Engineering Risk Management
Description
This revised and updated 4th edition of Engineering Risk Management (ERM) presents an understanding and insights into what risk is, what it constitutes, and how to interpret the building blocks of the concept. It promotes a culture of risk awareness and integrating risk management principles and practices into the educational environment. This is essential to ensure that students have the knowledge and skills to identify hazards and assess and control risks in different contexts through the development and implementation of a risk management curriculum.
The book also elaborates on the differences between safety and security, and risk management metaphors. Models, theories and principles are discussed, as well as risk assessment methods, risk treatment, risk resilience and micro-economic approaches to optimizing risk decision-making. Some iconic major accidents are explained, followed by examples of practical implementation of ERM in chemistry, physics, and nanotechnology.
Overall, the interface between risk management and education is essential to develop a generation of professionals who can effectively deal with risks in a variety of contexts. By integrating risk management principles and practices into the educational process, educational institutions can help ensure, that their students are well prepared to meet the challenges of the modern world.
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Prof. Dr. Thierry Meyer received a diploma degree (MSc) in chemical engineering from the Swiss Federal Institute of Technology in Lausanne (EPFL) in 1986. He was awarded in 1989 a PhD at EPFL for his thesis on micromixing in highly viscous polymeric media. From 1989 until 1993, he worked in the Chemical Engineering Institute as senior scientist in the field of polymerization reactions. In 1994, he joined Ciba-Geigy SA in the pigment division as successively development chemist, head of development a.i. and finally production manager for high performance pigments. At the end of 1998, he returned to the Chemical Engineering Institute of the EPFL in Lausanne and was appointed "maître d'enseignement et de recherche" (MER) to lead a new research group in the field of polymers and supercritical fluids, and to teach in the fields of process development, introduction to chemical engineering, polymer and organic chemistry at bachelor and master levels to chemists, chemical engineers and material science students. In 2005, he took on the responsibility of the occupational health and safety service of the school of basic sciences on top of his research activities dealing with risk management and supercritical fluids. He is presently teaching introduction to chemical engineering at bachelor level, risk management at master level and specific courses on safety aspects in research activities. He is also active as adviser and expert in risk assessment and chemical engineering matters for the ICC (International Chamber of Commerce) of the World Business Organization, as well as for several assessment companies and for major and SME's chemical industries. Thierry Meyer is currently member of several international associations of the European Federation of Chemical Engineering and American Chemical Society. He was chairman of the European Working Party on Polymer Reaction Engineering from 2001 to 2006. He is member of several editorial boards: Chemical Engineering Research and Design, Macromolecular Reaction Engineering, Chemical Engineering and Technology.
Prof Dr. Genserik Reniers obtained a Master's degree in chemical engineering at the Vrije Universiteit Brussel and received his PhD in Applied Economic Sciences from the University of Antwerp. He lectures amongst others in chemistry, organic chemistry, chemical process technology, and Technological Risk Management at TU Delft and the University of Antwerp. He is also visiting professor of Security Management at the Antwerp Management School, Risk Management at ITMMA, and Risk Analysis in a Postgraduate Disaster Management at VESTA. At the Hogeschool-Universiteit Brussel in Brussels he lectures in prevention management, advanced occupational health and safety management and chemical processes/unit operations. His main research interests concern the collaboration surrounding safety and security topics and socio-economic optimization within the chemical industry. He coordinates the Antwerp Research Group on Safety and Security, unifying multi-disciplinary safety and security research at the University of Antwerp. He has extensive experience in leading research projects funded both by the Belgian government and the chemical industry.
Content
1 Risk management is not only a matter of financial risk
Risk continues to perplex humankind. All societies worldwide, present and past, face and have faced decisions about how to adequately confront risks. Risk is indeed a key issue affecting everyone and everything. How to effectively and efficiently manage and deal with risks has been, is and will always be a central question for policymakers, industrialists, academics and actually for everyone (depending on the specific risk). This is because the future cannot be predicted; it is uncertain, and no one has ever been successful in forecasting it. But we are very interested in the future, and especially in possible risky decisions and how they will turn out. We all face all kinds of risks in our everyday life and going about our day-to-day business. So, would it not make sense to learn how to adequately and swiftly manage risks, so that the future becomes less obscure?
Answering this question with an engineering perspective is the heart of this book. If you went to work this morning, you faced a risk. Riding a bicycle, using public transportation, walking or driving all involved risk. Choosing to put your money in a bank, invest in stocks, or hide it under a mattress carried other forms of risk. Buying a lottery ticket introduced an element of chance - closely tied to the concept of risk. Opting for one production process over another or deciding to write a book instead of research papers were also choices involving risk. Even the choice to publish one book over another was a risk. These examples show that "risk" can take on various meanings, depending on our perspective.
The current highly competitive nature of economics might encourage firms to take on risks that could lead to more or higher profits, but at the same time also more or higher possible losses. Risks thus need to be managed with care and attention. Giving up managing such risks would or could indeed be financially destructive or even suicidal, even possibly in the short term, because once disaster has struck, it is too late to rewrite history. Some people might argue that safety is expensive. We would answer that an accident is even more expensive: the costs of a major accident are very likely to be huge in comparison with what should have been invested as prevention.
