Hazardous Material in the Economy of the United States - Assignment Example

 A B S T R A C T Hazardous material or HAZMAT are essential to the economy of the United States as they are used to fuel cars and trucks, heat and cool homes and offices, in manufacturing, farming and mining. A hazardous material may be in solid, liquid or gas form and may be radioactive, flammable, explosive, toxic, corrosive, bio-hazardous, an oxidizer, an asphyxiant, an allergen, or may have other characteristics. Hazards could lead to death, injury or damage to the environment. Risk reflects the range of the possible outcomes and the distribution of the probabilities of each outcome. Risk analysis and outcomes help decide on the risk management system. Human errors cannot be ignored but risks should be shared by all stake holders equally. Insuring HAZMAT only proves a disincentive to keep the system in place. Precautions and warnings are ignored. Technology has advanced and software helps detect the flaws in the system including spatial data. Even containers can be cleaned and warnings developed without stopping the process. Storing in-house keeps the firm alert to technology and responsibility although it does cost the firm in terms of time, technology and effort. This is more important than shirking responsibility on to the insurer or the transporter by insuring away the HAZMAT. A C K N O W L E D G E M E N T S TABLE OF CONTENTS 1. Introduction Definition of hazardous material 1 Hazards involved 1 Definition of Risk 2 2. Perception of risk and risk management process 3 3. Advantages/Disadvantages of Insuring 5 4. Review of Industries Disasters 7 5. Technology reduces risk impact Ultrasonic system 9 Advanced software – GIS 10 Regular Exercise System 11 Incidence Command System (ICS) 13 6. Analysis of Errors Human Errors 14 Social Errors 14 Technical Errors 15 Organizational Errors 15 7. Government Regulations 16 8. Conclusion 17 References 19 Introduction Definition of hazardous material Hazardous material or HAZMAT are essential to the economy of the United States as they are used to fuel cars and trucks, heat and cool homes and offices, in manufacturing, farming and mining. HAZMAT is transported by plane, trains, trucks or vessels and the quantity can be thousands of gallons at a time. A hazardous material (HAZMAT) is any solid, liquid or gas that can harm people, other living organisms or the environment. A hazardous material may be radioactive, flammable, explosive, toxic, corrosive, bio-hazardous, an oxidizer, an asphyxiant, an allergen, or may have other characteristics that make it hazardous in specific circumstances (Gourt, n.d.). Mitigating risks associated with these materials may require the application of safety precautions during transport, storage and disposal. Hazards involved Substances are hazardous if they are toxic, flammable, corrosive, or reactive. Toxic materials can be poisonous and can cause injury or death of inhaled, or through ingestion or absorption through the skin. Toxic materials are used to chlorinate the pool, as fertilizers and pesticides, in the science labs, in the print and art studio (Colgate, n.d.). Hazardous substances like gasoline and propane are flammable. Vapors from these materials can ignite from a single spark. The hazard becomes double because most flammable materials are also toxic. Some HAZMAT is also reactive. Sometimes even when combined with water they become violent or explosive. Some react when exposed to heat, shock, friction or pressure. Hazardous wastes are also dangerous if not handled properly. Some are even corrosive in natures and cause damage to the skin and eyes. HAZMAT can cause danger through spill or release. Even hazardous waste can cause danger if not handled properly. Definition of Risk Risk has been defined as “the level of exposure to uncertainties that the enterprise must understand and effectively manage as it executes its strategies to achieve its business objectives and create value” (Deloach, 2000 cited by Norrman & Jansson, 2004). Risk is thus the chance of a defined hazard occurring. This implies that an organization should be conscious of the probability of the events that might occur and the consequences of that event. Hence, risk reflects the range of the possible outcomes and the distribution of the probabilities of each outcome. While technological progress is accelerating, risks too are rising and require close monitoring. Technology enhances economic growth and improves the quality of life; it also helps prevent and reduce disasters but human errors cannot be ignored. New industrial products and process often hide lethal side effects that show up in the long run (Sinclair-Desgagné & Vachon, 1999). Risks can be catastrophic risks which are characterized by small probabilities of large, collective and irreversible losses. There can be dreadful outcomes linked to fire, leakage or an explosion. It could also be the outcome of malfunctioning of the system or misuse of technology. Exposure to hazardous industrial substances can also lead to outbreak of some disease which can take the form of an epidemic. In view of these, this paper will discuss whether insuring away hazardous materials is better than mitigating these risks using in-house and collaborative operational activities. Perception of risk and risk management process This process requires understanding the risk and minimizing the impact by addressing the probability and the direct impact (Norrman & Jonsson). The first step in risk management is to assess the maximum possible adverse outcomes. After