The Fine Art of Risk Management

The ANDY Spotlight is brought to you by ANDY Transport, Inc. and focuses on a salient topic related to trade, transportation, and supply chain.

Andy Transport recently achieved "platinum" status by its insurer, Northbridge Insurance. This achievement sheds light on the topic of risk, relative to a truck transportation firm, and highlights a successful effort in ensuring the safety of people and property under their control.

Risk is a four-letter word. Some view it as a word to be avoided. Andy Transport, however, embraces risk and has been recognized as successful in managing it well.

Recently, Andy Transport was recognized by their insurer for being designated the prestigious "platinum” status according to the Northbridge Insurance Transportation Best Practices Profile. Such an achievement means Andy Transport ranks among the top 10% percent of Canadian trucking fleets by creating, implementing, and delivering industry best practices of safety management.

Statistics Indicate Risk

The Transportation Best Practices Profile was developed from their longstanding experience in the transportation industry. The profile they established is a way of ranking companies relative to one another by comparing it to Canadian trucking data and benchmarking. For this achievement, Andy Transport was compared to hundreds of firms who are peers to them in the truck transport industry.

Northbridge's profile is based on statistics and facts. Such statistics and facts are gathered by organizations such as the Société de l'assurance automobile du Québec or SAAQ. The government organization is the transportation authority in Canada who regulates truck transportation. Vehicles are registered with them, and the agency oversees safety and compliance. It is a similar organization to the Federal Motor Carrier Safety Act (FMCSA) within the U.S. Department of Transportation who tracks and trends heavy truck accident data.

Because statistics drive trends and the data put forth by this regulatory body, it's important to look at some that the FMCSA have compiled. For example, according to their data, in 2019, 4,805 large trucks were involved in fatal crashes. Hazardous materials (HM) cargo was present on 2 percent of the large trucks involved in fatal crashes and 2 percent of those in injury and towaway crashes. HM was released from the cargo compartments of 17 percent of the placarded trucks in these crashes. Flammable liquids (gasoline, fuel oil, etc.) accounted for 52 percent of the HM releases from cargo compartments in fatal crashes and 51 percent of the HM releases in injury and towaway crashes.

"Collision with vehicle in transport" was recorded as the most harmful event for 75 percent of the large trucks involved in fatal crashes and for 78 percent of the large trucks involved in nonfatal crashes. 74 percent of the large trucks in fatal crashes was another vehicle, person, animal, or object in the large truck’s lane or encroaching into it. Twenty-three percent of the large trucks in fatal crashes had critical precrash events of their own movement or loss of control.

Singles (truck tractors pulling a single semi-trailer) accounted for 55 percent of the large trucks involved in fatal crashes in 2019. Doubles (tractors pulling two trailers) made up 2 percent of the large trucks involved in fatal crashes; and triples (tractors pulling three trailers) accounted for 0.1 percent of all large trucks involved in fatal crashes.

In Québec, Canada, for example, from 2010 to 2015, heavy vehicles represented 2.8% of all road vehicles on average but were involved in 10.5% of all accidents and 19.3% of all fatal accidents. During this period, 7.8% of all traffic accident victims were the result of an accident involving a heavy vehicle. Regarding fatalities, this proportion reached 19.3%. Statistics drive risk. For a trucking firm, risk becomes a predictor of their reputation and value in the supply chain they move.

Identifying Risk Translates to Reputation and Value

Carmen Banica, Director of Risk Management at Andy Transport, says a risk manager should identify, analyze, and strive to prevent known risk that is already identified and analyzed.

For a trucking company risk originates from many sources. "It's first and mostly from safety and compliance," she says. "So trucking companies, there are regulations that require mandatory compliance such as vehicle and trailer length and/or dimensions of the vehicles, weight of their cargo, and hours of service for drivers. I think, the industry is much more regulated than in the past."

Banica says that risk comes from many different sources. Not only does risk endanger the safety of personnel and equipment, but it can be costly. For example, if a driver does not obey traffic rules, they may get tickets. Tickets come with fines, which is an expense to the company. In addition to fines, a driver may be summoned to court. Thus, you'd need to hire a law firm that would handle this ticket files, contesting them in court. Plus, there are demerit points that come with the tickets that impair the driver's track record and indicates - more risk.

Each trucking company has a file with the authority where it's based. "We are in Quebec so with the SAAQ, where all these violations regarding safety and compliance are listed, are entered and in order to keep a good score, because we get a score based on that file, we can have a satisfactory score or not," says Banica. "It's very important to have a good score for the sake of your relationship with your clients. The client and the shipper wouldn't want to work with a company that is not satisfactory from this point of view."

