E Risk Assessment & Management

What is Risk?

Types of risk

Operational risk
Technical risk
Health and safety risk
Environmental risk
Economic risk
Social risk
Political risk

Business risk

Risk?

Risk = Consequence x

Frequency

Impact

probability or
likelihood

What is the
consequence or loss?
$

PROFITS

MONTH

Failure Chronology
Weak
Systems

Hazards

Trajectory
Of Events

Organizational
Factors
Preconditions to
Unsafe Acts

Unsafe
Events

Incident

Types of Failure

Sporadic
Sudden, Direct

Chronic
Subtle, Gradual

Chronic Failure
Slow and occurs over time and erodes value from a
system.

Subtle and sometimes difficult to detect.

May undermine basic strengths and lead to a major
loss.

Exposure

Window of time in which a loss is possible.

Factor applied to adjust probability.
Failure is dependent on precise conditions being
met.
Contact between 2 energy sources
Direct line up (hazard and receptor)

Not all potential incidents will occur

But any potential incident could occur

Frequency / Probability

Can it happen?
How often can it happen?
How likely is it to happen?

Risk Analysis

HAZARD
IDENTIFICATION

Risk Assessment Methodology

OPERATING
HAZARDS

EXTERNAL
HAZARDS

NATURAL
HAZARDS

HUMAN ERROR
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
DEVELOP
MITIGATION
MEASURES

LIKELIHOOD
ANALYSIS

CONSEQUENCE
ANALYSIS

RESIDUAL RISK
MANAGEMENT

OTHER
CONSIDERATIONS

YES

OPERATION

NO

FURTHER
RISK REDUCTION
REQUIRED

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

System Risk
Organizations also need to be viewed as
systems.
A system is an array of components or
functions linked together by a common
purpose
Risk Management must identify and address
any system risks that can compromise the
business goals.

Total System Risk

A typical system contains a wide variety and range of
risks. These address different scenarios and impacts.

HIGH IMPACT - LOW PROBABILITY

HIGH PROBABILITY - LOW IMPACT

HAZARD
IDENTIFICATION

Risk Assessment Methodology

OPERATING
HAZARDS

EXTERNAL
HAZARDS

NATURAL
HAZARDS

HUMAN ERROR
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
DEVELOP
MITIGATION
MEASURES

LIKELIHOOD
ANALYSIS

CONSEQUENCE
ANALYSIS

RESIDUAL RISK
MANAGEMENT

YES

OPERATION

NO

FURTHER
RISK REDUCTION
REQUIRED
?

OTHER
CONSIDERATIONS

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

Hazard Identification
Conditions, devices or substances which directly cause
harm.

How to Identify?
Systematic
Awareness
ALL?

Management of Change
Change is any shift or alteration in
appearance, behavior or properties
within a system.
Unusual activity
Deviation from normal
measurement
Temporary arrangements

Examples of change

New regulations
New facilities
New procedures
New tools and equipment
Incremental change (creep)
Increased job scope
Altered work sequence
Replacement parts
Inexperienced workers
Inclement weather
Deteriorating materials

Human Error

Machines are predictable

Humans are unpredictable
Human error potential is a function of:

Frequency of task
Level of difficulty
Degrees of freedom
Level of stress

Previous Loss History

Indicator that a future loss can happen
Highlights similarities
Highlights differences
Test conditions for loss - are these met?
Test conditions to prevent loss - are these met?

Is your situation the same or different? Why?

HAZARD
IDENTIFICATION

Risk Assessment Methodology

OPERATING
HAZARDS

EXTERNAL
HAZARDS

NATURAL
HAZARDS

HUMAN ERROR
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
(Release, Incident, Impact)
DEVELOP
MITIGATION
MEASURES
CONSEQUENCE
ANALYSIS
(Safety,
Environmental,
Reputation,
Financial Impact)

RESIDUAL RISK
MANAGEMENT

YES

OPERATION

NO

FURTHER
RISK REDUCTION
REQUIRED
?