identification or assessment, evaluations of the possible outcomes have to be done to ascertain the best possible way for risk management. It is equally important to know how to mitigate the issue if the accident does happen. After risk analysis, it is important to assess and prioritize risks to be able to choose management actions suitable to the situation. Past events, the possibilities and the outcomes are great indicators of actions to be taken. The process of applying risk reduction techniques is management of risk. Probability of risks could be reduced by improving risk operational process, and improving related processes like the suppliers selection. Risk could also be transferred to insurance companies or the transporters. Contracts could be used to transfer commercial risks. Risk could also be shared by contractual mechanisms and shared collaboration. Nevertheless risk assessment remains a controversial issue for several reasons. The majority of the technical risk assessment is rarely precise. There could be inaccuracies in the system’s description, lack of confidence in the statistical data, the diversity of assessment methods (Sinclair-Desgagné & Vachon). All these could lead to a significant error is risk calculation. Uncertainty is always attached to the risk assessment and uncertainty dictates priority setting. This helps one to decide whether to focus on the better known risks or the least known risks. Risk perception often depends upon people’s ability to recall or imagine. The degree of control one has over the risk also affects risk perception. An organization decides on the risk it considers tolerable based on its legal liability, assets and revenue, technological constraints and the insurance coverage that it can get. The perception of risk may differ between stakeholders and this gives rise to conflicts. Some stakeholders may question the transparency of the process and the objectivity of the experts involved. Advantages/Disadvantages of Insuring Sharing of technological risks amounts to allocation of priority of the financial liability of the potential damages. It has first to be ascertained whether the firm or its insurers, or the government would take the responsibility of restoring the environment and compensation of the victims. Most firms are not in a position to share the burden alone and often rely on the insurance company for support. Risk sharing makes all other agents also conscious of their responsibilities and accountable for their decisions. Even if a firm decides to outsource risky activities or insure away the hazardous materials, such sub-contractors would demand a risk premium. For activities like transportation, outsourcing is appealing since the premium that can be extracted is limited by the market structure (Sinclair-Desgagné & Vachon). In doing so, lesser effort needs to be devoted to safety. Smaller contractors would be willing to take the risks as they have very little to lose. In the event of an accident, they would seek protection under bankruptcy laws. They thus take fewer precautions and under invest in the process. It has been further noted that for technological risks insurance is not readily available and hence insurers cannot fulfill a role in risk sharing and reduction. If the risk is too uncertain for a firm to bear, the insurance company would also show ambiguity aversion (Sinclair-Desgagné & Vachon). Liability rules keep changing and exact actuarial data is seldom available, which deter an insurance company from covering technological risks. If complex technology makes the causal relationship between safety measures and risk reduction difficult to grasp, it aggravates the moral hazard. Once the firm is insured, there would be a tendency to take less precaution and this will also reduce the available coverage. The level of safety and prevention has to be perfectly understood by the insurance company otherwise the insured firm will tend to be less prudent, once insured. This implies that the insured firm must be made liable to bear some risk so that there is some incentive for risk prevention. Hence there is a tradeoff between optimal risk sharing and incentives to prevention and mitigation. Even the nation’s railroad industry is shouldering inordinately high risks which must be dramatically reduced through improved safety and there should be provision of reasonable liability protection (Hess, 2006). The railroads are required by federal law to provide rates and service upon request by any shipper. The insurance industry is unwilling to insure the HAZMAT associated with such shipments. While the HAZMAT constitutes only 0.3% of the total carloads, they cost the industry 50% of the total insurance cost. The legal liability should be with the parties responsible for the accident and shifting responsibility could have unforeseen consequences. It is likely to erode safety performance by the carriers and create a disincentive to address the many factors that add up to HAZMAT transportation safety. Review of Industries Disasters Risks in supply chains also increase as companies outsource activities and become dependent on other organizations. Such companies need to focus not just on their own risks but also on risks in other links in the supply chain. Disasters in supply chain can create devastating ripple effects like the flooding of the a Daimler-Chrysler plant due to Hurricane Floyd which was producing suspension parts in North Carolina, USA. As a chain reaction, seven of the other plants of the company had to be shut down for seven days. Toyota was forced to shut down 18 of