RISK
MANAGEMENT?
Presented By:
KHURRAM ALI KHAN
MarshEFU
Risk Management
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Relevance of Losses to (Engineering) Risk Management?
Stages of Risk Management
 Risk Identification
–
what can go wrong
 Risk Quantification
–
probability and severity
 Mitigation
–
safeguards, “hard” and “soft”
 Risk Tolerance Criteria
–
Corporate, Legislative, Social
 Acceptability
–
ALARP “As Low as Reasonably
Practical”
Relevance of Losses ?
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Relevance of Losses to (Engineering) Risk Management?
 Tolerability criteria and Mitigation requirements, both legislative or
corporate, are often based on incident investigations
– ASME Boiler codes written in blood spilled in the 19th and 20th
centuries.
 Hauge street explosion, New York 1850 , 67 dead
 SS Pennsylvania, Memphis
1858, 250 dead
 Town and son factory, Yorkshire 1869, 15 dead
 “Rules for construction of Boilers” issued in 1914 as an act of
public service in response to numerous failures and mishaps in
ships, factories, steel mills and woodworking shops”
– Management of Change procedures – post Flixbrough and 28
fatalities
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Incre asing C onseq uen ce
Risk Evaluation – Risk Matrices
Frequency of Losses helps quantify probability
4 - Ca t a st ro ph ic
C
B
A
A
3 - C ritic a l
D
C
B
A
2 - M a rg ina l
D
D
C
B
1 - N e glig a ble
D
D
D
C
1 - U nlik e ly
2 - O c c a s ion a l
3 - P ro ba b le
4 - Fr e qu e nt
I n c re a s in g F re q u e n c y
CONSEQUENCE - People / Reputation / Environment / Assets
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Does Learning From Losses have a Shelf Life?
To help with this question we will examine a 1912
loss, the most famous maritime disaster in history.
Recognise this Ship?
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Recognise this Ship?
The White Star Liner’s The Olympic
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The White Star Liner Company
The Olympic: Commissioned
14th June 1911
The Titanic: Commissioned
11th April 1912
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Sinking of Titanic, 15 April 1912
 Owner: White Star Line
 Construction: Harland & Wolff, Belfast
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Olympic Class of White Star Steamers
 Developed by JP Morgan’s White
StarShipping Group
 Constructed by Harland & Wolff in Belfast
included The Olympic, The Titanic and
The Britannic
 Designed to compete with Cunard &
German Shippers on the prestigious
Transatlantic English Channel in the early
1900s
 Built for affluent travelers offering
highspeed luxury
– The prized ‘Blue Riband’ was
bestowed upon the ship with the
fastest crossing. Held by Cunard’s
Mauretania 1907-1929
Reference: ‘The Riddle of the Titanic’, Gardiner et. al. Orion, 1998
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Sinking of Titanic, 15 April 1912
 Details:
– 882 ft 9 in (269.1 m) long, 92 ft 6 in (28.2 m) wide
– Gross register tonnage of 46,328 tons
– Steam from 29 boilers powered two reciprocating steam engines and one
low-pressure Parsons turbine, which drove three propellers.
– Possible top speed of 23 knots (43 km/h).
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What has changed since 1912
 Information technology
– Computers, phones, radar
 Advanced materials – metallurgy, plastics, resins
 Huge advances in machinery design.
