How Insurance Works

Mod-01 Lec-03 Safety assurance and assessment(Contd)

So, ladies and gentlemen, we saw two examples.
Ultimately both examples were focusing on how to actually finance risk. The goal is
even if you invest on risk reduction, what would be your commitment towards finance,
what would be the return, what would be the benefit annually you get from that risk reduction
process, and of course, what would be the payback period of your investment. Now, we are interested in looking at a very
simple phenomena called how will you defeat an accident process. What are the steps involved
in defeating an accident process. What are the desired effects and what would be the
procedure the control them. The steps involved are the following initiation, propagation,
termination. The event that starts the accident is what we called as an initiative accident;
events that expand the accidents is propagation; and the events that stop the accident are
called termination. The desired effects on the events that would start the accident should
be diminishing. And the procedure to control them may be grounding, inerting, maintenance,
procedure, process design, training to reduce human error.
When you look at the propagation you do not want those events to expand to result in accident.
Therefore, the desired effect I want on propagating events should be diminishing. The procedures
to control them are emergency material transfer, less inventory of chemicals to be stored in
the working place, use non-flammable construction materials, installation of check and emergency
shutdown valves etcetera. And the events that stop the accident should be on the increasing
side that is the desired effect I want. And the procedure to control them would be end
of pipe control measures, effective firefighting equipments, effective relief systems on board,
effective sprinkler systems on board. After understanding how actually you would
finance risk. What are the different methods? The fundamental question which you may get
in a mind is, is there anything like acceptable risk? In on offshore industry can I accept
a risk, because risk is contemporary to safety? Whenever I say, I accept a risk, safety is
a question. Ladies and gentlemen it is very interesting to know that risk is acceptable
to regulatory agency and also to public. According to United States EPA criteria you have lifetime
risk of 1 in million that is 1 in 10 powers 6 is defined as an acceptable for carcinogens.
For non carcinogens, acceptable risk is hazard index of less than 1. According to UK health
and safety executive acceptable fatality accident rate is 1.0. So, all international bodies
basically specify an acceptable value of risk. Look at the fatality statistics for common
non-industrial activities. Before understanding, what would be such statistics for oil and
petroleum industry? Let us have a very common example of looking at non industrial activities;
this is suggested by loss prevention given by Frank P. Lees, Butterworth publications
reference. It is a simple table given by Frank saying
that interestingly even staying at home can have an FAR of three deaths at 10 power 8
hours; travelling by car can create an FAR of 57, and rock climbing can be as high as
4000. These are all non industrial activities; therefore you will not see any of these numbers
related to offshore and petroleum industry, we will talk about that in the coming slides.
What I want to apprise from the slide is there is an acceptable level of risk even when we
stay at home that is what Lee as suggested. I would like to just give you a tutorial sheet.
Interestingly can you try to solve these question which I posting to you? Remember that the
solution of this tutorial sheet is not presented in the presentation here. You have to write
your feedback and request for the solution from NP-TEL at IIT, Madras.
Identify major ways to prevent accidents resulting from fire and explosions. There are three
common systems use as a measure of accidents. Can you name them? Also indicate the most
important common feature between the three methods. Can you define individual risk and
societal risk? What do you understand by acceptable risk? As an employee of an oil industry, how
do you react to a term acceptable risk? We have some numerical questions also for
you. You are given two options to reach station A from station B. You wish to drive the complete
distance of 2200 kilometers between A and B by an average speed of 45 kilometer an hour
to reach the station by road; alternatively you are plan to fly and reach the station
B by commercial airlines which will just take 2 and half hours.
Now, the questions are the following: Which travel is the safest? A travelling by a road
at specific speed, B traveling by airlines a specific time, amongst these two if you
have got to travel which travel is the safest. Remember you have got to identify your answer
based on fatality accident rate in general. Table 3 for different fatality accident rate
for different modes of transport available in the presentation, I will just show you.