its plants for two weeks following a fire in 1997 at its brake-fluid proportioning valve supplier (Norrman & Jonsson). Malaysia has rapidly industrialized in the last two decades and due to discovery of oil and gas in the country, there has been a growth in the chemical-related industries. While having its own benefits, such materials often pose health and safety hazards. Transportation of such materials is extremely hazardous. An explosion of a liquid petroleum gas tanker in Bangkok killed 20 people and explosion of a petrol tanker in Pakistan killed 50 and injured 70 people (Aini et al., 2001). Due to these, the interstate shipment of hazardous materials in Malaysia is of great concern as the potential for mishaps have increased. A study was conducted in Malaysia to assess the management system of emergency preparedness and response plan for hazardous material transportation by land. The study revealed that there was insufficient management in place for emergency response. It also revealed that the drivers or the transporters were unaware of the hazards associated with the material they transported and they were not prepared to deal with emergency situations. Most of the companies surveyed did not even meet the Occupational Safety and Health Act (OSHA) of 1994 which requires having a written safety and health policy. The lorries were equipped with basic equipments but not with proper facilities to handle chemical spills. This was mainly due to lack of legal requirements in Malaysia. Aini et al., suggest that the chemical-related industries should be made to adopt the international quality systems of either ISO 9000 or the specialized ISO 14000. Community awareness along with responsible employers is essential. Technology reduces risk impact Ultrasonic system In the petrochemical and oil industry leakage from corroded floor plates is a major environmental, safety and economic hazard. It is essential that storage tanks are regularly inspected and evaluated and preventive measures for oil and chemical leakages are taken. Internal storage inspection leads to losses on various counts including time and availability of the equipment. The hazardous cleaning process also involves high risk exposure of workers to chemicals. New technology has now been developed which involves in-service inspection of storage tanks by using ultrasonic (UT) systems and avoiding the inconvenience of emptying the tanks (Cruz & Rebeiro, 2005). The disadvantages of the conventional inspection methods can be mitigated to a large extent by the installation of RobTank Inspec. This does not require emptying and cleaning the tanks but at the same time ahs its own drawbacks. Sludge deposits at the bottom of the crude oil tank can only be reduced but not eliminate totally. Thus the remaining sludge can cause slippage and the different type of debris can disturb free movement of the vehicle inside the tank for inspection. Internal fixtures like drain wells and pipes can also cause disturbance in the free movement of the vehicle. Robotics in industrial applications is predominantly used in Japan and USA. European Union is seriously considering this specially in view of the savings that it would bring. RobTank Inspec can enter through a small opening on the roof of the tank. It can detect corrosion in critical areas and detect corrosion rates. Advanced software - GIS Processing, storage or transportation of chemicals in process plants is described as an accident, which may lead to injury, deaths or evacuation of people from the site. The development of Geographic Information Systems (GIS) technology helps to link the databases of hazardous chemicals and hazardous installations in a hypertext structure (El-Harbawi et al., 2004). GIS helps officials to pinpoint disasters and evaluate its consequences. GIS helps the planners and modeler to visualize the development changes to the landscape and to produce resultant input values. GIS software encompasses storage, retrieval, analysis and display of spatial-geographical data. There is constant development on the software. GIS provides a tool for entering and manipulating geographic information such as addresses and political boundaries, and helps create intelligent digital maps that can analyze, query for more information and print for presentation. The GIS software was employed in the LPG storage system. If the liquefied petroleum is stored in-house the following steps can mitigate the risks. The risk hazards associated with storage have to be identified after which techniques help to calculate the storage failure if any. The GIS software can then be employed to select procedures that can evaluate the hazard effects and finally a map of the target source can be created. The different types of explosion that can take place have to be assessed which would help to employ the right model. The GIS model was also applied at the swimming pool at University Putra Malaysia (UPM) to ascertain the impact of chlorine release in the area, the expected consequences, and actions needed to evaluate the probable effects on humans in the area. GIS helped to carry out the spatial analysis – through spatial query and spatial difference (Mustapha et al., 2004). The swimming pool is close to the residential area and chlorine powder is used to disinfect the tank. Chlorine gas is one of the ten hazardous chemicals most commonly involved in a release. It results in deaths and injuries. It was also used as a chemical warfare agent in World War I. the accidental release of such materials can present a serious threat to areas of population. As