Let us take, for example, the human, ecological and financial disaster of the Deepwater Horizon drilling rig in April 2010. Are the induced costs of several billions of euros comparable to the investments that could or might have averted the catastrophe? Answering this question is difficult, a priori, because it would require assessing these uncertainties and therefore managing a myriad of risks, even the most improbable. Most decisions related to environment, health and safety are based on the concept that there exists a low level of residual risk that can be deemed as "acceptably low." For this purpose, many companies have established their own risk acceptance or risk tolerance criteria. However, there exists many different types of risk and many methods of dealing with them, and at present, many organizations fail to do so. Taking the different types of risk into consideration, the answer to whether it would have been of benefit to the company to make all necessary risk management investments to prevent the Deepwater Horizon disaster would have been - without any doubt - "yes." And this is actually, and regretfully, the case for all human-made disastrous accidents.
In 2500 BC, the Chinese had already reduced risks associated with the boat transportation of grain by dividing and distributing their valuable loads between six boats instead of one. The ancient Egyptians (1600 BC) had identified and recognized the risks involved by the fumes released during the fusion of gold and silver [1]. Hippocrates (460-377 BC), father of modern medicine, had already established links between respiratory problems of stonemasons and their activity. Since then, the management of risks has continued to evolve:
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Pliny the Younger (first century AD) described illnesses among slaves.
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In 1472, Dr. Ellenbog of Augsburg wrote an eight-page note on the hazards of silver, mercury and lead vapors [2].
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Ailments of the lungs found in miners were described extensively in 1556 by Georg Bauer, writing under the name "Agricola" [3].
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Dating from 1667 and resulting from the great fire that destroyed a part of London, the first Fire Insurance Act was published.
Despite today's steep increase of risk and risk management knowledge and the never-ending acceleration of all kinds of risk management processes, what still remains to be discovered in risk management and risk engineering is rather systemic and more complex.
As Ale [4] indicates, the essence of risk was formulated by Arnaud as early as 1662: "Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event." Hence, the essence of risk lies in the aspect of probability or uncertainty. Ale further notes that Arnaud treats probability more as a certainty than an uncertainty and as, in principle, measurable. Frank Knight even defines risk in 1921 as a "measurable uncertainty" [5]. Today, the word "risk" is used in everyday speech to describe the probability of loss, either economic or otherwise, or the likelihood of accidents of some type. It has become a common word, and is used whether the risk in question is quantifiable or not. In Chapter 2, we will further elaborate on the true definition and the description of the concept of "risk" and what constitutes it.
In response to threats to individuals, society and the environment, policymakers, regulators, practitioners from the industry and others involved in managing and controlling risks have taken a variety of approaches. Nowadays, the management of risk is a decision-making process aimed at achieving predetermined goals by reducing the number of losses of people, equipment and materials caused by accidents possibly happening while trying to achieve those goals. It is a proactive and reactive approach to accident and loss reduction. We will discuss risk management and its definition in a more general way in the next chapters, and we will define risk as having a positive and a negative side, but we will focus, in the remainder of the book, on managing risks with possibly negative consequences.
Human needs and wants for certainty can be divided into several classes. Abraham Maslow [6] discerned five fundamental types of human needs and ordered them hierarchically according to their importance in the form of a pyramid (Fig. 1.1).
Fig. 1.1: Maslow's hierarchy of human needs.
As long as someone's basic needs at the bottom of the hierarchy are not satisfied, these needs demand attention and the other (higher) needs are more or less disregarded or - at least - they do not have the full attention they deserve. "Safety," or in other words, the striving for a decrease of uncertainty about the negative side of risks, is a very important human need, right above basic needs such as food, drink, sleep and sex. Consequently, if risks are not well managed in organizations, and people are not "safe," the organizations will not be well managed at all. They may focus upon "production" (the organizational equivalent of the physical basic needs), but the organizations will never reach a level in which they excel. Thus, engineering risk management (ERM), as discussed in this book, is essential for any organization's well-being and for its continuous improvement. Summarizing the above, following Maslow's pyramid, organizations that truly embrace safety in their culture will have employees who feel a strong belonging to the organization, there will be more creativity and profit, successfulness will increase and they will prosper.
When reading this book it is necessary to wear "engineering glasses." This means that we will look at risk management using an encompassing engineer's approach - being systemic on top of analytic:
The analytic and the systemic approaches are more complementary than opposed, yet neither one is reducible to the other. In systemic thinking - the whole is primary and the parts are secondary; in analytic thinking - the parts are primary and the whole is secondary.
The analytic approach seeks to reduce a system to its elementary elements in order to study in detail and understand the types of interaction that exist between them. By modifying one variable at a time, it tries to infer general laws that will enable us to predict the properties of a system under very different conditions. To make this prediction possible,...
