frequency.

Enough with a six-sigma mentality. This tool for process improvement made famous by Jack Welch at General Electric reduces defects and errors but must be applied correctly. It does not work for certain decisions.

Six Sigma has a goal of no more than 3.4 defects per million opportunities. This produces fairly flawless results in manufacturing. It would produce one commercial airliner crash every five days in the United States.

We have the technology. We can raise the visibility of risk management and increase transparency of risk at the Board level and in the C-suite.

Most companies have positions or committees on the Board reserved for compensation and audit. They should create a similar role for risk management.

Once created, technology can collect and organize data and create dashboards. C-suite officers and board members can track down information and update the status of risk management.

It can be done easily and visually from a smart phone. Preferably one that does not catch on fire.

It can be done via satellite connection to the Internet from a train. Preferably one with positive train control.

It can be done from a passenger seat in a car without a faulty ignition switch or exploding air bag.

The time is now. We have the technology. We can make risk management better.

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