LIKELIHOOD
ANALYSIS
(Probability,
Frequency)

OTHER
CONSIDERATIONS
(Business, Feasibility)

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

Comparison of life threatening risks

C AU S E
ALL C AU S ES
H E A R T D IS E A S E
C AN C E R
M IS C . A C C ID E N T S
IN D U S T . A C C ID E N T S
FALLS
D R O W N IN G S
F IR E S
L IG H T N IN G

IN D IV ID U A L R IS K 1 0 -6
9000
3500
1600
500
120
75
35
20
0 .5

Individual Fatality Statistics

Probability of being struck by lightning;
= 1 in 1,000,000 or 1 x 10-6 per year

Probability of being killed in the

construction industry
= 1 in 1, 000 or 1 x 10-3 per yr

Probability of being killed in a road

accident = 1 in 100 or 1 x 10-2 per year

Dont start with numbers!

Establish the failure

Determine the loss.
Estimate the impact and probability of the loss.

Simple Risk Assessment

What could go wrong?
(What could cause it to happen?)
How could it affect me?
How likely is it to happen?
What can I do about it?
Used as a constant reminder in the workplace to
engage employees in the business of risk
management.

Formal Risk Assessment

Understanding of potential failure mechanisms.
Quantifies and ranks risks.
Determines whether activities, facilities or
systems are acceptable.
Evaluates the effects of change.
It quantifies and ranks risks for follow-up action.
Aids decision making.
Risk Assessment is not a rubber stamp license
to endorse change.

Biggest Risk?

Exercise #
Risk Ranking

HAZARD
IDENTIFICATION

Risk Assessment Methodology

OPERATING
HAZARDS

EXTERNAL
HAZARDS

NATURAL
HAZARDS

HUMAN ERROR
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
DEVELOP
MITIGATION
MEASURES

LIKELIHOOD
ANALYSIS

CONSEQUENCE
ANALYSIS

RESIDUAL RISK
MANAGEMENT

YES

OPERATION

NO

OTHER
CONSIDERATIONS
(Business, Feasibility)

FURTHER
RISK REDUCTION
REQUIRED
?

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

Risk Management

RISK

OPPORTUNITY

Risk Acceptance
Threshold level of risk acceptance depends on:
Background risk
Availability of resources
Availability of capital
Practical solutions available
Previous loss history
Contingency plans
External factors
Management discretion
Risk matrix is used to gauge risks.

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Risk Criteria

IMPACT

D
C
B
A
1

FREQUENCY

Risk Acceptance Will you fly?

Risk Acceptance Will you fly?

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What is acceptable?
HIGH
unacceptable
10-3

marginal
RISK

10-6

broadly
tolerable

LOW

Whiting Handrail 2003

Risk Evaluation
Frequency Band - MAR
(<10-6/yr)

(10-6 to 10-5/yr)

(10-5
to 10-4/yr)
Frequency

(10-4 to 10-3/yr)

(<10-3/yr)

HSSE

MAR Severity Scale

Consequences

Frequency Band
B

Re

e
uc

sk
Ri

(<10-3)

(10-3 to 10-1/yr)

focus
(>10-1/yr)

MIA
1

D
2

Texas City 2005

Tr@ction Severity Scale

PSM & IM
Standard
focus

BP Approach to Risk

12

HAZARD
IDENTIFICATION

Risk Assessment Methodology

OPERATING
HAZARDS

EXTERNAL
HAZARDS

NATURAL
HAZARDS

HUMAN ERROR
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
DEVELOP
MITIGATION
MEASURES

LIKELIHOOD
ANALYSIS

CONSEQUENCE
ANALYSIS

RESIDUAL RISK
MANAGEMENT

YES

OPERATION

NO

OTHER
CONSIDERATIONS

FURTHER
RISK REDUCTION
REQUIRED
?