 Mass transit systems
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Timeline
 10 April 12:00 departure Titanic from Southampton on maiden voyage
to New York (via Cherbourg and Queenstown)
 12 April, reports of ice fields on course coming in
 14 April, increasing ice field reports, course altered to south, speed
maintained at 22 knots
 14 April, night: moonless, clam seas, temperatures just below freezing
 14 April, 23:00, Californian radioed more ice and mentioned it stopped
for the night because of pack ice, answer from Marconi radio operator
”shut up, shut up, I’m busy, I’m working Cape Race”
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Timeline
 14 April, 23:40
– “iceberg directly ahead” alarm from crows nest to bridge
– First Officer Murdoch ordered helm hard to starboard and engines
stopped
– to prevent stern hitting iceberg, he then ordered helm hard to port,
this manoeuvre came too early and
– ship’s bow hit undersea shelf of ice, causing damage to riveted
seams
 14 April, 23:52 decision to restart engines by Ismay, increasing leak,
with rivets popped open below water line over length of 90 m, allowing
increasing amounts of water to enter damaged
compartments, causing bow to sink, and water
eventually to rise above watertight bulkheads
terminating at E deck
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Timeline
 15 April, 00:10 distress calls started (SOS)
 15 April, 00:19 engines stopped for last time
 15 April, 00:27 first lifeboat lowered (with capacity for 65 people,
carrying 27)
 15 April, 00:35 distress rockets launched
 15 April, 02:20 Titanic sinks
 15 April, 04:10 Carpathia arrived on scene
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What lessons can we (still) learn ??
 Learning from previous Incidents
 Staff Selection
 Organizational Goals and Leadership
 Management of Change
 Material Integrity
 Emergency Planning
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The Olympic – Prelude to Disaster
Learning from Incidents and Staff Selection
 21st Jun 1911 – Upon commissioning
crashed into & almost sunk O.L. Halenbeck
in Manhattan
 20th Sep 1911 - Crashed into the Naval
Cruiser the HMS Hawke in Southampton
 24th Feb 1912 - Knocked-off one of its
twenty-six tone propellers on a well-known
wreck in the Grand Banks
 Captained by Edward J. Smith.
 Were large displacement effects
understood?
 How were people trained?
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Staff selection and learning from previous incidents
 Regarded as very experienced
but…..
 27th Jan 1889 - Ran The Republic
aground in New York
 1st Dec 1890 - Ran The Coptic
aground in Rio de Janerio
 4th Nov 1909 - Ran The Adriatic
aground outside New York
History of running ships too
fast through narrow
passages.. and of not
adequately training his officers
Captain Smith was commissioned to command the Titanic
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Setting the Right Culture
 Titanic was “Unsinkable” and specifically built to “Compete” for the fastest
Atlantic crossing
– This set the tone for poor decisions and leadership pressures
 Personnel competency and leadership (pressure to make fast crossing
 Incident investigation (no culture of near miss reporting and accident / incident
investigation on previous events involving captain Smith)
 Decision by Ismay (White Star Managing Director) to start engines after impact
and reach Halifax under own steam)
 Smith received at least six warnings of Ice from ships at dead stop in the area
 Titanic sped toward ice field at 22.5 knots vs a recommended 10
knots in such conditions
 No binoculars in the crows nest made early warning near impossible
 No need for lifeboats
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‘Safety outweighing every other
consideration’
Was the framed notice in the chart room of every
White Star liner in 1912
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Setting the right culture
“… I faced a dilemma on the day, standing 20 metres
from the explosion and the fire as to whether or not I
should activate ESD 1, because I was for some strange
reason, worried about the possible impact on
production …”
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Quality Control and Material Identification
 Asset integrity (rivets of best rather than best-best quality with high
concentration of slags)
 Shortage of skilled riveters
 Rivets popping contributed to speed of sinking
 Inferior quality of steel alloys is a genuine concern today
 Mix-up of materials is a known cause of incidents
– 2nd fire at Texas City
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Quality Control and Material Identification
 France: 6,500 faulty Chinese valves in use
 N-090925-02 Sud Robinetterie (SRI). Vannes Rigau S.A.S. On September 24,
the regional newspaper La Provence reported that it had exclusive
information, confirmed by Direction Régionale de l’Environnement, de
l’Aménagement et du Logement (DREAL – Regional Administration of
Environment, Planning and Housing), that several thousand substandard
Chinese-made valves were in use throughout French industry. The valves
were reportedly delivered to Vannes Rigau S.A.S., in Lille, on the orders of its
parent company in Marseille, Sud Robinetterie. The valves in question were
described as “corner or angle valves”, “globe valves”, and “flapper valves”, in
carbon steel, and certified by the German TÜV before their entry into France.