You got also find what is the fatality rate for the safest trip amongst this two? Now, the fatality statistics given for different
travel by Frank Lee are the following. So, travelling they air has a fatality rate of
240, whereas travelling by a car as a rate of only 57. Remember travelling by cycle also
has a fatality accident rate. Suppose you travel by a car at an average speed of 60
kilometers an hour. Do you think that FAR will change? Because the earlier example said
you are travel by 45 kilometer an hour. Do you think by increasing the speed of the car
the fatality accident rate will change? If you feel it is changing, will it increase
or decrease? Guess the answer; do not try to work it out again. You should also justify
your answer without working out the FAR in detail. I have a nother question for you – question
number 6. An employee works in the process industry with an FAR of 4.0. This industry
has normal working hours. As the employee gained experience in this tray, he wishes
to change his job. Another oil and gas company in abroad offered him a job. The work agreement
between the employee and the company says that is working hours are only 4 hours per
shift and shall have to work only for 200 days in a year. This is a part of the work
agreement shown to the employee by the company in advance. Now, the process industry and
the oil and gas industry as different FAR(s); for the process industry the FAR is 4; for
oil and a gas industry I have a table given to you.
With reference to that table you have got to suggest the following. Now the employee
is confused, why because the FAR ratio for oil and gas industry. It is much more than
the process industry. The employee is confused because he foresees a higher risk in oil and
gas industry compared to the current process industry where he is employed. But he expects
a financial gain by shifting his job. Now answer the following. Let us type to again
read the problem in understand. An employee works in a process industry. The FAR is 4.
He wants to shift his job from this industry to oil and gas company. The FAR for oil and
gas company is much more than 4. I have a table which I will show you what is the FAR
for oil and gas company. But the working hours of this company is scheduled in the agreement.
He has to work only for 4 hours per shift and has to only work only for 200 days in
a year. The employee is confused, because the FAR ratio or the FAR number given for
oil and gas company is much more, he foresees a higher risk. Now the employee opts for a change in his
job. Should he change the job? You must advise him as an HSE consultant, explains the basis
on which you will work out a safety in the new job. Suppose employee wants to shift back
to original employer after his abroad assignment is over. Can you advise him to bargain towards
his working hours, so that his face the same fatality rate as that of recent abroad assignment?
If so state briefly those lines of advice that you will sketch for him. Now, this part
is very interesting, the employee changes from FAR – 4 to an oil gas industry, as an
HSE consultant you advise him accordingly. But suddenly after working for some years
in the oil and gas industry, the employee wants to get back to the previous job. Now,
you have got again an advice accordingly what bargain he should do. he can now do a bargain
because he is more experienced. This is a very interesting table given for
you; taken from Bob Skeleton to 1997. For different industry got other different FAR(s).
For example, the employee is now working in a factory which is having an FAR of 4, the
employee wants to shift from a factory to an oil and gas industry which is FAR is 62.
And that is the worry what the employees is having, because this FAR is now moving 15
times ahead is worry. As a HSE consultant tell him should shift this job or not. The solutions for these tutorial sheets are
available on request. You have got to write to NP-TEL at IIT, Madras for requesting the
solutions along with a feedback for the problems. Let us look further beyond; I am interested
to do what I called as risk assessment. It has got two categories risk determination
and risk evaluation. What do you mean by risk determination? It is got again two branches
– first identify the risk and then estimate; both of them are called risk determination.
In identification, I will observe for new risks or for change in risk parameters already
existing. In estimation, I will determine the probability of occurrence of risk and
magnitude of the consequences if the risk occurs. Whereas in risk evaluation, I will
look for risk aversion or risk acceptance. In risk aversion, I will determine the degree
of reduction and the degree of risk avoidance, whereas in this risk acceptance I will establish
the risk references and risk referents. Let us take a specific case for risk assessment.
