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If you’re a CEO, employee negligence could land YOU in jail!

Excalibur Yacht - Applied Alloy Yachts

Article:  By Dennis Keay

I recently had a discussion with the CEO of a company about business growth. After learning more about their business I realised that there was a level of risk they hadn’t identified…a very real risk that could lead to the demise of the business and imprisonment of the CEO. To put you in the picture, they manufacture a brilliant product that they sell internationally, and the failure of part of the product could lead to death of the user.

Coming from an engineering background in the automotive industry I was able to outline a process for assessing and managing those risks, and I’ll briefly cover that in this article, but first let me tell you about the demise of a manufacturing company and its Managing Director who was sentenced to 3 years in prison for manslaughter.


Excalibur was the name of a racing yacht manufactured by Applied Alloy Yachts. It had 6 crew members, 4 of which drowned after the yacht capsized.

During manufacture, the keel had been cut and re-welded. The welding was defective and eventually failed causing the keel to detach from the yacht, which resulted in it capsizing within 30 seconds.

Who was responsible for the manufacturing defect?  Was it the person who did the welding? Were they just doing what they were told? Did they do something from their own ‘initiative’ and not do what they were told? Was their immediate supervisor partly to blame? Where was the buck to stop? Surely, 4 lives were needlessly lost and someone was responsible!

After 7 years of legal battles Alex Cittadini (Managing Director of Applied Alloy Yachts), was found guilty of manslaughter and handed a three year jail sentence, even though he may have been kept in ignorance of his workman’s error during the construction of the yacht.  There’s a saying, ‘ignorance is bliss’, though I think it should be ‘ignorance is risk’.

Ignorance is Bliss!Ignorance is Risk!!

Understandably, the manufacturer, Applied Alloy Yachts became defunct…they went under, just like Excalibur! Thankfully for Alex Cittadini, his conviction was overturned, but no doubt he would have felt the weight of the whole episode on his life, felt a level of responsibility for the 4 lives lost,  and wondered what could have been done differently during manufacture if he could turn back the clock.

Predicting and Managing Risks

People talk about ‘minimising’ risks when they should be talking about ‘managing risks. Minimising risk can impose costs (financial and social) that we’re not able or willing to accept as individuals or a society. For example, driving a car each day involves risk. Wearing seatbelts, ensuring that drivers pass a driving test to get their license, imposing road rules and penalties for breaching them are methods of managing risks. We don’t try to minimize risks by mandating that cars be built with roll cages and top speeds of 15 km/h, nor legislate that drivers wear crash helmets. So, how do we determine what level of risk is acceptable and how do we manage it?

Risk Identification Tools

Sure, there should be quality standards and in-process quality checks to avoid defective products from reaching customers…but there’s also more to it. There are various risk identification tools available that use a combination of a structured approach + available data + experience/expertise. They vary in the level of application and complexity, and typically consider the following three things:

S:   Severity or consequence of the adverse event (failure). It considers the worst possible consequence of a failure.

P:   Probability of the event occurring.

D:  Detection, related to how easy it is to identify that a failure may occur or is in the process of occurring.

Examples are:

  • The electric motor on a small concrete mixer fails while in use: Severity is LOW since the worst outcome is an inconvenience.
  • A parachute doesn’t deploy properly because it’s packed incorrectly: Severity is HIGH since the worst outcome is death.
  • Probability of a user dropping their phone at least once per year: Medium (?) {Maybe ‘high’ if you’re a klutz like me, or if you use it very frequently.}
  • Probability of a flywheel in a car engine shattering leading to catastrophic failure: Very low
  • Detection:
    • A light-globe working one day, then not working the next: No warning! Detection level: Very low
    • A car tyre gradually going flat: Detection level: High, since the bulging side-walls can be seen and there are gradually worsening ride and handling characteristics of the car.

Once S, P and D are assessed, the challenge is to then implement appropriate actions to ensure they’re controlled within acceptable levels.  One structured and systematic tool used to help do this is known as Failure Mode and Effects Analysis (FMEA).

There are essentially 2 types of FMEA:

  1. DFMEA: Design Failure Mode and Effects Analysis
    • For example: Are the tires selected (as part of a vehicle Design), appropriate for the anticipated speed, load carrying capacity of the vehicle and antipated terrain usage?
  2. PFMEA: Process Failure Mode and Effects Analysis
    • For example: Is the Process of fitting the wheels at the factory sufficiently robust that every wheel nut is installed and tightened to the correct torque, and that no vehicle leaves the factory with loose wheel nuts?

The Point

The objective of this article isn’t to teach you how to identify and manage risks, but to make you aware that there may be risks in your business that you don’t know about, and that there are structured approaches available to help identify them and control them.  Unless you’re proactive in managing risk to acceptable levels, then you can be found negligent and responsible, in a court of law, for any severe adverse consequences to your people or your customers.

Everyone in a business has a duty of care, the most onerous being with the person at the top. Ignorance of this fact is no defence in a court of law. Identifying and managing risk appropriately is the best insurance for you, your people, your customers and your business.

A great place to start is by assessing the Occupational Health and Safety risks within your business in an effort to keep your employees safe. A quick hint here is DON’T simply use a check-sheet that someone in the past has created. You don’t want it to become a ‘tick-in-the-box’ exercise.  You need a structured process where people have their minds engaged in identifying risks that may not have been identified before. If you’d like more details on such a process, feel free to reach out and discuss this with us at .

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