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

Risk Reduction Measures

Well spaced facility - reduces impact
Upgraded metallurgy - reduces probability
Double mechanical seal - reduces impact and
probability
Warning sign - reduces probability
Use of fall protection equipment - reduces impact
High level trip - reduces probability
Spare equipment - reduces impact
Fireproofing - reduces impact

MAJOR ACCIDENT
THEORY
DEMONSTRATION

MAJOR
ACCIDENT

MITIGATION

CONTROL

MAJOR
HAZARD

PREVENTION

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Risk Reduction Measures

Exercise #
Prevent/Control/Mitigate

HAZARD
IDENTIFICATION

Risk Assessment Methodology

OPERATING
HAZARDS

EXTERNAL
HAZARDS

NATURAL
HAZARDS

HUMAN ERROR
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
DEVELOP
MITIGATION
MEASURES

LIKELIHOOD
ANALYSIS

CONSEQUENCE
ANALYSIS

RESIDUAL RISK
MANAGEMENT

YES

OPERATION

NO

FURTHER
RISK REDUCTION
REQUIRED
?

OTHER
CONSIDERATIONS

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

Residual Risk
Risk remaining after the implementation of risk
controls.
Should be measurably less than original risk.
Residual risks must be carefully monitored
Sometimes risk controls introduce a different type
of risk.
This part of the residual risk.

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Risk Controls
Well spaced facility - reduces impact
Upgraded metallurgy - reduces probability
Double mechanical seal - reduces impact and
probability
Warning sign - reduces probability
Use of fall protection equipment - reduces impact
High level trip - reduces probability
Spare equipment - reduces impact
Fireproofing - reduces impact

HAZARD
IDENTIFICATION

Risk Assessment Methodology

OPERATING
HAZARDS

HAZARD IDENTIFICATION
EXTERNAL
NATURAL
ERROR
What
wrong ?HUMAN
HAZARDScan go
HAZARDS
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
DEVELOP
MITIGATION
MEASURES

WHAT NEXT ?
CONSEQUENCE
ANALYSIS

RESIDUAL RISK
MANAGEMENT

HOW BAD ?
OTHER
CONSIDERATIONS

YES

OPERATION

WHAT DO
YOU DO NOW?
NO

LIKELIHOOD
ANALYSIS

HOW OFTEN ?

RISK
REDUCTION
APPROPRIATE

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

Risk Management Process

Leadership determines path forward
Document actions and assign
responsibility
Action resolutions are documented and
items closed out.
Implementation of mitigation
Control of risk in alternative manner
Manage residual risk

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HAZARD
IDENTIFICATION

Risk Assessment Methodology

SYSTEM
MONITORING

OPERATING
HAZARDS

EXTERNAL
HAZARDS

NATURAL
HAZARDS

HUMAN ERROR
HAZARDS

OTHER
HAZARDS?

SCENARIO DEVELOPMENT
DEVELOP
MITIGATION
MEASURES

LIKELIHOOD
ANALYSIS

CONSEQUENCE
ANALYSIS

RESIDUAL RISK
MANAGEMENT

YES

OPERATION

NO

OTHER
CONSIDERATIONS

FURTHER
RISK REDUCTION
REQUIRED
?

RISK
ANALYSIS

RISK ASSESSMENT
METHODOLOGY

Risk Communication
Risks fully understood by Management
and Staff.
Risk Management allows informed,
meaningful decisions based on
defendable criteria.
Key Risk Controls clear
Instill confidence for normal operation.

Documentation
Permanent record of all
proceedings including attendees,
date performed, assumptions and
rationale.
Required in case conclusions are
challenged. Opportunity to update
when more data available.
Should be appended to project
files.
Admissible evidence in court.

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Monitoring

Regular inspections
Surveillance cameras
Audit work practices
Analyse failure trends
Competency checks
Vendor source inspections
Etc.

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