Managings Strategi Risks: Chemical Plant Risk Assessment - Case Study Example

Managing Strategic Risks Chemical Plant Risk Assessment Table of Contents 1 Introduction 1.1 Overview of Scenario The Chemical Company in this risks assessment is located outside the Industrial Centre of the City and surrounded by near three housing estates and a small village. Operating in this location for over 40 years, the plant is along River Ure, home for salmon and other wildlife. The small chemical company processed, transporting, and selling Formaldehyde to industrial customers in UK and Europe. Formaldehyde is the most profitable product of the company but the local community is worried about it because although it was contained, the Formaldehyde leaking tank accident that occurred 3 years ago may be repeated in the near future. However, the plant still operate and tolerated due to the immunity provided by planning law for such site and the significant number of local residents working in the Chemical Plant. 1.2 Critical Risks Related Information of theScenario 1250 people work in this Chemical plant. Chemical plant is near a population of around 3,000 people Near a River habituated by salmon and other wildlife There was a leaking accident but was controlled 3 years ago. Community members near the plant already expressed their concern to the danger of Formaldehyde processing and transport. The Chemical Plant has been in operation in this site for nearly 40 years. Formaldehyde processing is profitable thus central to the company’s business. Research result suggest that exposure to Formaldehyde gas is indeed dangerous. 2 Chemical Plant Risk Assessment 2.1 Formaldehyde Chemical Composition and Structure Formaldehyde is also as formalin. It is the simplest of aldehyde is an organic compound with the formula HCHO or CH2O. Other information and structure of this organic compound are shown below Chemical Composition: 2.1‑ Formaldehyde Figure 2.1.2.1‑1 - Formaldehyde structure 2.1.1 Typical storage tank, drums, and transport for Formaldehyde Figure 2.1.2.1‑2 - Typical formaldehyde indoor storage tank Figure 2.1.2.1‑3 – Typical transport tank for formaldehyde 2.1.2 Formaldehyde processing, storage, and transport risks 2.1.2.1 Formaldehyde can cause fire and explosion Formaldehyde is 37% Formaldehyde and 63% Water but it can cause fire and explosion when exposed to heat or flame. It has 185 °F flash point: (85 °C) closed cup. Its lower explosion limit is 7 % while upper limit is 73 %. Auto ignition Temperature - 806 °F (430 °C), Flammability (OSHA) Category 4 flammable liquid, Fire suppression: Use dry chemical, “alcohol foam”, carbon dioxide, or water in flooding amounts as fog . 2.1.2.2 Exposure to Formaldehyde is Harmful to Health Formaldehyde can enter the body through ingestion, inhalation, skin absorption, and eye contact. However, exposure to formaldehyde is only considered when it is about 0.1%, airborne concentration exceeding 0.75 parts of formaldehyde per million parts of air (0.755 ppm) as an eight-hour time-weighted average, Short-term exposure limit (STEL) is about two parts formaldehyde per million parts of air (2 ppm) as a 15-minute STEL . 2.2 Risks Assessment and Management 2.2.1 Objectives The objectives of this risks assessment and management is to identify risks in Formaldehyde processing , storage and transport, determine the impact of identified, prioritized risks by probability, perform risks treatment and control analysis, enter risks information in Risk Register, show proof that risks have been reduced to acceptable level, Initiate measures to monitoring the performance of applied control measures. 2.2.2 Risk Identification 2.2.2.1 Risk Identification Using Root Cause Identification Method Root causes are the most basic causes that can be identified and corrected to reduce the probability of recurrence . Root cause identification according to include three important steps, determine events and causal factors, coding and documenting root causes, generate recommendations. See Table below for determined events and causal factors. developed safe handling and storage requirement for Formaldehyde as shown below. Figure 2.2.2.1‑4 – Safe Handling and Storage Requirements Considering the above handling and storage safety requirements, a number of risks may be identified by reversing the safe process as shown in the table below. Table 2.2.2‑A – Probable risks when safe handling and storage is done the other way. No. Risks Assigned Code Likely Trigger or Causes 01 Under ventilation, exposure to sunlight, ignition sources resulting to fire and explosion FR1 Poor safety management 02 Storage temperature setting error leading to leak or explosion FR2 Operator’s inadequate knowledge / skills 03 Formaldehyde exposure to lack of respiratory equipment FR3 Poor safety planning & Inadequate safety equipment 04 Incompatible chemicals and solutions mixing resulting to fire and explosion FR4 Inadequate knowledge / skills, poor safety management 06 Corrosion in tank and barrels resulting to leak and exposure FR5 Error in tank design or inadequate maintenance 07 Poor work practices resulting to toxic gases exposure