soon as indications of chlorine release are received, corrective steps can be taken. Apart from GIS, the Pasquill-Gillford Model helps to calculate chlorine concentration after the release. Analysis of the results from this model can be done using the probit correlation to indicate different dangerous zones. GIS can pinpoint the toxic release effects and map the risk area. The buffer zones in the swimming pool can be located in which the chlorine concentration is dangerous to human life. Even though GIS was introduced to the world in early 1960s by the Canadian Government, chlorine disasters have been taking place. The worst ever disaster was in Bhopal in 1984 when 4000 people lost their lives after water entered storage tank of methyl isocyanate causing overheating and release of methyl isocyanate vapor. Innovation and developments are continuously taking place and today industry is much better equipped than those days. GIS is a powerful tool now to indicate warnings. Nevertheless, it is important to know how long an explosive or inflammable and toxic chemical concentration can exist. Regular Exercise System While chemicals contribute to material prosperity, they also contribute to drawbacks of prosperity. Dangerous substances cause harm to man and the environment. Effective disaster management helps take a decision whether to insure away hazardous material or mitigating these risks using in-house and collaborative operational activities. Most industrialized countries have mandatory disaster exercises. Exercises are a valuable part of the emergency management in any organization. Disaster exercises permit inferential testing of the adequacy of the disaster plan (Peterson & Perry, 1999) apart from testing the adequacy of training of the personnel. It helps to uncover gaps in participant knowledge, skills and abilities. These exercises make the public conscious that the authorities are aware of the dangers involved. Communication systems and equipments are checked periodically. Mitigating risks is seen as prevention or stopping a negative event before it happens. When there is insufficient human control, actions are undertaken to reduce the negative events likely to occur. Evacuation planning is one such action. Preparedness for an activity involves planning, training and exercising. Exercises amounts to rehearsing response measures so that the organization is always equipped to handle disasters. It validates training and planning. Regular exercise trains and enhances the experience of the personnel responsible to tackle this and also help evaluate the threat data. To consider the impacts of the exercise, a study was conducted in a private industrial firm in USA (Peterson & Perry). Two classes of emergence responders were studied – professional firefighters from jurisdictions that would respond to accidents at the plant, and especially trained company employees who serve on the company emergency response team. A hazardous material accident scenario was created at a local manufacturing facility. One large tank truck carrying sulfuric acid and another small truck carrying hazardous chemicals were set and leaks from both the trucks were simulated. The drivers and a passenger were also asked to enact inhaling fumes. The result of this exercise revealed that regular disaster exercise does have a positive impact in handling situations. They have the ability to change participation perceptions of teamwork, response network effectiveness, training and equipment adequacy, and job risk. Responders reported a decrease in the perceived level of danger associated with their job. Since dealing with hazardous material is rife with danger, it can be surmised that the combination of training and experience obtained in the process of exercise participation could convince responders that careful adherence to protocol can reduce levels of risk. Thus if an organization undertakes proper planning, training and exercising, it is always prepared for risks. Each component is critically connected to the others and a failure in a single link can affect the entire process. Hence exercises are an avenue to continuous improvement in risk preparedness. Incidence Command System (ICS) ICS is an emergency response system that provides a uniform command system to manage any form of disaster. It covers five major functions including command, planning, operation, logistics, and finance (Shaluf & Ahmadun, 2003). The command function sets the objectives and priorities while the operational function is to develop tactical objectives while the planning function develops the action plan. The logistic function provides support to meet incident needs and the finance function monitors the costs related to incidents. Thus every organization should be equipped with all of these functions to meet any emergency situation arising out of storage of any HAZMAT. Analysis of Errors Human Errors Human error has invariably been found to be the reason for major industrial accidents. This could happen at the design, construction, operation or maintenance stage. Human error could be classified as slips and lapses, mistakes, misperceptions, mistaken priorities, and straightforward violations (Sinclair-Desgagné & Vachon). Poor involvement of senior executives in risk management is attributed to high levels of risk. In the Sevesco accident the directors of the corporation were unaware of the hazards. If they senior are involved, there it would result in stronger control over intermediate management decisions. Employees’ incentives should also be realigned with firm’s safety