JV HSE

Health , Safety and Environment (HSE) pose some of the greatest risks to a successful JV (joint venture). Before these areas can be addressed it is essential that there is clarity over exactly who has operational accountability for the JV (in other words who is its ‘operator’). The operator should be responsible for the design and operation of procedures and processes which ensure the JV:

  • operates in a safe manner,
  • minimises any health risk to employees and other stakeholders from its operations, and
  • minimises any negative environmental impact as a result of its existence.

The JV shareholders or ownership participants (if they are not the operators of the JV) should use their influence in JV oversight bodies (e.g. Board of Directors and Shareholders Meetings or committees) to understand the HSE performance of the JV operator and where necessary apply their influence to introduce operational improvements in the JV.

Chris Duggleby‘s JointVentureRisk site is a ‘living’ free-of-charge virtual publication. It is regularly updated and improved. If you are interested in this subject please save this site link and visit again.

HSE Leadership Commitment - JV Managers celebrate safety milestone with 'Safe Team Work' shirts
HSE Leadership Commitment – JV Managers celebrate safety milestone with ‘Safe Team Work’ shirts

Who Operates the JV?

Many JV’s are created as distinct legal entities (e.g. limited liability companies) and are separate legally from the parters (e.g. shareholders) that own them. In such constructions the JV may be responsible for managing its own operations (be ‘self operating‘) or perhaps one of the partners is specified in the JV formation agreements as the JV’s ‘operator‘. It is quite common for unincorporated JV’s (for example in the oil industry) to have one partner defined as the JV operator with clearly specified responsibilities and liabilities for HSE. Sometimes this ‘JV operatorship‘ may rotate with each partner operating the JV in a mutually pre-agreed sequence for a fixed period of time.

When a partner in a JV is not its operator that partner’s ability to change HSE activities is limited by the level of influence the partner has through its role on the JV oversight and governance structures. This influence will be defined in accordance with the locally applicable company/enterprise laws and the JV formation agreements (see JV Governance section).

If a partner in a JV is not it’s formal operator but tries to impose upon the JV it’s own operating procedures and practices this partner may find itself viewed as the JV operator by certain legal authorities. If in such a situation the JV, following a partner’s procedures and practices, is found lacking in its approach to HSE this partner may be considered as the JV operator rather than simply as a shareholder or ownership participant.  Therefore as a JV partner it is very important to take legal advice as to what is appropriate ‘influence’ with regard to JV operations and HSE matters.

Operatorship and Liability for HSE should be clearly documented in JV Formation Agreements - Buncefield, UK - 2005
Operatorship and Liability for HSE should be clearly documented in JV Formation Agreements – JV at Buncefield, UK – 2005

Although a JV partner may not be directly considered legally accountable for the operations and HSE performance of its JV it should have a strong interest to protect its human and financial investment by ensuring the JV is well run and applies its resources wisely. A good JV partner will want to get assurance that the JV is operating responsibly and not taking unnecessary HSE risks which could turn out to be very expensive; financially, socially, and morally. The partners own reputation will be influenced by the HSE performance of its investments.

What does good JV HSE look like?

As mentioned above the three HSE goals for a JV are that it:

  • operates in a safe manner,
  • minimises any health risk to employees and other stakeholders from its operations, and
  • minimises any negative environmental impact as a result of its existence.

In order to achieve these goals the JV will need HSE procedures and processes which are appropriate to its own operations. Often partners can help the JV in the early stages of developing its own systems by providing information from or even copies of their own procedures as a starting point. The decision regarding the appropriateness of these procedures should rest with the formal JV operator (or its own management if the JV is self operated). The final processes and procedures adopted by a JV should be ‘bespoke’ to its own operations, resources and risks.

In the past I have found it tremendously useful to have HSE workshops or benchmarking exercises attended by both JV and partner experts in the relevant field. Here both sides can share best practice and learn from one another. The participating organisations develop a network of experts who can support and advise one another. In addition third party experts should be drawn upon if there are gaps in the ‘in-house’ knowledge and experience of the JV and its partners.

HSE statistics from the JV should be a standing requirement at regular oversight meetings (e.g. Board of Directors or shareholders meetings and committees). The accuracy of the information provided should be verified through shareholder or independent HSE audits of the JV. As with any auditing process it will reduce the burden on the JV if all partners can participate in single consolidated audits rather than each one turning up on separate occasions with its own bespoke testing agenda.

The JV’s risk management system (see the separate section on risk systems) can be a useful source of HSE information. It will also indicate if the JV management/operator understands those principles of risk management which also apply to HSE risks.  In particular it is important to ensure HSE related risk management actions are being monitored, followed up and closed in a timely manner.

It is beyond the scope of a site about general JV risks to provide a detailed account of HSE risks – that would justify a website of its own. However the following HSE check-list highlights some of the risk elements that a good HSE system should consider (please note this list is not comprehensive):

  • Equipment Related Risks: e.g., Cutting, Crushing, Drilling, Ejection, Electrical, Entanglement, Falling, Glare (e.g. Welding), Impact, Mechanical Failure, Noise, Overloading, Pressure, Radiation, Temperature, Trapping, Vibration
  • Handling Related Risks: e.g., Abrasion, Aches, Burning, Bruising, Carrying, Driving, Freezing, Lifting, Lowering, Overwork, Positioning, Posture, Pulling, Pushing, Repetitive Strains, Sunburn, Twisting, Typing 
  • Location Related Risks: e.g., Collisions, Contagion/Pandemics, Falls, Drowning, Heat/Cold, Height, Hidden/Buried Risks (Cables/Pipes), Obstructions, Poisoning, Trapping (e.g. in emergencies), Trips, Slips, Storage (e.g. hazardous items), Suffocation, Ventilation, Weather/Sun Exposure 
  • Material Related Risks: e.g., Abrasives, Asphyxiation, Burns (hot and cold), Combustion, Corrosives, Cuts, Dust/Micro Particles, Explosion, Fire, Flammables, Fumes, Hazardous waste, Ingestion, Irritants, Oxidation, Poisons, Pollution (ground, water, air), Radiation,  Vapours

By developing a JV HSE risk check-list like the one above shareholder/owner representatives and members of Boards of Directors will be able to review the HSE information they are provided and identify areas where there may be gaps. These gaps can then be further investigated to check whether more checks are needed or the risk simply doesn’t apply for this JV.

Similarly within the JV itself managers should develop similar bespoke check lists to aid them when they are preparing for HSE reviews or a safety ‘walk-about’. The management of these risks can be incorporated into the JV overarching risk management programme (see the section on JV risk systems). This will help to ensure risks are evaluated, prioritised, monitored, managed or mitigated (details in the risk systems section).

The JointVentureRisk.com website and its author, Chris Duggleby, are not qualified to provide legal advice and therefore any questions in relation to the legal liability of a joint venture or its partners should be addressed to suitably qualified, competent legal advisers.

Chris Duggleby

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