Risk Management of Major Chemical Process Accidents, Using a Business Approach

Traditional risk management has focused on effects on people, particularly when using Quantitative Risk Assessment (QRA). A much broader approach is being adopted nowadays, with companies beginning to consider potential accidental losses in their decision making process. This paper describes a study where business risks from major accident hazards were assessed for a large petrochemical plant.

The results are presented as F-Cost curves, which are similar to traditional F-N curves, but represent cumulative frequencies of events versus their cost, instead of fatalities. A different variety of costs can be evaluated as property damage, business interruption, inventory loss, environmental loss, clean-up costs, legal costs, fatality and injury costs, amongst others. As final objective of the study insurance values can be adjusted as well as decisions on reducing risk can be made based on the actual benefit, considering the reduction of losses and the amount to be spent on mitigating major risks. Also, values for civil liability insurance can be reviewed, based on the hazards that can result in fatalities and injuries, as well as property losses, for third parties. This paper presents the results of a study which involved the evaluation of the company's civil liability. The key driver was to consider a more accurate value for the company insurance policy, considering the different losses that major accident can lead on for a community and industries located nearby a petrochemical plant. The results of the analysis are presented as F-Cost curves and we describe the risk-based decision making process and criteria adopted by the company to set the maximum loss value to be insured for civil liability. In conclusion, this paper presents results from a real life example of the application of the quantitative evaluation of business risks, illustrating that a financial or business risk approach can help management in day-to-day decisions when considering possible effects of major chemical process accidents.