$06 Risk Management and Emergency Response
$06 Risk Management and Emergency Response
response
Outline
• Risk management introduction
• Health risk assessment
• Safety risk assessment/ management
• Business continuity planning
• Emergency response
• Community action levels
Risk management
• Risk can be defined as the likelihood of occurrence of an
undesirable event combined to the magnitude of its impact
– Risk= probability * consequence
• Risk management: the process of analyzing exposure to
risk and determining how to best handle such exposure
with systematic application of management policies,
procedures and practices
– Risk identification
– Risk analysis
– Eliminating or reducing risks
– Financing risks
– Administering the risk management process
Risk management objectives
• Preloss objectives
– Economy: minimizing the economic expenditures consistent with
postloss goals for safety programs, risk identification and analysis,
insurance premiums and so forth
– Reduction in anxiety: reducing the fear and worry over potential
losses
– Meeting externally imposed obligations: satisfying safety, health
and environmental regulations; satisfying employee-benefit plans,
acquiring required insurance
– Social responsibility: meeting the demands for good citizenship to
employees, customers, supplier, and the community. Maintaining
public image and social consciousness
Risk management objectives
• Postloss objectives
– Survival: being able to resume some operations following a loss
– Continuity of operations: to return to or continue full operations
keeping an interruption. There may be reduction in earnings
– Earnings stability: keeping earnings stable through continued
operations with cost control or from funds to replace lost earnings
– Continued growth: finding ways to expand growth by product
development. Market expansion, acquisition and mergers
– Social responsibility: taking care of employees, customers,
suppliers and the public. Maintaining public relations and public
image
Hazard risk assessment – step one
• Hazard identification
– Physical/chemical properties of the toxic substance:
solubility, chemical reactivity, molecular size, ion/non-
ion state
– Source of toxicity information
– Human data
• Epidemiological studies: prospective study, retrospective study
• Monitoring and surveillance
• Monitoring and surveillance
• Clinical studies
Hazard risk assessment – step one
• Hazard identification
– Toxicological study
– Acute toxicity studies: NOEL, NOAEL, LD50, LC50
– Chronic toxicity studies: mutagenic, teratogenic,
carcinogenic, other biological effects (heart failure,
liver disease, skin rash, etc.)
– Species of test animal
– Other variables affecting toxicity: age, sex, health
– In vitro tests
– Molecular structure- activity relation
– Other confounding factors: diet, lifestyle, occupation
Hazard risk assessment – step two
• Dose-response assessment
– Human studies
• Epidemiologic studies
• Clinical studies
– Animal studies
• Minimal effects determination
• Dose-response modeling
• Special issues, including interspecies conversion and high-to
low-dose extrapolation
– Physiologically-based pharmacokinetic (PBPK)
studies/modeling
How to obtain safe human dose?
Address uncertainty
Health risk assessment – step three
• Exposure assessment
– General information for each chemical
• Identify: molecular formula and structure, other identifying characteristics
• Chemical and physical properties
– Sources
• Characterization of production and distribution
• Uses
• Disposal
• Summary of environmental releases
– Exposure pathways and environmental fate
• Transport and transformation
• Identification of principal pathways of exposure
• Identification of principal pathways of exposure
• Predicting environmental distribution
Health risk assessment – step three
• Exposure assessment
– Measured or estimated concentrations
• Uses of measurements
• Estimation of environmental distribution
– Exposed populations
• Population size and characteristics
• Population location
• Population habits
– Exposure to toxic substance
• Route of exposure: skin, inhalation, ingestion, injection
• Duration of exposure
• Frequency of exposure
• Exposure to other toxic substance
Health risk assessment – step four
• Risk characterization
• Mathematical
• Unit and population risk estimates
• Threshold determination (e.g., safety factor approach, NOEL)
• Statistical characterization of uncertainty
– Formal decision analysis
– Inter-risk comparisons
– Qualitative-panel reviews
– Qualitative-informal scientific advice
– Risk-benefit analysis
Safe human dose estimation:
example
Risk management: key elements
• Hazard identification
• Consequence analysis
• Control or treatment responses (management)
• Procedures
– Operating
– Maintenance
– Testing and inspection
– Change control
• Training
• Emergency planning
• Accident investigation
• audits
Hazard identification
• Screening and ranking methodologies: early stages
of process development
– Hazard checklists or indices: Dow/Mond
• Structured approaches: later stage of design or
during operation of a process
– FMEA, what-if analysis, HAZOP, etc.
• Mathematical and probabilistic techniques:
reviewing complex interdependent systems
– FTA, ETA, etc.