goals. Distribution of tasks should be such that it does not result in lack of coordination. Incentives would lead to efficient allocation of effort and different departments should be involved in the overall decisions about risk sharing and reduction. Highly automated plants require human intervention during emergency. Errors made by operators can include incorrect operation of the machine, testing the hazard material in an unsafe place, storing in unsafe locations, and incorrect repair and maintenance of equipments (Said et al., 2002). Social Errors Managers supervise the operators and make decisions directly affecting the operations. Social aspects like morals, personality, awareness, managerial decisions and experience have a bearing on the operation activities. Hence both management and operators directly or indirectly contribute to accidents. Lack of awareness, lack of staff continuity, lack of safety culture is the main cause behind technical errors (Said et al). Technical Errors Inappropriate design and equipment failure lead to disasters. When the relief valves, internal pressures, back pressure are not in alignment with each other, errors occur. Alarms may not have been set to warn the operators in time. High risk locations not properly identified, or the reliability of the control system not properly considered can lead to technical errors. Organizational Errors Such errors can occur when there is lack of safety and health policy or lack of integrity between organizations. Poor organizational communication is also responsible for disasters. Lack of management of change and the procedure to manage change in technology, facility and equipment if not included in the management system can result in disaster. Government Regulations OSHA’s Process Safety Management Standard (PMS) and Clean Air Act Amendments (1990) rule require employees to take a systematic approach to addressing safety and health hazards. This implies progress should be regularly tracked and controlled. This also includes employees’ participation and emphasis on performance based obligations under which firms can develop risk-management plans tailored to suit the location and industry (Shaluf & Ahmadun). The companies are expected to plan how they would respond to accidents, demonstrate their preparedness for such emergencies, and be conscious of the impact that accidents can have on the surrounding areas. OSHA also defines all duties of the employer, manufacturer, employee, self-employed person, importer, designer, and supplier. It concentrates on the health and welfare of people at work, and other people against risks to safety and health. In nutshell, it ensures that all parties at workplace are equally responsible for safety and health. Conclusion Insuring away HAZMAT would involve regular transportation by some means to the site where the materials are needed. This in itself is a risk as discussed above. The transporters are usually small firms with not much at stake and hence there is a tendency not to take precautions during transportation. The firms would tend to lack in preparedness and planning if it was insured by any other agent. The insurance industry is reluctant to insure unless proper precautions have been undertaken. Under the circumstances, the ideal situation would be if the insurance contracts can provide incentives for risk reduction by aligning their terms with good risk control measures. Better techniques should be employed to monitor and appraise initiatives in risk control. Third-party inspection helps to improve risk estimates which thereby enhances the role insurance can play in risk reduction and risk sharing. Risk control measures should include self-protection and self-insurance. This implies that a firm should take steps that the probability of loss is less and the loss itself is reduced. There should be an optimal combination of the two approaches to risk control. Human error cannot be ignored but involvement and initiatives by the senior executives helps to keep the lower employees alert to the risk factor and take necessary precautions. Besides, due to advanced technology, software allows early detection of dangers and extends warning signals. Human errors in planning, designing and operations can be avoided through proper coordination between different departments but it cannot be totally eliminated. Thus, instead of insuring away HAZMAT, it would be better to store in-house under maximum precautions, using the latest technology, software and equipments. This should be supported by the staff at all levels. Frequent transportation is a riskier proposition than storing HAZMAT in-house. The insurance industry should feel encouraged to extend insurance and the entire process should be finalized in collaboration with all the stakeholders which include the transporters, the firm and the insurance company. Unless the organization concerned has something at stake in case of an accident caused due to HAZMAT, there would be a tendency to shift responsibility to the insurance company. Hence, equal responsibility should be shouldered taking into consideration the technology available today. The government should have a coherent national policy to ensure this strategy. OSHA ensures safety and heath for all stakeholders, which includes suppliers and employees alike. By storing HAZMAT in-house, the trade off is increasing risks or shouldering responsibilities which would help to keep the staff alert at all times. Regular exercises would keep the system in place. Reference: Aini, M. 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