ACCA SBL in Real Life: Risk Management
The September 2023 SBL case study is based on the airline industry so the examiner may draw some examples of real-life scenarios when setting questions. The following article relates to the Boeing 747 disaster and covers elements of risk management which is an important element of the SBL syllabus.
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Boeing 737 Max: A Case Study in Risk Management Failure
The Boeing 737 Max crisis serves as a stark reminder of how failures in risk management can have far-reaching consequences for a company, its stakeholders, and the broader aviation industry. This case study delves into the series of events that led to the Boeing 737 Max crisis, highlighting the critical failures in risk management that played a central role.
Boeing, a renowned aerospace manufacturer, aimed to compete with rival Airbus by introducing the Boeing 737 Max, touted as a fuel-efficient, technologically advanced aircraft. To achieve this, Boeing implemented a new automated flight control system called the Maneuvering Characteristics Augmentation System (MCAS). MCAS was designed to address potential stall risks due to the aircraft’s altered engine placement.
Risk Management Failures:
Lack of Proper Training and Communication:
Boeing’s risk management failure began with a lack of adequate pilot training on the MCAS system. Pilots were not explicitly informed about the system’s existence and its potential impact on flight control.
The lack of effective communication between Boeing and the aviation regulatory authorities further exacerbated the issue. The Federal Aviation Administration (FAA) delegated some certification tasks to Boeing, which led to conflicts of interest and a lack of independent oversight.
Inadequate Risk Assessment:
Boeing’s risk assessment processes failed to identify the potential dangers associated with the MCAS system. The company did not adequately consider scenarios where the system could be triggered by erroneous sensor data, leading to unintended nosedives.
Overreliance on Single Point of Failure:
The MCAS system relied on data from a single Angle of Attack (AoA) sensor. This design flaw meant that a malfunctioning sensor could trigger the system, potentially putting the aircraft into a dangerous situation.
Boeing’s risk management team did not sufficiently consider the implications of a single point of failure in the system.
Inadequate Reporting and Transparency:
Boeing’s risk management culture lacked transparency in reporting issues related to the MCAS system. Employees reported pressure to prioritize project deadlines over safety concerns, leading to a culture of underreporting risks.
Strategic impact and consequences of poor risk management
In October 2018 and March 2019, two Boeing 737 Max aircraft (Lion Air Flight 610 and Ethiopian Airlines Flight 302) crashed shortly after takeoff, resulting in a total of 346 lives lost. Investigations revealed that the MCAS system was a significant factor in both accidents.
Grounding and Financial Losses:
The crashes prompted a global grounding of all Boeing 737 Max aircraft, leading to substantial financial losses for Boeing and its customers, including airlines and leasing companies.
Reputation Damage and Regulatory Scrutiny:
Boeing’s reputation suffered a significant blow, and the company faced intense regulatory scrutiny. Questions were raised about Boeing’s corporate culture, risk management practices, and relationship with aviation regulators.
The Boeing 737 Max crisis underscores the critical importance of robust risk management in the aviation industry and beyond. The failures highlighted in this case study—lack of proper training, inadequate risk assessment, overreliance on a single point of failure, and inadequate reporting—serve as cautionary lessons for companies seeking to balance innovation and safety. Effective risk management requires transparency, rigorous assessment, and a commitment to prioritizing safety over other considerations.
25 August 2023 Marty Windle SBL GURU