Risk Management: An Overview
Risk management concept has found applications in various organizations, businesses and in engineering projects and forms part of active organization strategic management. The success of the organization business strategy and even plans is dependent on the organizations or companies efforts to develop an effective risk management system. Effective risk management strategies allow organizations to identify their projects strengths, weaknesses, opportunities as well as threats. It is a broader concept and therefore involves the understanding of the various risk factors or hazards which could eventually contribute to a potential loss or danger to the people, the environment and the organization at large. Risk management can be well understood as a continuous and proactive process of identification, evaluation, and prioritization of risks and application of resources through coordinated efforts to minimize monitor as well as control the probability or the impact of unfortunate events. This essay presents a case based risk analysis report from the Tianjin China Exploration of the 13th August 2015. The story will provide an understanding of the critical issues which have a significant impact on risks associated with engineering activities such as safety and environmental management systems. Particular focus will be on providing an understanding of risk management, risk assessment, and risk mitigations plans as a critical process of risk management in engineering.
The risk is defined or understood to be a possibility of injury, loss or environmental injury which is usually created by a hazard. It is therefore essential to know that the relevance of risk to a company or organization is a function of an unwanted incident and the impact of its consequences. All projects would involve an absolute magnitude of risk even if the plans were similar to previously completed ones. In case of engineering activities, risk management is mostly understood as the process of analyzing exposure to losing as well as taking the appropriate steps or putting in place the proper measures to eliminate the risk or reduce it to acceptable levels (Sarfraz, Qun, Hui & Abdullah, 2018). The eventuality of risk can affect people, environment, company or organization assets as well as production. With this understanding, most engineers or company, when developing risk management systems focus on the hazards relevant to their work which in this case may be chemical hazards, thermal hazards, mechanical forces as well as electrical hazards. They will then analyze the risk from these hazards concerning injuries, environmental, asset destruction as well as a business financial loss (Kotb & Ghattas, 2017). Risks, therefore, present various strategic issues to the company or organization such as legal issues, human resource issues, and environmental issues as well as fiancé issues. These are the critical issues which should be taken into consideration when developing an organization risk management system.
The Tianjin China explosion was a series of the explosion which led to the death of over 170 people while others (700) were left injured and missing from 12th of August 2015 to 18th of August in the same year. The explosion took place at a container warehouse owned by Ruihai International Logistics at the port of Tianjin (China Explosions, BBC News, 2015). However, the cause of the explosion was not identified in the first days of the investigation until a report that was published leading the object to the overheating of a container that contained dry nitrocellulose and hence chemical explosion. Therefore exposed warehouse chemicals were found to have been the cause that threatened the safety and health of the residents as well as the businesses around the explosion site (The New York Times, 2015). Ruihai International logistics, the company which owned the warehouse, was found to have stored hazardous chemicals which posed a danger to the lives of both businesses and people in the surrounding. Such compounds included sodium cyanide, butanone, toluene diisocyanate as well as natural gas.
Risk and Engineering Activities
The environmental hazards as a result of the chemical explosion according to the Tianjin and China ecological officers included; an expressed concern over an increase in the levels of sodium cyanide as much as 300 times than the average safety level. They also expressed concern over the increased levels of cyanide in waters around Tianjin port to have risen 277 times higher than the acceptable levels. Their report also expressed concerns over the thousands of fish which were found dead and washed the Haihe River ashore near Tianjin.
Over 100 people lost their lives according to CNN News, while 700 people were left injured and 50 people were also left missing among which included the employees working in the warehouse. 17000 homes were destroyed affecting over 300 000 people while property which included warehouses, port building, processing factories, residential homes were extensively damaged. Thousands of shipping containers were also damaged beyond salvage with companies such as King Tran International logistics which was located 500 meters from the explosions being extensively damaged and projected to have undergone great financial loss (CNN, 2015). Companies such as Toyota Motor Company Ltd and the Deere & Co limited had to shut down their operations as well. The activities of two of the Tianjin port were also suspended while ships carrying chemical substances were also barred from entering the central zone of the port which is situated close to the explosion site. Railway and roads network in the place were vigorously damaged while others were shut down such as the railway line of the subway system serving TEDA as a result of extensive damage.