FR6 Poor work practices, poor safety culture, inadequate knowledge / skills 08 Poor safety management resulting to off-site leak and pollution FR7 Poor safety management 09 Error in tank design leading to leak and explosion FR8 Error in tank design 10 Inadequate maintenance resulting to explosion FR9 Inadequate maintenance 11 Improper installation resulting to electric shock and explosion FR10 Error in tank design or improper installation Figure 2.2.2.1‑5 – Formaldehyde Risks and their Root Causes 2.2.3 Risks Probability and Impact Analysis using Event Tree Method The Event Tree probability and impact analysis shown below for FR1 and FR2 below can be applied to risks FR3 to FR10. EVENT TREE 2.3.2‑A for FR1 EVENT TREE 2.3.2‑B for FR2 2.2.4 Risks Prioritization by Probability Ranking Table 2.2.4‑B Risk Probability Ranking / Rating and Criteria Risk Probability Ranking Rank Rating Probability Criteria 1 Very Low Very Unlikely (10%) Never occurred and will never occur in the next 10 years 2 Low Unlikely (30%) Will not likely occur during a 10 year period 3 Medium Likely (50%) Probably will occur during a 10 year period 4 High Very Likely (90%) Almost certain to occur anytime Table 2.2.4‑C – Process Risks Priority by Probability Ranking Code Risks Description Trigger Rank FR1 Under ventilation, exposure to sunlight, ignition sources resulting to fire and explosion Poor safety management 3 FR4 Incompatible chemicals and solutions mixing resulting to fire and explosion Inadequate knowledge / skills, poor safety management 3 FR5 Corrosion in tank and barrels resulting to leak and exposure Error in tank design or inadequate maintenance 3 FR2 Storage temperature setting error leading to leak or explosion Operator’s inadequate knowledge / skills 2 FR3 Formaldehyde exposure to lack of respiratory equipment Poor safety planning & Inadequate safety equipment 2 FR6 Poor work practices resulting to toxic gases exposure Poor work practices, poor safety culture, inadequate knowledge / skills 2 FR7 Poor safety management resulting to off-site leak and pollution Poor safety management 2 FR8 Error in tank design leading to leak and explosion Error in tank design 2 FR9 Inadequate maintenance resulting to explosion Inadequate maintenance 2 FR10 Improper installation resulting to electric shock and explosion Error in tank design or improper installation 2 Table 2.2.4‑D Process Risks Severity and Ranking Severity Rank Criteria High 5 Would prevent goals and objectives from being achieved Significant 4 Would cause significant problems or delays in objectives being achieved Medium Low 3 Would cause problems that can affect objectives Low 2 Would cause relatively minor problems or delays in objectives Insignificant 1 Would probably not affect project implementation Table 2.2.4‑E Process Risks Priority by Severity Code Risks Description Initiating Events Rank FR1 Under ventilation, exposure to sunlight, ignition sources resulting to fire and explosion Poor safety management 5 FR4 Incompatible chemicals and solutions mixing resulting to fire and explosion Inadequate knowledge / skills, poor safety management 4 FR5 Corrosion in tank and barrels resulting to leak and exposure Error in tank design or inadequate maintenance 4 FR2 Storage temperature setting error leading to leak or explosion Operator’s inadequate knowledge / skills 4 FR8 Error in tank design leading to leak and explosion Error in tank design 4 FR9 Inadequate maintenance resulting to explosion Inadequate maintenance 4 FR3 Formaldehyde exposure to lack of respiratory equipment Poor safety planning & Inadequate safety equipment 3 FR6 Poor work practices resulting to toxic gases exposure Poor work practices, poor safety culture, inadequate knowledge / skills 3 FR7 Poor safety management resulting to off-site leak and pollution Poor safety management 3 FR10 Improper installation resulting to electric shock and explosion Error in tank design or improper installation 3 2.2.5 Risks Treatment and Control using Accept, Transfer, Mitigate, Avoid Strategies Table 2.2.5‑F - Risk Treatment, Control, and Criteria Risk Treatment & Control Codes and Description CRITERIA TREATMENT CODE CONTROL CODE Organisation sees the risk acceptable and merely prepare a contingency plan in case it occurs. ACCEPT 1 Contingency Planning A Organisation see the need to apply control measures MITIGATE 2 Apply control measures, train staff, upgrading equipment, detailed planning, improve management & supervision, open communication, etc. B Organisation decided to undertake contingency planning, disaster recovery & business planning, REDUCE 3 Plan and prepare, allocate funds, train staff in emergency procedures C Organisation decided to share some part of the risk to another party TRANSFER 4 Contract provisions, outsourcing, insurance coverage, and so on D Organisation decided to cancel activities that are likely to generate the risk whenever possible AVOID 5 Cancel risk generating activities E Table 2.2.5‑G Process Risks Treatment and Control Codes and Description Table 2.2.5‑H Formaldehyde Processing Risk Register RISKS REGISTER FOR PROCESS No Risks Code Initiating Events Probability Severity