Safety Governance: Getting it Right Exercising effective safety governance across large, diverse corporations

Immanuel Kemp, Business Analyst, Arthur D. Little
Stephen Watson, Principal, Risk Practice, Arthur D. Little

As companies become increasingly consolidated under the ownership of very large corporations, there is a growing challenge in exercising appropriate safety governance over their constituent businesses. This challenge is compounded by the wide range of available governance models from which to choose, an increasing diversity of operations, and the significant risk of reputational damage arising from poor safety performance by a business unit in which the parent corporation does not necessarily hold a controlling stake. Choosing an optimal approach for corporate safety governance is a critical decision for the board and the executive leadership team. This paper explores how to meet these challenges and to get safety governance right, by using a two-factor model, which characterises different styles of governance, and examines their relative advantages and disadvantages. This model has been applied in a benchmarking study of nine multinational corporations across a range of sectors to gain further insights into how safety governance is implemented in practice. The study, along with Arthur D. Little’s experience in these sectors, concludes that there is no universally optimal solution for safety governance, but selection of an approach needs to be based on a company’s specific circumstances. This paper explores how certain aspects of the chosen approach, the role of corporate leadership, and balance between corporate requirements and corporate intervention can influence the effectiveness of these different styles.