How to Implement Risk Management

Risk is defined as a measure of economic loss or injury in terms of both the incident likelihood and magnitude of loss or injury. It implies a probability of something occurring in advance. The average rate of risk considered to be tolerated for a given activity is known as acceptable risk. For example, an accident is one of the risks which is nothing but the combination of events or circumstances that leads to an undesirable consequence.

Risk Analysis: Risk analysis is nothing but the development of quantitative estimate of risk based on engineering evaluation and mathematical techniques for combining estimates of incident consequences and frequencies.

Managing Risk: Managing risk is the process by which the results of risk analysis are used to make decisions by means of risk reduction strategies or through the comparison with risk targets.

Risk consists of two components which are the probability of the accident and the consequences of the accident. The purpose of risk analysis and risk management in a chemical process industry is:

  • To characterize the risks associated with a chemical facility.
  • To determine how these risks can result in an accident.
  • To determine the probability and consequences of an accident (i.e.) risk.
  • In order to identify the risks, analysis is made by a risk management committee. This committee must be formed by a group of talented people having specific and relevant experience to chemical process under consideration.
  • There are a few steps in risk management. They are
  • The first step is to have a complete and detailed description of the system, process or procedure under consideration. This include physical properties of materials, design of flow sheets, operating temperature and pressure, instrumentation diagrams of process and other detailed design procedures with up to date information.
  • Next step is hazard identification. It is done by some established procedures.
  • Identification of various scenarios which could cause loss of control of hazard and result in an accident. Many accidents are due to the result of improper characterization of accident scenario. For a reasonably complex process there might be number of scenarios for each hazard.
  • Next step is the risk assessment step. It includes the determination of probability and consequences of the accident and is done for each of the scenario identified in the previous step.
  • The final part of the procedure is to decide if the risk is acceptable if it is not, then change must be done and the entire procedure must be restarted.

Thus risk management procedure can be applied to any stage in the lifetime of a process or procedure.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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