Sandvik’s newly located headquarters in bustling downtown Stockholm is just a short walk from Gamla Stan, the city’s pedestrian-friendly old town center. Brightly lit, colorfully designed and modern, the lobby and adjoining spaces are open and warm, inviting social interaction and collaboration. In fact, that’s the whole idea.
In large part, the company’s new home office—relocated a few years ago from the northern town of Sandviken, Sweden, to Stockholm—represents Sandvik’s revitalization. Founded back in 1862, Sandvik’s original operations were considered historic and innovative. The company specialized in manufacturing drill steel, stainless steel and cemented carbide. Production of cemented carbide tools began in the 1950s in Gimo, Sweden, about an hour north of Stockholm, near Sandviken. More on that location later.
Today, Sandvik concentrates on three core areas: tools and tooling systems for metal cutting as well as components in cemented carbide and other hard materials; equipment and tools for the mining and construction industries as processing systems; products in advanced stainless steels, special alloys and titanium as well as metallic and ceramic resistance materials. A 2011 restructuring resulted in three separate business areas at Sandvik becoming five. These five are Mining, Machining Solutions, Materials Technology, Construction and Venture.
Few if any companies can compete with Sandvik’s products. They are one of the leading manufacturers in Europe, and the 10th largest employer among Scandinavian countries, with more than 47,000 people representing Sandvik in 130 countries.
What is also impressive about Sandvik today is its sharp new perspective on managing risk, and on safety in general. In 2011, just shy of the company’s 150th anniversary, the company set out to redefine itself. They focused on the future, on the next 150 years, and on developing the guidelines for a major strategy shift. Many of their goals revolved around property loss prevention.
In the first decade of the 2000s, Sandvik had taken some losses. Not surprisingly, the incidents disrupted production. They were harmful to Sandvik’s reputation and unacceptable to management. That created a brief period of instability, which in turn set in motion a journey toward more conscientious loss prevention ideals.
“We were in a place where we thought it was time to set some new core values and new direction for the company,” says Jonas Gustavsson, president for the Sandvik Machining Solutions (SMS) business area. “One of the core values that we actually kept from the old ones is called fair play, and in fair play you invest a lot in the safety culture. In that regard, we wanted to set the industry standard.”
The company’s group risk management function also began to develop a Sandvik-specific property loss prevention program. This program was created with a focus on business continuity, to help the company keep its promise of delivering to customers. Group risk management further developed the Sandvik property loss prevention standard together with FM Global. This is the foundation of all Sandvik risk control efforts moving forward. This is true of SMS, in this case, but also across the other, aforementioned four business areas within the company.
Emelie Ekholm, group risk manager, and Henrik Paajarvi, property insurance and loss prevention manager, spearheaded Sandvik’s new approach to loss prevention. “We thought it was very important, based on our recent history, to enforce a ‘safety first’ culture beginning in 2011,” says Paajarvi.
"Today, we strictly enforce it, mainly to protect Sandvik personnel and everyone going into a Sandvik facility. We have a strong belief in this and everyone is aware of the safety culture.”
If insurance is the financial protection of a risk, loss prevention and loss mitigation are the operational protection. Driving loss prevention is an important element in the scope of Sandvik’s group risk management arm. “We have broadened the risk management function from the more traditional risk management model,” says Ekholm. “In the past, we have focused on tailoring the insurance terms and insurance coverage for different Sandvik groups. Now we have a common approach to risk so that it’s consistent within the Sandvik organization.”
Risk management today is also very linked to the business—looking at and unlocking potential opportunities. “Once a risk is identified,” Ekholm continues, “we now have a decision to make as to whether we take that risk or leave it. Taking the risk is about mitigating or preventing it—that’s the operational protection of the risk. Insurance is the financial protection of that risk.”
A consistent approach and organizational outlook to risk is essential when it comes to enterprise risk management. “The overall objective is to clarify the risk exposure of the Sandvik Group and to define and assess status of mitigation activities under way,” says Paajarvi. “The aim is to ensure that enterprise risk management activities across Sandvik are optimally integrated into the business.”
“The SMS business area is quite large,” says Gustavsson. “It’s the biggest business area in Sandvik, and we have been able to develop products and services over the years that have, in some ways, revolutionized the business. We have a fantastic competence, and we are investing heavily in both risk management and sales.”
"You can always improve your operations. You can always optimize the flow. I think for us to integrate risk management even further into our business will bring us to the next level."Jonas Gustavsson, President, Sandvik Machining Solutions
Still, Sandvik personnel are not resting on its laurels by any stretch. “It is really a tremendous area,” he continues, “but one thing we are learning is that historical success is not a guarantee for being successful moving forward. We have to earn the right to be the leader to our customers and maintain it."
Today, Ekholm and Paajarvi want no part of losses. “We wish not to have to accept losses,” says Paajarvi. “As a corporation we want to win; one of our core values is a ‘passion to win,’ and a big part of winning is meeting our customers’ needs. To achieve this, we transformed into a new risk management organization to better meet future risk exposures.”
Sandvik forges ahead on cultural transformation. Losses, should they occur, only provide lessons to be learned, and safety is paramount. Any visitor to a Sandvik site will be familiar with the company’s mantra “Safety First.” Even in the throes of organizational shifts, the concept of safety surged to the forefront of Sandvik’s corporate culture.
