Legal Risk Management: Lessons from three high-profile failures

Lesson one

Identifying Key Risks: An example from the Nimrod Report

Facts:

On 2 September 2006, RAF Nimrod MR2 XV230 suffered a catastrophic mid-air fire, fatal to all on board.

The crew had been alerted to the fire around 90 seconds after completion of an air-to-air refuelling of the tanks.

There was ultimately nothing the crew could have done to avert disaster.

However, a Report later concluded that the disaster could have been averted if the risk posed by the combination of components in this case had been identified earlier, in particular in reflecting on certain pre-cursory incidents, and in the design of the aircraft’s Safety Case.

What were the missed opportunities to identify this key risk?

Failures:

An enormously simplified explanation is that a fire broke out on the aircraft because fuel got into an area that was supposed to stay dry. In this space, there were both pipes carrying fuel and pipes that got extremely hot.

The fuel leaked or was pushed into this area and ended up touching one of these hot pipes, causing the fuel to catch fire. The materials meant to keep things safe had gaps or had worn out, making it easier for the fire to start.

Precursory incidents

In his ‘Nimrod Review’, the Rt Hon Lord Justice Haddon-Cave (as he is now, as a judge in the Court of Appeal) identified that there had been seven previous significant incidents which, in hindsight, were missed opportunities to identify the risks posed by the combination of components that led to the fire in this case.

Of these incidents, the one involving RAF Nimrod XV227 “should have been a ‘wake up call’ but appears not to have been”. The XV227 incident was a ‘near miss’ which involved the same combination of components but a different ‘failure sequence’.

These previous incidents illustrated the risks from split fuel seals, the potential for leaks from fuel couplings to migrate back down the plane, the fire risks from fuel leaking onto a hot duct and the risk that this could result in an ignition – all relevant to the incident.

Lord Justice Haddon-Cave found that of these incidents “Most tended to be treated in isolation as ‘one-off’ incidents with little further thought being given to potential systemic issues, risks or implications once the particular problem on that aircraft was dealt with. Rarely did anyone attempt to grasp the wider implications of a particular incident for the future”.

“It was the elephant in the room, which nobody saw because nobody was looking for it.”

Safety case failure

A safety case is a structured and evidence-backed argument (usually brought together in a single document) demonstrating that an asset (such as an aircraft) or system or process is acceptably safe for its intended application.

Lord Justice Haddon-Cave did not mince his words in reaching the conclusion that the Nimrod Safety Case had not successfully identified key risks; “The Nimrod Safety Case [drawn up between 2001 and 2005] represented the best opportunity to capture the serious design flaws in the Nimrod which had lain dormant for years”. In particular, he pointed to the importance of drawing on appropriate data when seeking to identify, assess and mitigate risks.

He concluded that “The Nimrod Safety Case process was fatally undermined by… a widespread assumption by those involved that the Nimrod was ‘safe anyway’ (because it had successfully flown for 30 years)”. He was concerned that “the task of drawing up the Safety Case became essentially a paperwork and ‘tick-box’ exercise”.

Lord Justice Haddon-Cave found that this was no excuse for not revisiting the NSC once the facts of the Nimrod XV227 incident had become apparent; “the Nimrod [Team] failed properly to manage the NSC post its production and failed in any meaningful sense to treat it as a “living” document.”

Lessons for Legal Professionals:

Focus on the cause, not the process

It is not uncommon for legal advisers (internal and/or external) to be engaged in the aftermath of a near miss or accident, both to consider the immediate exposures (legal and otherwise) but also often to consider future exposure and mitigating measures.

When an organisation is subject to a ‘near miss’ or actual incident it is important to consider lessons learned. In particular, this includes the identification of relevant risks which have become apparent from what happened.

It is important not to ‘rush to implement process’: a not uncommon instinct in an organisation seeking to demonstrate to stakeholders that it is ‘doing something’ in response. Priority should be given to this initial groundwork of risk identification.

It is vital to commit sufficient time, resource and energy to this exercise. That may be a difficult task for a variety of reasons. Particular difficulties which we have seen play out detrimentally later include:

1. where risk identification, or perhaps a proper understanding of impact and/or likelihood of resulting harm) relies on expert knowledge,
2. risk identification requires the knowledge of the interaction of components (systems, objects or organisation departments) which is not superficially obvious,
3. where the resulting risk is hard to quantify, for example because the risk is less obviously financial and instead legal or human.

Seeking to ensure the right people are at the discussion table, and the right information is available for consideration, is an important step, although not guaranteed to result in a complete outcome.

Whilst examples like Nimrod are salutary, there are also respects in which they are exactly the opposite. In particular, a key risk can appear more blatant in hindsight.

Those seeking to identify and mitigate risks are not only unarmed with the benefits of hindsight, but are required to exercise foresight in circumstances where (not infrequently) a particular risk has never resulted in harm before, potentially leading to false confidence that ‘nothing bad will happen’ or ‘it won’t happen to us’.

These factors (amongst others) help explain why it would be a mistake to assume that misidentification of risk is restricted to bad organisations and/or could not happen to our organisations.

