Risk Management•Risk- Uncertainty of occurrence of anyunforeseen event•Pure Risk- Always leads to loss•Speculative Risk- May Result in loss or Gain•Static Risk- Results in loss•Dynamic Risk- May Result in loss or Gain•Commercial Trade Risk•Insurable Risk
Types of Risks•Material Risk- Building,Plant &Machinery,Furniture,Fixtures,fittings,Stocks.•Consequential Risk- Loss of production,Lossof profit,Loss of market,Good will.•Social Risk•Legal Risk- Product liability,Public liability.•Political Risk- Subsidies,Sanctions etc.
•Risk Management•Economic protection of Company’s Assets,Earnings & Liabilities.•Risk Management Process•Identification of Risk•Various Methods•Some are Quantitative,Some are Qualitative
•Check List•Flow chart•Risk Inspection•HAZOP•HAZAN•Fault Tree Method•Hazard Indices
Risk Evaluation• Arrange them in order of priority• Provide information for deciding the most appropriate way of handling.Ranking risks according to :1. Frequency of loss ; and2. Potential severity of loss.
Risk AnalysisRisk and Human behavior looks into psychology of risk. How others look at the risk? How they behave in the face of risk? How they behave in groups?Perception of Risk.
Risk analysis is to be carried out with properperception of risk of risk and cost involved inAnalysis.Not to stick to one methodUnderstand company and industryShould be financially reasonableAccurate record keepingAmount of imagination of required
Risk Reduction / Loss PreventionReduce probability of loss and its severity.Most important for RM process.Risk Reduction / Prevention can be from –•Loss prevention•Safety•Fire protection / Detection•Environmental protection
Risk Retention If,•Charge losses against normal operation cost.•Contingency fund.•Borrow the cost of any loss, repaying overagreed period.Risk Transfer : To insurers – Pure risks
Risk Management – Common Sense•Disproportionate Emphasis on Risk Financelike•Self Insurance Alternatives•Non-Insurance option of Retention•Assumption of Loss by Numerous Techniques•But not much attention on Loss prevention,Safety and Loss control
Risk Management•On going plan to avoid circumstances andevents that can cause loss & Minimize theoperational and financial impact of loss,should it occur.•Thus it includes loss prevention and lossfinance:
Mom and Pop Large Risk Business Light at night to Burglary Alarms, prevent Burglary Surveillance, Petrol’s, Electronic Sensors House Keeping House Keeping Loss Finance from Loss Finance from Insurance Proceeds Insurance Proceeds Withdrawal of Surplus (Savings) savings Loan from Banking Loan from BankThus, Risk Management principals for small and large risks are moreor less same.
Risk Management•It involves Insurance But is more thanInsurance•It is specified part of financial managementbut is more than that•It may require knowledge of chemicalprocesses, Fundamentals of Fire Engg.Physical properties of Different materials Butis more than that
Risk Management•Requires Statistical Techniques But is morethan Loss Statistics•Thus RM involves Multi-DisciplinaryApproach.•Insurance Managers, Fire Engineers,Statisticians and the like are Dealing withmany Aspects of Risk But no one takes overallview of Risk.
Risk Management•Risk Manager should look into overall viewof the risk.•Co-ordinate with various Line Managers toget the same.
Sources of IgnitionThe main sources of ignition involved in almost allindustries are: Smoking Heat of Cutting Spontaneous Oxidation from Grinding Welding Cutting Hot surfaces such as furnaces etc. Electrical sparking Arching Impact ignition
Risk Exposure Data – What to Look for ?Layout of the Plant.Interconnectivity of roads/ accessibility.Proximity to Fire Stations/ Police Station/ Hospital.Condition/ location and number of Emergency Exits/ Stairs/Gates.Earthquake Exposure of the Buildings.(Seismic Zone)Flood/ Inundation Exposure.Landslide/ Rockslide Exposure.Terrorism Exposure.Proximity to Water Bodies – River, Lake, Sea, Drains etc.Internal & External Drainage System.Congestion at the Site.Employee – Employer relations (Industrial Relation)Type of labour employed – young/ mature – skilled/ unskilled..Condition of Raw/ Process/ Intermediate & Finished Materialsstored – Flammable/ Hazardous.Major Changes in the future/ near past.
Risk Exposure Data – What to Look for ?Neighboring occupancies & their exposure.History of Natural disasters/ AOG Perils – Flood/ Eq./ Landslide/Storm etc.General law & order & political situation in the area.Terrorism exposure in the area.Adherence to No Smoking Regulation.Installation of FEAs – their adequacy and placement – theirmaintenance.General Awareness of the employees and their training regardingFEA appliances installed/ their usage.Presence of Trained full time Safety & Fire Officers & Staff.ISO CertificationsSHE policy/Maintenance philosophyEnforcement of work permit system (Hot/ Cold /electrical/atheights etc.)General housekeeping (Orderliness and cleanliness.)
Risk Exposure Data – What to Look for ?Management awareness & involvement in safety andsecurity matters.Quantity and quality of security staff..Regulation of entry and exit of persons, vehicles, trucks &materials.Source of water and quantity of storage facility.Condition of electrical wiring and installations.Condition of machinery, their maintenance, hazardsinvolved with them, presence of qualified personnel tohandle them.Condition of electrical equipment, their maintenance andpresence of qualified personnel to handle them.Condition of Buildings & their construction.Condition and construction of Boundary Wall.Exposed openings and presence of combustible materials.Quantity of Fire load.