Operations,Risk,and,Business,C business, insurance Operations Risk and Business Continuity – The Eurostar Case

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The recent problems experienced by the Eurostar train service that links London to Paris and Brussels is a very precise example of Operational Risk. As a case study the Eurostar events explain all the key issues that Risk Professionals have been speaking about for years. Because it is topical and has affected tens of thousands of people like you and me, at a critical travel period of the year – in the run-up to the Christmas holidays, it is worth taking a closer look at events in relation to their operational risk aspects.The Eruostar “event” has all the drama and the pulling power that very few other events have in drawing attention to the nature of operational risk and the practices and procedures that should have been in place to mitigate the severity of the event.  For those who may not be familiar with the nature of the event this is what happened. The week before Christmas (2009) five Eurostar trains mysteriously broke down as they traveled through the English Channel Tunnel. Some two thousand passengers were trapped in the cold and the dark, without food or water for up to twelve or more hours. Thousands of other scheduled passengers were stranded at stations in all three countries.     This is precisely what Operational Risk is all about. Using the definition contained in the Basle II capital adequacy rules, operational risk is defined as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events”.The failure of five trains in rapid succession clearly points to “inadequate or failed internal processes, people or systems”. As matters unfold, “external events” play into this as well. What failed and why? Well investigations rapidly revealed that sudden extreme weather conditions in France caused a very fine powdery snow that was able to penetrate the protective filters on the locomotives. Once the trains moved into the warmer air of the English Channel Tunnel, the water from the melted snow, now on the wrong side of the filters, led to the engine failures. This was the external event.Could these events have been prevented? Possibly, but it is extreme situations like this that usually cannot be predicted because they are so rare. In normal operating conditions we would expect a combination of conditions like this to occur only once in a long, long time – usually to the magnitude of tens or even hundreds of years.    Where the real problem comes about is in the follow-up or lack of it. This part is the “…inadequate or failed internal processes, people or systems” component. In the Eurostar case it was the inability to move those stalled trains and their hapless passengers out of the tunnel quickly that became the real difficulty.  This should have happened within no more than one hour after each train had stalled. This “rescue” ability has nothing to do with the cause of the event, but rather with the location. By its nature a tunnel is a weak point. It is a single concentration of train tracks in a very vulnerable position. Any stoppage of any train here, irrespective of the reason is a potentially extreme danger.It is this issue that is the acid test for back-up, business continuity or the like. Getting the trains and their passenger out of the tunnel should have been a priority irrespective of what caused the problem. This should have been in the form of standby locomotives that are on twenty-four hour call at both ends of the tunnel. The provision of emergency lighting and basic food and water for such situations should not even be in question.  A further problem was the initial inability of Eurostar staff to provide adequate information to either the stranded passengers in the tunnel or at stations for an inordinately long period of time. Aside from other events this issue is awful for customer relations and bad for company reputation. This highlights two more aspects to being prepared for such events. The one is practice, test-runs, drills, for all staff on a regular basis; the second is communicating with trapped passengers and telling them what is happening and what to expect. That is why airlines make you sit through that awfully boring demonstration before each flight.   Happily, apart from financial loss and ruined vacations, there was no real physical loss or injury. Yet these events provide a very clear example of what operational risk is and the procedures that should have been in place to mitigate the effects of the event once it had occurred. The Eurostar saga also provides a clear example of critical aspect of public relations in events like these.