Ekholm adds, “One of the most important duties that we have as a department is to keep abreast of business knowledge. With five very different business areas, the organization—and Sandvik in general—vary a lot. In order to provide adequate and sufficient insurance coverage, we need to constantly be aware of what everyone is doing. We make sure we understand the unique risk exposures for each business area, and ensure that insurance coverage is refined and tailored for each.”
Going to Gimo
Gimo, Sweden, is small tangle of roads about 30 miles northeast of the university town of Uppsala and two hours southeast of Sandviken, the location of Sandvik’s original headquarters. The road to Gimo is flat and winding, through nondescript farmland and modest villages. That a manufacturing facility, run by a workforce of 1,600, is located somewhere along it is unlikely. Only frequent bus stops give any indication that there is more in the area than meets the eye.
Once inside the Gimo facility, the modest entrance belies the mammoth production facility that extends behind the scenes. It is here, at one of Sandvik’s most profitable sites, that tools for turning, milling and drilling are produced. The facility is impressively automated and sparklingly clean.
Per “Pelle” Jonsson is the security manager at the facility. “From the beginning, Gimo was viewed as very important by group risk management,” he says. “It’s a big plant that is important to Sandvik’s business. So they have been there a lot, both with and without FM Global to determine safety issues.”
Jonsson, a quiet, rugged man customarily outfitted in a long blue work coat, oversees fire protection, security, process safety and crisis management at Gimo. “There are four departments here that could have major risks,” he says, “the pressing area, where we have hydraulic presses; the grinding area, where we use oil for cooling; the spray dryers where the metal powder is being produced; and the surface treatment area, in our adjoining plant.”
Once risk management, together with the business, identified Gimo as mission-critical, changes started taking place. Investments were made, routines were altered and processes were changed. “In the beginning, the human element was the biggest consideration,” he says. “We implemented regular fire training for all personnel, and established new routines for quarterly checkups of equipment, evacuation exits and more.” This was a big change from the old days, when the facility wasn’t even thoroughly equipped with alarms.
Anna Junker, environment health and safety director and risk manager for the SMS business area, knew that prior to the culture shift in 2011 there were plenty of open recommendations. “I knew that when I started the work with property loss prevention, we had a lot to do. So now, when we get a risk report from FM Global, we follow it up like any other audit and inspection, to make sure we take action on it within three or six months, depending on the priority. Then we also make sure that the recommendation is closed. So we are focusing much more now on closure and on the findings to have one consistent plan for our risk improvement investments.”
“We have a really strong culture,” says Paajarvi, “not only in Gimo but throughout Sandvik. That culture states that we should follow all procedures and routines to ensure that we avoid any hazardous incidents. Then second,” he looks up and points to the ceiling, “we have installed a lot of sprinklers, investing in a thorough sprinkler protection system that covers high-risk areas.”
Of course, that installation initially encountered some pushback. Like many facilities outside the United States, Gimo had maintained a long-standing resistance to sprinklers for fear the water would do more damage to property than the fire itself. “People are more afraid of the sprinklers starting by accident, without a fire,” Jonsson explains. “That’s what people see in the movies, when a fire starts, how it looks like it’s raining everywhere.”
To overcome that fear and to understand the reality of a sprinkler system, Jonsson teamed with FM Global and a community fire service to demonstrate to staff how a sprinkler really responds in the event of a fire. “We set some oil on fire, the sprinkler head opened and water came out and slowly extinguished the fire. It was a simple but very effective demonstration. Everyone was like, ‘Oh, so this is how a sprinkler works!’”
The Gimo personnel also scrutinized its handling of ignitable liquids. Specifically, they ensured there were interlocks to automatically shut down oil and ignitable liquid pumps. “We use a lot of ignitable liquids such as ethanol, methanol and oil,” says Jonsson. “We’ve managed to get the operators to understand the risks as well and they are very careful. They now report incidents, which is valuable for us, so we can learn from the loss and prevent something bigger from happening. We can identify the risk and do something about it early.”
Taking it step by step
Across Sandvik, and at Gimo especially, the personnel involved in the company’s risk transformation feel a genuine source of pride. Their work, attention to detail and commitment to safety have all been successful, and that success has permeated the company both from the ground up and the top down.
“We saw a need to approach the risk management function a little differently,” says Ekholm. “So we created a plan and took it step by step. Going forward, we must really ensure that it’s consistent and widespread globally. It’s a source of pride now that we have risk management naturally embedded in our business.”
“Today, the Sandvik vision is to set the industry standard which also includes safety,” Paajarvi says, “just as FM Global sets the industry standard when it comes to property loss prevention. In fact, these are two concepts that fit very well together. We want to have the best available advice and support when it comes to property loss prevention. This is an area in which FM Global provides real value for Sandvik.”
Of course, there are always opportunities to improve productivity and performance, and Gustavsson, as business area president, specializes in finding ways to do so. “You can always improve your operations. You can always optimize the flow,” he says. “I think for us to integrate risk management even further into our business will bring us to the next level. It will be a continuous journey to improve upon the things we have done over the last few years.”
Pelle Jonsson, with his boots on the ground, will be one of those people tapped to execute the vision set out for him by Gustavsson and group risk management. “Sandvik has a saying, a core value,” says Jonsson, invoking the core value already mentioned by Paajarvi. “It’s a ‘passion to win.’ Sure,” he says, “that means something to everyone. To me it means having a ‘passion’ for my work. Although I’ve worked with risk and fire safety nearly all of my life, I still believe I can learn and do new things every day.”