The initial exercise of risk identification (or, more correctly, the process of identifying the ‘hazard’ with potential to cause harm and then assessing the risk that it will do so) sits at the root of the many processes and actions which follow.

If a risk is not correctly identified then the subsequent steps of the risk management cycle – identification of mitigations (or risk transfer), implementation of measures, and monitoring – will be corresponding flawed due to this gap in its foundations.

Lesson three

Making risk-based decisions: The distinction between the role of advisors and decision-makers: A lesson from Covid-19 Preparedness

Facts:

The context of the UK’s response to the Covid-19 pandemic needs little introduction. The Covid Inquiry was established in 2021 and set its Terms of Reference in June 2022.

The first ‘module’ of the Covid Inquiry was “The resilience and preparedness of the United Kingdom”. A key finding of its ‘Module 1 Report’ was that:

“In 2019, it was widely believed… that the UK was not only properly prepared but was one of the best-prepared countries in the world to respond to a pandemic. This Report concludes that, in reality, the UK was ill prepared for dealing with a catastrophic emergency, let alone the coronavirus (Covid-19) pandemic that actually struck.”

Within the eight most significant flaws summarised in the Report, there are two overlapping ones which concern the way in which advisers advise on risk, and the way in which decision-makers then decide what to do about it.

Failures:

Commissioning the ‘right’ advice

Decision-makers are often not sufficiently expert or apprised of relevant detail meaning that “those making the requests may not know exactly how they should be framed”.

Although not a factor examined by this Inquiry, there might of course be the converse risk that decision-makers know enough that they deliberately frame the ‘ask’ in a particular way (“I want to be able to say that the answer is x”).

In either case, incorrect framing can impact the quality and value of the resulting advice, particularly if (for various reasons) advisers feel the understandable need to ‘stick to the brief’. As the Covid Inquiry found: “The way experts were asked to advise limited their freedom to advise”; “Often their remit was set too narrowly”; “The content of the [advisory] meetings was very much commissioned by [the decision-makers]… there was no expectation or explicit encouragement to consider issues beyond the specific commissions.”

Potential solutions were found to include those commissioning advice “to think more carefully about the remits of, and questions put to, the expert” and a culture of setting a remit which sets an “expectation or explicit encouragement to consider issues beyond the specific commissions”.

Giving the ‘right’ advice

Decision-makers are often constrained by time and the need to process multi-agenda items within that time. This raises the vexed question of the ‘right level of detail’ to provide to the decision-maker.

A key risk here is that the drive for conciseness, together with other factors (for example wanting to be seen to be ‘constructive’ (or at least not ‘obstructive’) or to streamline the decision), leads to the omission of sufficient detail to enable both an appropriately informed decision and, as importantly, the ability to challenge the advice.

At its highest, presenting advice which is a fait accompli removes true decision-making autonomy or reduces it to an underinformed binary outcome (go/no-go).

The Covid Inquiry found that “policy-makers were usually presented with a consensus view… [instead of] a range of options”. It recommended that: “[Decision-makers] should… be aware of the fact that they may be presented with uncertainty, and experts should be prepared to present it. An integral part of any advice is its inherent uncertainty. The advice of experts is no different. If a minister is to challenge effectively, those who provide advice to ministers should ensure that they communicate this uncertainty.”

In the specific context of Covid-19 preparedness it found: “the purpose of preparedness is to allow policy-makers to consider and interrogate policies in advance. The purpose of presenting ministers in advance of a pandemic with a range of options, each with scientific evidence and uncertainty of varying degrees, is to allow them to choose the most appropriate response when the crisis happens. This is necessarily a value judgement – underlining the importance of political leaders making the ultimate decisions”.

The value of ‘access to the expert’

One solution to the above is to ensure direct dialogue between the advisor(s) and the decision-maker.

In the context of Covid-19 preparedness, the Inquiry stressed the value of “two-way discussion between ministers and experts. There should be a system that invites a back-and-forth between… advisers and decision-makers. This would enhance the quality of both the questions asked and the advice provided”.

It would also increase the prospect of more effective interrogation and effective challenge to the advice provided which the Inquiry considered was highly valuable:

“The quality of the decision-making of ministers will only be as good as the depth and range of advice they receive, as well as their interrogation of that advice.”

Lessons for Legal Professionals:

The right advice the right way

Key parts of the job of an in-house adviser are the giving of legal advice to inform strategic and/or operational decision-making, or the commissioning of external expert advice (whether legal or from other professionals) to inform such decision-making.

A particular aspect of this role is the provision of advice to Boards and committees which may be taking important risk-based decisions.

As the failures highlighted above demonstrate, there are particular risks here around the way in which the advice is commissioned (‘the ask’), and the way in which (often with best intentions) that advice is filtered for decision-maker use.

The Covid Inquiry is not the first (and certainly won’t be the last, even in the near future) to recommend that a form of ‘two way dialogue’ between the adviser and the decision-maker is an important mitigation of these risks and likely to improve the quality of the decision-making.

There are often logistical, cultural and other challenges in trying to get decision-makers and advisers in the same room together. However, the benefits of two-way dialogue are obvious.