According to La Provence, the valves have incorrect heat treatment, and are
prone to leak at low temperatures. Expected to operate down to -10ºC, they
can only be used down to +5ºC. It was alleged that one of these valves may
have been involved in an un-reported incident at Total’s Gonfreville site in
April, 2009
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Management of Change
 Lowering watertight bulkheads to allow ease of movement of people
– As the bow sank, water came above E deck, accelerating the sinking as there
were no bulkheads to limit the ingress.
– Hazard evaluation (requirement to be unsinkable relies on integrity of watertight
compartments, see above)

Was the decision to change the rivets a conscious one?
 Lifeboats had been reduced for 64 to 22 in favour of more expansive promenade
decks cf Olympic design
 Insufficient to take the passengers and crew
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Management Of Modifications
As important as ever
Norway's PSA criticizes StatoilHydro's safety culture
In May 2008, StatoilHydro’s
Statfjord A platform, discharged
400 m³ of oil from one of the
shafts into the Norwegian North
Sea. StatoilHydro was forced to
evacuate 156 persons.
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Management Of Modifications
As important as ever
Norway's PSA criticises StatoilHydro's safety culture
 LONDON, September 27 2008 – Norway’s Petroleum Safety Authority (PSA)
has released a report attacking StatoilHydro's safety standards on the
Norwegian continental shelf
 PSA indicated dissatisfaction with the quality of the risk assessment
StatoilHydro and partners Industrikonsult AS (IK) and Aker Solutions AS
carried out for the modification work on Statfjord A's utility shaft. It said they
had failed to meet regulatory standards
 PSA issued an order to StatoilHydro to revamp its procedures for these
types of projects by November 1. It also ordered that management of
modification improvements be appreciably improved by December 1
 PSA also ordered Aker "to identify and implement necessary
improvements in the company's management of modification
assignments, including identification of risk and use of information
about risk in planning and executing hazardous work operations,
including the selection of work methods and equipment, and follow-up of
subcontractors"
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Emergency Planning
 Major accident potential (worst case scenario sinking) was discounted.
 Emergency response arrangements (total lifeboat capacity of 1,172 for
maximum number of passengers and crew of 3,547, however
complying with regulatory requirements.
– Original design had just about enough lifeboats
 The officers on board The Titanic had not trained with the lifeboats and
were unsure of their holding capacity.
 Smith often claimed to have never faced a “near disaster”
– Reportedly his performance deteriorated in the last two hours.
 Many people could not read the English signs
 There was not a standing safety-response plan.. the ‘Women and
Children first’ response was a (commendable) reaction more than a
previously-agreed plan.
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Lack of Emergency Planning – the results
 Lives Saved:
 Lives Lost:
 Total passengers
 Max Lifeboat Capacity
705
1500
2,205
1,600
 It wasn’t until 45 minutes after the collision
that officers commence preparing the lifeboats
 Twenty lifeboats were launched
 Officers feared that the ship’s davits &
winches would not hold the weight of the
recommended 70 people
 All but the last few lifeboats floated were
half-filled
 It is a fact that had the Officers filled the
lifeboats per their specification an additional
600+ people could have been saved.
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Does learning have a shelf life?
 The lessons from Titanic are still relevant today
 There are good lessons which cross between industries
 “Can we learn from the past”….the Risk Engineering team would say
yes!
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Learning From Losses – The Insurance Perspective
 Much has been written on learning from incidents
– Almost all clients have incident reporting systems
– Few formal systems for ‘third party’ incidents
 Major incidents occur relatively often somewhere
– Focus has been mainly on personnel safety
– Lessons do not appear to be new
 Major incidents continue to occur
 Lessons are well documented, but not always learnt by other
organisations
– A number of possible reasons for this exist
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Risk Management and Losses
“Why is learning from losses difficult?”