Treatment Control 1 Under ventilation, exposure to sunlight, ignition sources resulting to fire and explosion FR1 Poor safety management 3 5 2 & 4 B & D 2 Storage temperature setting error leading to leak or explosion FR2 Operator’s inadequate knowledge / skills 2 4 2 B 3 Formaldehyde exposure to lack of respiratory equipment FR3 Poor safety planning & Inadequate safety equipment 2 3 2 B 4 Incompatible chemicals and solutions mixing resulting to fire and explosion FR4 Inadequate knowledge / skills, poor safety management 3 4 2 & 4 B & D 5 Corrosion in tank and barrels resulting to leak and exposure FR5 Error in tank design or inadequate maintenance 3 4 2 & 4 B & D 6 Poor work practices resulting to toxic gases exposure FR6 Poor work practices, poor safety culture, inadequate knowledge / skills 2 3 2 B 7 Poor safety management resulting to off-site leak and pollution FR7 Poor safety management 2 3 2 B 8 Error in tank design leading to leak and explosion FR8 Error in tank design 2 4 2 B 9 Inadequate maintenance resulting to explosion FR9 Inadequate maintenance 2 4 2 B 10 Improper installation resulting to electric shock and explosion FR10 Error in tank design or improper installation 2 3 2 B 2.2.6 Risk Matrix of Likelihood and Severity 3 Strategic Risks Assessment 3.1 Strategic Risks Categories & Examples Political – regulations, change of government or policy, political instability, law enforcement, restrictive legislations, destabilization, passage of laws , . Environmental –climate change, weather, natural disaster, outbreak of disease, changes in the environment due to human activity . Social – public protest, large-scale or violent labour strikes, concealment of information, suspicion of hazard, public perception the possibility of accident . Technical - rapid changes in technology, over-dependence on technical expertise and inaccessible bodies of knowledge, risk associated to people operating machines and equipment, and others . Legal –legal dispute or court decisions imposing limitations, penalties, damages, and compensation, breach of contract, new laws threatening the interest of the chemical plant, and others . Economic –funds shortage, cost overrun, increased operational expenses, low competitive advantage, decreasing customers, exchange rates, and other financial risks . 3.2 Risks Root Causes Identification Figure 2.2.2.2‑6 – Root Causes Identification results Table 2.2.6‑I – Risks Root Causes by Category Code Risks Initiating Events Risk Category SR1 Change in Planning laws Political SR2 Change in Health & Safety Regulations SR3 New & more restrictive laws SR4 Contamination /Pollution Environmental SR5 Climate Change SR6 Natural Disaster SR7 Pressure from Environmental Groups SR8 Public protest Social SR9 Labour strikes SR10 Media suspicion of hazards SR11 Rapid change in technology Technical SR12 Over-reliant on expertise SR13 Inaccessible knowledge & skills SR14 Legal Actions or dispute Legal SR15 Court decisions imposing penalty & others SR16 Shortage of funds Economic SR17 Cost overrun SR18 Low competitive advantage SR19 Dissatisfied customers 3.3 Strategic Risks Treatment Strategy (Accept, Transfer, Avoid, Mitigate) Table 2.2.6‑J - Modified Strategic Risk Treatment & Control Criteria Strategic Risk Treatment & Control Criteria CRITERIA TREATMENT CODE CONTROL CODE Organisation sees the risk acceptable and merely prepare a contingency plan in case it occurs. ACCEPT 1 Create contingency plan A Organisation see the need to comply and apply control measures MITIGATE 2 Apply control measures and follow environmental pollution control standards, train staff on safety, upgrade equipment, enhance safety measures, conduct detailed planning, improve management & supervision, open communication, create emergency plans, develop effective HR, PR, Media, Employment strategies, R & D, B Organisation decided to share some part of the risk to another party TRANSFER 3 Contractors, outsourcing skills & expertise, acquire insurance coverage, and improve HR processes. C Organisation decided to cancel activities that are likely to generate the risk whenever possible AVOID 4 Cancel risk generating activities D Table 2.2.6‑K – Chemical Plant Strategic Risks Treatment and Control Code Risks Initiating Events Risk Category Treatment Control SR1 Change in Planning laws Political 1 A R2 Change in Health & Safety Regulations SR3 New & more restrictive laws SR4 Contamination /Pollution Environmental 1 & 2 A & B SR5 Climate Change SR6 Natural Disaster SR7 Pressure from Environmental Groups SR8 Public protest Social 1 & 2 A & B SR9 Labour strikes SR10 Media suspicion of hazards SR11 Rapid change in technology Technical 2 & 3 B & C SR12 Over-reliant on expertise SR13 Inaccessible knowledge & skills SR14 Legal Actions or dispute Legal 2 & 3 B & C SR15 Court decisions imposing penalty & others SR16 Shortage of funds Economic 2 & 3 B & C SR17 Cost overrun SR18 Low competitive advantage SR19 Dissatisfied customers 3.4 Strategic Risks Management 3.4.1 Integrated Risk Management Approach Figure 2.2.2.2‑7 Integrated Risk Management (Source: ) 4 References Ale, B. 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