The primary factor that contributed to the loss of lives and property was attributed to exposed hazardous chemicals that threatened the safety and health of the residents and businesses in and around the explosion site. However, human and organizational factors have been found to be the leading primary cause of the Chinese Hazardous chemical explosion and in particular the 12th August Tianjin Port fire and explosion (ABC News, 2015). This can be attributed to lack of an effective risk management system by the organization as well as residents and companies surrounding the explosion site. Ruihal International Logistics Company which owned the warehouse was found to be storing the hazardous chemicals without proper permission and was not also compliant with Chinas safety regulations (Crain Communications Inc. 2015). Therefore the strategic legal issues were not taken into consideration as part of risk management by the company. The legal requirements according to Chinese safety rules required that in the event of establishing such a chemical storage facility, it should be at least 1000 meters away from any residential properties, public buildings as well as from road networks such as highways. However, according to a report by an Associated Press (AP) online map indicated that the warehouse owned by Ruihal International Logistics Company was established just 500 meters of both an expressway or road and rail network and 100,000 square meters of an apartment complex (The Associated Press, 2015). As a result of lack of adherence to legal strategy and safety rules, other companies such as the Kingtran International Logistics, a subsidiary company of the Evergreens Company was also established 500 meters from the explosion site.
The Tianjin China Explosion: A Case Study
Every project or business has a potential or possibility of risks due to the principle of uncertainty in risk management. As a result, the control of every organization or company has to set and comply with specific regulations aimed at curbing or reducing the consequences of risks in the event of occurrence in future. Such risks may include financial risks, legal risks, environmental risks as well as human resource strategic risks. Risk management, therefore, involves the identification of hazards, assessment of their probabilities and consequences as well as the development of effective management strategies and continuous monitoring of the projects new state with the aim of maintaining situational awareness of any changes that may pose any potential threat. The management of the company, therefore, failed to put in place an effective risk management strategy and as a result, both the company human and organizational factors were found to be the prime cause of the chemical explosion.
Financial risks accruing from the explosions include the destruction of property worth millions to the company including the storage containers, processing factories which were damaged beyond salvage. The company faced a legal risk by adhering to the Chinese safety regulations and also by not having proper permission to establish the warehouse (Want China Times, 2015). The Chemical materials kept under the warehouse were also found to be more than the allowed levels as well as storing the chemicals close to residential areas. As a result of the explosion, the environment was exposed to higher risk through pollutions and disposal of toxic substances which were a significant health concern to the residents around the explosion site. The sodium cyanide chemicals presented a tremendous environmental risk to not only human beings but also to the animals such as fish (IBTimes Co. Ltd, 2015). Due to frequent explosions from the site the human resource were also affected as they feared the danger and health risks from chemical blasts and therefore could not access the section concerning the production activities of the companies in the place.
The development of an active risk management systems calls for the development of equally effective risk assessment strategy. In engineering, it is very useful, and the process must be conducted before the start of any project for proper planning and to enable the contractors to mitigate any possible risk that could pose a danger to the lives of people working in the project (Carbonara & Pellegrino, 2017). Risk assessment has, therefore, become a standard phrase in not only health but also in safety and environmental management. It refers to the careful examination of hazards in the workplace which could cause harm to people whether from the activities or external factors such as the layout of the premises and the evaluation of the extent of the risk involved by taking into account the existing precautions. In our case study, this would imply a careful examination of any threat such as chemical explosion risks, the inflammable capacity of the chemicals, the possible damage to the people around the premises, etc. and putting in place the necessary precautions such as establishing the warehouse at a distance away from any residential and transport infrastructures. However, most businesses have misunderstood the concept of risk assessment as a complicated and challenging process.
Environmental Hazards and Impact of the Explosion
Hopkin, (2018) in his article describes risk assessment as useful in that it helps in identifying different ways of enabling safety for employees as they carry out their duties and also helps in identifying practical steps to protect them from the risks that cause real harm and suffering to them as well as to the environment. However, its effectiveness is depended on the motivation and interest of the team, the resource availability, management support, training, commitment and relevant experience. After the risk assessment process has been done, possible interventions should be agreed with the workforce to ensure that the solution is carefully implemented, monitored and evaluated. Monitoring and reviewing the findings should be done continuously to assess the effectiveness of the control measures and also to ensure that the risks have been reduced appropriately while providing that no other dangers or hazards have been created in the process (Alshammari & Simpson, 2018). However, for the effectiveness of risk assessment process, communication system should be implemented, and the project directors should ensure that they communicate what exactly they are doing to reduce the risks, engage other representatives or stakeholders in the process to ensure that everyone participates in the process. This is because ignorance and indifference have been the main limitations to successful risk assessment process. It has been argued that most accidents happen or are associated with the breakdown or defects in organization management system not because people don’t know about mitigating the risks but due to their failure to use the knowledge.
Every project has a potential to experience different types of risk during implementation or even after application. It is, therefore, the responsibility of the owner through the directors of the projects to ensure that adequate and timely risk identification is performed. The earlier the risks are identified, the earlier the mitigation and management plans are made (Gurses, Rosen & Pronovost, (2018). Therefore it is essential for the company or organization through the project directors to ensure that all the project management personnel to be trained on risk management methodologies, the training should cover not only the risk analysis techniques but also the managerial skills for interpreting risk assessment. The objective of risk identification should be to identify all possible risks associated with a particular project or work (Xing & Guan, (2017). However, it is important to note that different organizations or companies employ the use of various risk identification tools depending on the nature of their work, their objectives as well as the available resources. For our case study on the Tianjin chemical explosion, the use of the following risk identification tools would help the management and workforce of Ruihal International Logistics Company to develop an effective risk management system.