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(Not) learning from positive results
 Learning from Transformer fires ?
– See plenty of transformers with
no dividing fire walls
– See plenty of large transformers
with no deluge systems
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“Classic” Process Industry Losses around the World
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Date
Country
Fatalities
Injuries
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2004
Algeria
27
80
33
Date
Country
Fatalities
Injuries
Financial Loss (PD)
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2005
India
13
300
USD 380m
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So why do we not learn ?
 Distance effects
 Time effects
 Cultural effects
 Tunnel vision
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Distance effects
 Local awareness
 Local media pressure
 Local regulatory effects
 Potential differences between multinationals and NOCs
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Incident Timeline
1966
France
1975
UAE
1974
UK
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1987
UK
1984
Mexico
Risk Management
1989
Indonesia
1988
Brazil
1993
Venzuela
1992
France
2000
Kuwait
1998
Australia
2005
USA
2004
Algeria
2005
UK
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Time effects
 “Time is a great healer”
 Loss of experienced people
 Loss of corporate memory
 Young companies
– Not just in the Middle East
 Understanding Risk can change with age of plant
– “Has worked fine for 20 years”
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Loss Trends and Analysis
Losses by Age of Process Unit (excluding Nat Cat.)
 Only includes losses where age of process plant known (sample size of 79 losses)
 65% of losses involve process units >30 years old
 Typical design life 25-30 years
Losses by Age of Process Unit
3,500
3,000
Total Loss
(USD Millions)
2,500
2,000
1,500
1,000
500
0
<10yrs
10 to 20yrs
20 to 30yrs
>30yrs
Source: LIU Loss Database
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Cultural effects
 “It has not happened here”
 Engineers like to believe things work – not consider failure
 Flawed assumptions re “international standards”
 Personnel safety vs Process safety
 Fear of litigation
 Fear of blame
 Difficulty in challenging upwards in some cultures
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Tunnel vision
 Within a site
 Within a division
 Within a company
 Within the industry
 “Unsinkable”, “built to compete”
 Focus is on projects, rationalisation, expansion, staying afloat
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Feyzin, France 1966
Marsh
Date
1966
Country
France
Fatalities
18
Injuries
18
Extensive damage to nearby
village
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FEYZIN 1966 – The Lessons
 Design sphere drains / sample points
– with fixed valve handles
– to discharge outside shadow of sphere
– no catch pits under spheres
 Improved training about:
– importance of correct valve sequence and operating procedures
– BLEVE can occur with water sprays and open relief valve
 Improved means and training about raising the alarm
 Coordination of emergency plans with public authorities to stop public
traffic, etc.
 Improve fire brigade response times
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The effect of distance, time, and language ?
 Feyzin
– French spheres
generally good
– Japanese
spheres poorer
– Recent
Japanesedesigned
installations
below average
– Recent survey
found plant with
most ball-valve
handles removed
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What was learnt from these 2 incidents?
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1998 – Australia
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Longford vs. Texas City
 Longford Royal Commission Report 1998
 “Those who were operating GP1 on 25 Sept 1998 did not have knowledge of
the dangers associated with loss of lean oil flow and did not take steps
necessary to avert those dangers. Nor did those charged with
supervision of the operations have the necessary knowledge and the
steps taken by them were inappropriate”.
 Texas City Report 2005
 Raffinate Splitter Startup Procedures and Application of Skills and Knowledge:
“Failure to follow the startup procedure contributed to the loss of process
control. Key individuals (management and operators) displayed lack of
applied skills and knowledge and there was a lack of supervisory
presence and oversight during this startup.”
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Conclusions: how we can learn from mistakes
 Recognise barriers of time and distance
– Keep the lessons alive
 Recognise cultural barriers
 Promote culture of learning – not blame
 Share positives and negatives
 Recognise limitations of national and international standards
 Look at other industries, Columbia 2003, Nimrod 2006
 Extract value from your broker relationship .. It’s a great potential
knowledge transfer opportunity
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