We will consider now a chemical plant, which I call as a process industry. The National
Academy of Sciences identified four steps in chemical risk assessment. I have a separate
module where I will explain in detail how to a chemical risk assessment. In summary
National Academy has identified four steps – hazard identification, Dose-response assessment,
exposure assessment, and risk characterization. What do you understand by hazard identification?
This includes engineering fault assessment. Basically it is used to evaluate reliability
of specific segments of a plant in operation. It determines probabilistic results. The method
employed is what we called as fault tree analysis. The dose-response assessment: This involves
describing quantitative relationship between the amount of exposure and extent of toxic
injury. Hazard of material is to be recognized before effects are assessed. Outcome will
be a linear equation relating exposure to disease. And a method used is regression analysis
of dose-response data The exposure assessment describes nature and
size of population exposed to the dose agent; its magnitude and duration of exposure. This
assessment shall include analysis of toxicants in air, water or food. And finally, the risk characterization is
an integration of data and analysis. This determines whether people will experience
effects of exposure or not. It includes estimating uncertainties associated with the entire process
of risk assessment. Now, let us look at some application issues
of risk assessment. Risk assessment often relies on inadequate scientific information
or lack of data – that is a very serious note, you do not have sufficient scientific
information to assist risk especially on oil and gas industry. For example, any data related
to repair may not be useful to assess newly designed equipment. Already we have shortage
of data even within the data there was a related to repair cannot be used for design. It means
that even though the data available is less, still all data related to that cannot be considered
as qualified data to do risk assessment. Then what do we do? Suppose, for example, we have enormous amount
of irrelevant data then what do we do? I can give you a specific code in toxicological
risk assessment. Generally the data related to use of them in animals is considered to
predict their effect on human beings. Now, one can say the effect of toxicants on animals
can be different to that of toxicant on human beings. So, one can also say it is an irrelevant
data, then do we do risk assessment? It is a good question. Do you think that risk assessment is going
to be a rigorous mathematics? The answer is yes, but it is simple and easy because we
use probabilistic tools to do that. For using probability; obviously, the data size what
we called as ensemble that is a main issue. But people still do conservative approach
to avoid overestimating risk. Others may use comparative techniques with several options
which will be discussed in different modules in the coming lectures. Why the approach is called a conservative
approach? Then what is quantitative risk assessment. In quantitative risk assessment, we identify
frequency of an event, its severity, then calculate risk rankings, then ascend them
and plan to reduce the risk this is what we address as risk management. We saw an example
of a, b, c, d sections of a plan given by Morgan analysis. We can also use what is called comparison
technique. This is what we called as qualitative risk assessment – this is done by conducting
a survey. You prepare a series of questionnaire then do risk rating. You try to understand
the plant a(s) risk compare to plan b form series of questions and c whether plant a
– is relatively safe compare b that is what we called as qualitative risk assessment. Now, William Fine has given a very good approach
for doing this. The reference is given in system safety journal 1971. This method is
applicable if cost to correct hazard is justified. Remember that in oil and petroleum industry,
if you are not able to justify the investment towards risk reduction or hazard investigation
then no industry will approve your methods of risk reduction at all. William Fine has
given a very interesting method to estimate the justification of such investments. This
is also suggest, how quickly hazards should be corrected. This method involves use of
risk assessment. Now, let us see how to estimate risk score
R. The risk score R is actually a product of C E and P; C is the consequence of rating,
E is the exposure value, and P is the probability value. Now, risk score can be used to decide
how quickly act to correct the hazards. The cost justification is then given by a simple
equation which is R by CF into DC. R is the risk score which I have already estimated
and CF is the cost factor and DC is the degree of the correction value. Now look at this figure. So that we can easily
estimate the probability that is the likelihood that accident sequence will follow to the
completion. Now, the complete accident sequence can be given a number. For example, if the
accident is most likely an expected result – if the hazard event takes place, I give