Risk analysis approaches
• Qualitative approach expresses probability and/or impact
using and ordinal rating system to denote order
– Adjectives: high, medium, low
– Colors: red, yellow, green
• Quantitative approach expresses probability and/or impact
using numeric data
– 80% probability of occurrence
– $10,000 impact
– Three-week delay
• Semi-quantitative approach: use qualitative for probability
and quantitative for impact, or use qualitative analysis for
some risks and quantitative analysis for other risks
Risk analysis – qualitative approach
• Use description, requires definitions, rules, standards and processes
• Based on judgment, intuition, and experience
• Subjective, lacks hard numbers to justify return on investment
• Loose relationships
• Very limited analysis possible/limited resources
• Simple (non-specialized), fast and easy to administer and understand
for every one involved
• Start point for other approaches
• Rank and prioritize risks based on consequences
• Difficult to enforce uniformly across organization and projects
Qualitative risk analysis tools
• Interviewing
• Expect judgment
• Sensitivity analysis
• Job safety analysis
• FTA, etc.
• Analysis based on records of the operation
• Checklists and questionnaires
• Flowcharts
• Physical inspections
• SWOT analysis
Risk analysis – quantitative
approach
• Determine numerical values/data/hard data to costs
• Estimate probability of event occurring
• Defined relationships of components of the systems
• True mathematical analysis possible
• Resource intensive
• Potentially robust output/specialized
• Compute annual loss exposure (ALE) (via probability *
likely loss)
• Survey applicable controls and their costs
• Project annual savings from control
Characterisitcs of quantitative risk
analysis
• Can be unreliable/inaccurate/no accurate
probability database
• Probability is usually unique to case
• Expected loss hard to establish
• More time consuming,; requires estimation
• Misleading in that numbers may give appearance
of precision and specificity
• Difficult if team resists working with numbers
• Substantially more valuable in developing risk
response strategies and reserves
Quantitative risk analysis tools
• Expected monetary value analysis
• Decision tree/event trees
• Delphi (expert’s system)
• Probability distribution
• Bayesian analysis
• Monte Carlo Simulation
Semi-quantitative risk analysis
• Descriptors – some definition
• Perception – knowledge – other sources
• Judgments – experience – data
• Structured relationships
• Some structure to analysis
• Ranking based on qualitative and quantitative
information
• Less-specialized (but traps)
Sources of uncertainty
• Failure to consider specific scenarios
• Missing components in the hazard identification
• Lack of knowledge on risk probability or its
impact
• Assumptions may not be granted
• Improper hazard analysis method
• Improper parameter used for risk models or
computer simulation statistical analyses
Uncertainty analysis methods
• Initiating events
– Classical estimation by distribution functions
– Bayesian techniques
• Plant systems analysis
– Fault tree analysis
• Classical estimation by distribution function
• Method of moments
– Event tree analysis
• Discrete probability distribution (DPO) arithmetic
• Consequence analysis
– Complementary cumulative distribution function (CCDF)
– Sampling statistics (Monte Carlo)
The TARA strategy for risk
management
• Transfer the risk
– Mechanism to exchange the uncertainty of financial risk for the certainty
of a premium
– Analyze insurance options
– Sharing of investment
• Accept the risk
– Low impact
– Low probability
• Reduce the risk
– Business continuity planning
– Controls to inhibit impact threats
– Controls to compensate for impact of threats
• Avoid the risk
– Remove the cause or source of threat
Effective risk management
• Credible
• Organized and integrated the EHS risk
management program with the business
• Thorough (addressing the concerns of the public)
• Relevant, doable and economical
• Based on existing technology (with flexibility to
adapt to later advances)
• Publicized
• Visibility of EHS professionals on influencing,
advising and supporting the business
Risk financing
• Insurance
• Self-insurance: self funding, no risk transfer
• Exposures: candidate for insurance
– Product liability
– Environmental impairment liability
– Property
– Boiler and machinery
– Workers’ compensation
– Business interruption
– Directors’ and officers’ liability
– Vehicle liability
– General liability
– Inland marine (陆上运输保险)
– Fidelity (诚实保证保险)
Alternative risk financing techniques
• Cash flow plans
– Paid loss “retro”
– Incurred loss ratio
– Split payment plans
– Compensating balance plans
• Fronting plans
– The insured pays a fee to required certificates
– The insured signs a letter agreeing to pay the insurer for any losses
• Banking plans
– Can spread losses over long periods of time
– Pay an initial negotiated premium
– Final cost determined by a retrospective formula with annual adjustments
• Captives
– Insure the exposures of its owners or its owners’ affiliates
• Risk retention groups and risk purchase groups
Business continuity planning
(BCP) and emergency response
Crisis and emergency
• Natural events
– Cold weather (ice storms, blizzards)
– Hot weather
– Drought
– Tornadoes and hurricanes
– Floods
– Earthquakes
• Man-made events
– Hazardous material release
– Workplace violence
– Acts of terrorism: civil disorder
– Robbery
– Bomb threats
– Power outages
– Transportation crashes
– Fire
How likely your company will be
affected?
• Of the companies which suffer a disorder:
– 51% go out of business in 2 years
– 72% go out of business in 3 years
– 43% never re-open
– Only 6% survive
• 20% of small to medium companies suffer a
major disaster every 5 years
ER or BCP?
Corporate Crisis management Brand, image & reputation
protection, legal and
financial stability