During the process of risk assessment, a risk can be said to any significant event that the management or directors of the project would deem not wanted by the sponsor of the project to happen. Such risk may include failure of the project to meet its scope, mission, quality as well as performance objective, any budget override or even a schedule or timeline override (Gupta & Thakkar, 2018). However, it is important to note that different risks occur due to various causes or are triggered by multiple risk factors. The primary objective of the failures modes and effect analysis as a tool of risk identification is the identification of root or common causes which may affect the entire project. This tool of ID is, therefore, a discipline that is employed ion assessment and identification of risks qualitatively. It, thus, ranks the possible dangers for further investigation but does not quantify the threats by the probabilities.
Human and Organizational Factors in the Explosion
The tool is based on a subjective assessment of the relative magnitudes of the risk events based on their potential impacts and employs the use of a ranking scale of 1 to 10. The relative magnitude is then multiplied by the relative likelihood of the risk which is also under a scale of 1 to 10. The risk assessment also employs the use of another parameter to assess the degree of warning that the project will have regarding the real occurrence of the risk event (Keller & Gollwitzer, 2017). This parameter will play an important role in offering management support by enabling them to establish early warning indicators for serious risks. For instance, chemical storage warehouses should employ the use of explosion sensitivity and detection risk assessment tools to help in detecting early warnings of any chemical explosions.
This technique is widely used for reliability and safety analysis and is more useful for risk assessment in developing monitoring programs. It would be instrumental in producing a monitoring program for chemical explosions in a chemical processing industry or warehouse. It conducts risk identification through a top-down deductive approach which visually depicts a failure path or chain. The failure tree describes a risk-based path that helps in identification of the cause of the risk. Once the threat has been identified, the analysis drives the management or the project team to take actions intended to mitigate the chance before the project launch.
An effective risk management strategy will involve the following stages; the risk assessment process, risk identification, risk prioritization, risk treatment as well as risk monitoring and review.
Risk assessment: will be done to assess the cause of risk in a working environment and develop appropriate precautionary measures to protect the employees.
Risk identification: this will be done to identify the possible risks and to establish the relationship with the cause to ensure that adequate measures and training is done to mitigate the risks.
Risk prioritization: the prioritization of the risk should be done after they have been listed regarding their levels of administrative reviews and considerations.
Risk treatment: the risk will then be treated based on their priorities with the most likely to occur been given the priority and also based on their impact on the overall project.
Risk Monitoring and Review: the risk management committee should ensure that a continuous monitoring and review process is done to assess the contribution of the measure put in place and also identify any likelihood of a new risk.
Risk perceptions are built on feelings that a risk may occur or has a potential of occurrence while on the other hand risk communication involves an interactive process that includes the exchange of information and opinions among individuals, groups or institutions on a risk or potential risk to human life, health as well as to the environment (Savoia, Lin & Gamhewage, 2017). The communication, in this case, must be a two-way and multidirectional engagement with the affected groups so that they can make informed decisions to protect themselves as well as to protect their loved ones.
Strategic Issues in Risk Management
Development of a risk communication plan is very fundamental in the risk management process. Ignoring or misleading people in an organization is considered to be a process of losing the organizational strategy. Development of effective communication plan and skills will involve the following steps;
Establishing and maintaining dialogue; a multi-dimensional conversation should be kept with the key affected groups of people which may be the employees working in the chemical storage warehouse or the communities surrounding the facility.
Maintain a constant communication; the communication should be kept ongoing all throughout the process of risk management as this helps in making every one participant in the process of risk management
Creating and maintain trust; honest is essential in the development of an effective risk management system as it helps in reducing the barriers to useful implementations such as risk perception and ignorance. It is therefore essential to communicate and discuss every happening to the affected people in the process of risk management.
Empowering people; it is essential to focus on empowering people with the relevant risk management tools by educating and training them on risk analysis, assessment, and management skills.
Conclusion
Risks are inevitable in society due to the increased uncertainty involved in project development and implementation. However, developing effective risk management systems in the organizations is critical to the improvement and safety of the employees, the community as well as to the environment. It is the responsibility of the project owners and the directors to ensure that all the organization workforces are equipped with the rights skills of risk management. However, it is most important to ensure that the relevant safety and environmental regulations are taken into consideration before the development and implementation of any project. If the human and organizational factors which led to overlook of the legal and environmental safety regulations were adhered to by the Ruihal International Logistics company management, this risk would have been mitigated or reduced to a controllable or manageable level.
References
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