this rank as 10. If practically impossible sequence, I can give the value as 0.1. Look
at the exposure part it is basically covering up the frequency of occurrence of the hazard
event. If it is going to continuously occur then I can give a score of 10. If it is going
to remotely occur, I can give a score of 0.5. Look at the rating of the consequences; for
example, see in your calculation of analysis. If the consequence going to be catastrophic,
numerous fatalities is going to be expected, and the laws is going to be more than 100000
US dollars I can give the number as 100. If it is going to cost only a minor injury then
the consequence rank or rating can be simply 1. Look at the cost factor, if the estimated
dollar cost of the purposed corrective action is going to exceed 50000 US dollars, I give
a cost factor number as 10, if it is less than 25 US dollars I can make the cost factors
as 0.5. Look at the degree of correction which is
required if the hazard positively eliminated 100 percent. Look and give the rank as 1 or
the value as 1. If the slight effect on hazard is going to occur and less than 25 percent
keep this score as 6. If the risk score is obtained between 200 to 1500 then you must
recommend immediate correction action. So that the activity should be completely discontinue
until the hazard is reduced. If a risk score is lying between 90 to 199 then required attention
should be given as soon as possible. If of course, the risk score is coming less than
or between 0 and 89 then hazards should be eliminated without delay, but situation is
not very emergency. So, C, E and P values are selected from the
table just now shown to you. Cost justification is then estimated from a simple equation given
to you. If the justification is coming to be more than 10 then the cost involvement
is justified This method is used only for guidance. The value is given in the table
are only indicative. You can also prepare table of your own choice. One can also prepare
such table conducting a periodic survey. But interestingly the method provides a simple
way to evaluate the variety of hazards to present them to the management. I will take an example of offshore drilling
rig accident. The consequence of such accidents are hundred because when such accidents occur
it becomes catastrophic. Therefore C is 100; the exposure is 1, because rarely this kind
of event occurs. The probability of this accident is 10, because remember that this is not the
probability of occurrence of event. It is the probability of accident if it occurs we
will follow to completion. Generally all oil rig accidents follow to completion.
Therefore I have given this P number as 10. Now ladies and gentlemen, you can easily estimate
the product of these three which we call as risk score which is going to be 1000 for this
problem. Now, let us work out cost justification. This is simply given by the equation R divided
by CF into DC. I look for cause factor from the table back again, I put the value 10 here,
because the estimated damage level if at all any such rig accident occur is very high.
I also look at the degree of correction put the DC value as 6. You may wonder, I am giving
this very high value because the correcting measures taken will have very slight effect
on such hazards because all oil rig accidents are really accidents in a strict sense.
Whatever corrective measures you take accident still do occur. The corrective measures have
very light effect on controlling the hazard mitigation. Therefore I use 6 as my DC, now
I can easily work out the cost justification which comes to be 1000 divided by 60, which
is a product of CF and DC 16.66. Therefore, any mitigation methods suggested to reduce
such accidents is more than 10; therefore the cost involved is justified.
Look at the risk scores R which is 1000 – this falls between a value of 250 and 1500; it
means immediate correction of such accidents are required. This is very alarming because
detailed risk analysis is a mandate for such cases. All offshore industries conduct third
party HSE audits once in every year. So, ladies and gentlemen, we had a very explicit
presentation on telling you how to assess risk using different techniques. We have solved
three examples for you; I have left one tutorial sheet for you, which is having some objective
questions, subjective questions in theory, and some example problems to be solved. The
answers for tutorial sheets are available to you by request writing to NP-TEL at IIT
madras. Kindly give your feedback about the presentation and the lectures what you have
heard so far. And if you require any additional value to be added to presentation or to this
lecture kindly suggest your feedback with your affiliation to NP-TEL at IIT madras.
In the next lecture, we are going to look into much more in detail about the risk analysis
measurements and methods. Thank you very much.

Reader Comments

  1. @19;37 the table is not clear, i can't see it..Would you please kindly Zoom in or simply if you have it, can you post it here. Thank you.

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