introduction to risk based approch

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    A Risk-based Approach

    to Process RiskManagement

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    In Todays Operating

    Environment

    Management must make tougher decisionson risks:Acceptable risk - how safe is safe enough?

    Due diligence - what price for safety?

    Risk management - what are the options toreduce risk?

    Managing smart - what is the optimal solutionconsidering costs?

    Regulatory-driven minimal efforts are notenough

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    Underlying Critical Issues and

    Trends Facing Corporations:Challenging economic situation given new

    world economy

    More competitive business situation in afaster moving economy

    More regulations and performance-basedrequirements to comply with for safety,

    environment, health, and qualityRegulations are not always specific as to

    requirements leading to challenging decisions

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    Public Interest in Safety Is

    EmergingHealth, safety, and environment are more of

    concern to the public than ever before

    More news coverage than ever and increasing

    This is shaping public opinion and is setting higherstandards of care

    It is an indicator of the new awareness of safety

    More public involvement in risk decisions

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    Risk Tolerance Appears to Be

    LesseningThe public and workers seem less

    tolerant of risk

    Past practices may be unacceptable today

    The public expects minimal risk or evendemands zero risk

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    Liabilities

    Liabilities are increasing:

    Higher potential for legal action

    Higher jury awards for punitive damages

    Measured against higher standard of care

    More regulations to reference as precedent

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    What Is Needed:

    More sophisticated management of risk

    A risk-based foundation for the safetymanagement system established

    Integration of a risk managementprocess into the companys decision

    process

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    Goals:

    Reduce risk to acceptable levelsconsidering all stakeholders

    Who are the stakeholders?

    What is acceptable?

    How is risk to be measured?

    Provide a sound basis for making thesedecisions

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    Hazard Analysis and Risk

    AssessmentFoundation of risk management

    How can you manage risks that are either

    not known or not well understood?

    Provides an assessment of acceptability

    Provides an assessment of alternatives

    Provides consistency of analysis anddecisions

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    Traditional Measures of

    AcceptabilityRegulations

    Industry practice

    Company practice

    Engineering judgement

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    Modern Measures of

    AcceptabilityRegulations

    Industry practice

    Company practice

    Engineering judgement

    Risk-based decision making based onsystematic methods and risk criteria

    including consideration of costs

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    From Reactive to Proactive

    Develop a program for riskmanagement

    Train employees in risk principlesAddress key risks using these methods

    Make risk management a way of doing

    businessimbedded in the culture ofthe company as a standard work

    process

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    Hazard Analysis Definition A hazard analysis (HA) is a comprehensive study

    that: Identifies, and,

    Analyzes.

    The hazards of a process.It is the front end of a risk assessment.

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    Sequence of a Hazard Scenario

    Initiating

    Event

    Intermediate

    Events

    Final

    Event

    Dependent Events

    Operator

    Overfills

    Tank

    Level

    IncreasesInjury from

    Release

    ReleaseFrom

    Tank

    High Level

    Alarm

    Fails

    Operator

    Fails to

    Control

    Personnel

    in the

    Area

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    Risk Assessment Process Flow

    Diagram

    System

    Description

    Accident

    Severity

    Estimation

    ModifySystem

    Accident

    Likelihood

    Estimation

    Risk

    Determination

    Operate

    System

    Risk

    Acceptance

    Hazard

    Identification

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    Techniques Commonly Used in

    Hazard EvaluationCommonly used techs.:

    Hazard & operabilitystudy (HAZOP)

    Checklist analysis

    What-if

    What-if /checklist

    Failure modes & effectsanalysis (FMEA)

    Other techniques:

    Event tree analysis

    Fault tree analysisHuman reliability

    analysis

    Job safety analysis

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    Benefits of Hazard Analysis

    More complete awareness of hazards

    Provides a structured and systematic examinationof the hazards of a process

    Attempts to recognize all hazards

    Employee participation

    Gathers real input from the employees

    Concerns are discussed and documentedTeam is more informed about hazards

    Paramount to management/employee relationship

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    Benefits of Hazard Analysis

    Assists management in risk decisions

    Basis to assess if risks are acceptable

    Can be used to develop the most effectivestrategy to reduce or eliminate risks

    Provides a means to compare risks of

    different designs or operationsWorst firstrisks can be defined and

    addressed

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    Benefits of HA (Contd)

    Ultimate outcomes

    Improved safety performance resulting in

    less risk to the public, employees, propertyand the environment

    Assists with regulatory compliance

    Minimizes business interruptionImproves relations with the public and

    employees

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    EPAs Premise

    The public has a right and need forknowledge:

    chemical hazards they are exposed to

    programs in place to prevent releases

    emergency plans and proceduresThe public needs to have:

    open and honest information from industry

    reasonable levels of risk

    Industry has a need to have:the public informed of these hazards

    a cooperative effort of emergency planning

    trust of the community Slide 21

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    Example of Risk ManagementChallenge - Dilemma of EPARMP

    Described the hazard, not the risk

    Public may be misled by the presentation of worst

    case and alternative case scenariosNot a risk assessment only one or two cases

    No assessment of likelihood

    Subjective rules for alternative cases

    Recommended to prepare to understand riskmore exactly and to prepare for further

    communications with the public

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    23Slide 23

    How Industry Sees Their Worst Case Scenario

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    24Slide 24

    You are here

    How The Community Sees Their Worst Case Scenario

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    25Slide 25

    Its everywhere!!

    How The Community Sees All Worst Case Scenarios

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    RMP Issues and Solutions:

    Pressure will likely be put on companies thathave:

    The appearance of high exposure to the public

    Actual high incident frequencies (includingnuisance problems)

    Multiple fatality or serious injury accidents

    Incident which result in actual exposure to

    communityNo or poor detection, mitigation, and emergency

    planning for worst case scenarios Slide 26

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    RMP Issues and Solutions:

    Develop a risk-based (vs. only minimumregulatory based) risk management program

    Risk-Based Decision-Making processes can beemployed to:Determine the risk

    Identify and evaluate the risk reduction options

    Help management with the decision on bestsolution

    Make more consistent and justified decisions

    Manage public concerns

    Slide 27

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    Conclusions

    Risk based decision-making is required intodays business environment

    It involves a multitude of issues including:A full evaluation of risk

    The identification of options

    The evaluation of the cost-effectiveness of options

    Decision-making under uncertaintyCompanies need to be prepared for a greater

    demand for better risk information