Mitigating Risk with Training, Inspections, and Records

Banica says that traffic violations are just one part of the safety evaluation that composes risk. The other part is training. She emphasizes the importance of hiring good drivers and training them well.

"There is routine training, and there is a remedial training," she says. "Whenever there are missteps by drivers, they are usually required to take remedial training. Routine driver training and remedial training reduce overall risk."

Accidents are another segment where risk originates. Accidents obviously can cause damage and injury to other parties and vehicles "Our drivers can be injured," she says. "This means costs for the company and repairs or replacements if there is a total loss. Also, the company may be liable to pay the claim to a third party. So, it's a risk that you really have to try to prevent as much as possible, because it means costs for the company."

Safety and compliance are very important as there are inspections by SAAQ. Everything is very well inspected Banica says, "They go through all the files of drivers and find out: How do we hire them? How do we train them? How do we retain them for the company? How we recruit them? Do we give bonuses or not? And so on and so forth. How is the maintenance on our vehicles? Is it good? Is it done at the deadlines that are mandatory by the law? So, it covers a lot. And it is very important because safety on public road is really very important for everybody that shares the road with us, for us and for them as well."

Regulatory Oversight and Safety Scores

The SAAQ manages the oversight of trucking companies and looks at their accident and injury records continuously. Those records, as well as other factors, are also used by the insurance underwriter to give the company a safety score which calculates into the overall risk that the trucking company poses to the open roads and to the shippers they work for.

In Canada, all vehicles are registered with the SAAQ. For trucking companies such as Andy Transport, are subject to the SAAQ and the rules of liability. In Quebec, Banica explains, the rule that applies following an accident is a no-fault rule. This means that each owner or driver of the vehicle deals with their repairs or claims submitted to the insurer. Only personal and bodily injuries are settled by this authority. Thus, they have a very important role in governing the safety and compliance on the road. Ultimately, they pay the indemnity to the person that are injured in the accidents.

In Quebec, a trucking company receives a safety score. When an owner or an operator register for the first time, it assigns a safety rating of “satisfactory”. However, if the owner’s or operator’s conduct threatens the safety of other road users or compromises the integrity of the road network, the Commission may change the safety rating to “conditional” or “unsatisfactory.”

Northbridge Insurance (who focuses on the insurance of trucking firms and truck fleets) applies their own score that translates into a risk score. This is the rating that Andy Transport excelled in.

Northridge evaluates the insured every two years. They perform a risk evaluation using many different factors. Such factors include best practices in the industry. They evaluate drivers and managers in trucking companies and know where to look and how to advise the company.

"In this last evaluation we went from 3.8 to 4.5," explains Banica. "We reached a higher level than two years ago. Recently Northbridge recognized this by presenting us with a certificate and a letter of recognition to showcase where we excel. Another benefit of having a favorable risk evaluation by your insurer or by the government is that it allows you to show proof to potential shippers and clients that your risk score is favorable. It means that our insurer is more willing to underwrite our risk and our potential risk”.

How Andy Transport Achieved This Risk Rating

Banica says for starters, the company has a safety director and three other safety managers, one for each terminal. Training is managed by them. Drivers are trained using digital technology. But, if necessary, drivers may receive remedial training if any adverse performance is detected using vehicle telemetry or other infractions. The individual safety managers focus heavily on all topics of safety and focus trainings that can improve safety.

"Andy Transport uses an E-platform, which can be used from a mobile phone, a computer, laptop or virtually anywhere” Banica says. There is a calendar we set up regarding the seasons. So, for winter we have winter defensive driving. These courses are taken from government recommendations and the organizations that govern this industry. It is not something customized only for us, it is what everybody else is doing in the industry. It works very well because it is user friendly for the driver and can be accessed whenever and wherever. It gives us a perspective, a panoramic view on who took which training and where, allowing us to adjust the training if necessary."

In addition to all the actions, Andy Transport takes great strides to achieve a culture of safety. On top of that, they maintain a watchful eye on the material condition of their assets and ensure that they comply. Their training program adheres to a disciplined schedule and the company invests in the learning platform to meet any requirements.

To summarize, Andy Transport’s achievements and recognition by Northbridge Insurance are laudable. They are an indication of confidence by all: shippers, carriers, drivers, and others on the open highways. The company puts forth a concerted effort to understand risk and be staffed with full-time risk and safety managers. Cumulatively they exemplify the fine art of risk management which sends a message to anyone considering them as a partner to move the supply chain reliably.