A PROJ ECT REPORT Under the guidance Of Miss Lopamudra Pradhan Submitted by SUNIL KUMAR PRADHAN Regd. No: - 1302008570 In partial fulfillment of the requirement for the award of the degree Of MBA IN PROJECT MANAGEMENT
DECLARATION
I hereby declare that the project report entitled (PROJECT RISK MANAGEMENT AT TATA PROJECTS LIMITED) submitted in partial fulfillment of the requirements for the degree of Masters of Business Administration to Sikkim Manipal University, India, is my original work and not submitted for the award of any other degree, diploma, fellowship, or any other similar title of prizes.
The project report of Mr. SUNIL KUMAR PRADHAN Title PROJECT RISK MANAGEMENT AT TATA PROJECTS LIMITED is approved and is acceptable in quality and form.
Internal Examiner External Examiners
BONAFIDE CERTIFICATE
Certified that this project report titled PROJECT RISK MANAGEMENT AT TATA PROJECTS LIMITED is the bonafide work of SUNIL KUMAR PRADHAN who carried out the project work under my supervision.
SIGNATURE
HEAD OF THE DEPARTMENT
UNIVERSITY LEARNING CENTRE CERTIFICATE
This is to certify that the project report entitled PROJECT RISK MANAGEMENT AT TATA PROJECTS LIMITED submitted in partial fulfillment of the requirement for the degree of Master of Business Administration of Sikkim Manipal University of Health, Medical and technology sciences.
Student Name Mr. Sunil Kumar Pradhan has worked under my supervision and guidance and that no part of this report has been submitted for the award of any other degree, Diploma, Fellowship or other similar titles or prizes and that work has not been published in any journal or magazine.
Regd. No. 1302008570 Certified by Director
ACKNOWLEDGEMENT
I wish to acknowledge my indebtedness to my project guide Mr. Satpal Kumar Sharma (G.M.-Project) and faculty guide Miss Lopamudra Pradhan without whose sincere guidance and support this project would not have been a success. Thanking them is a small gesture for the generosity shown. I am also grateful to Mr. Vikash Kumar (Senior Manager - Mechanical) for helping me and providing me useful information. I am also indebted to all the employees of the organization for their sincere help and cooperation. This project is a satisfactory outcome of several days hard work. We are thankful to the respondent who have been given us sample feedback and co-operation during the preparation of this project. Finally, I take this opportunity to thank the entire senior executives team and every associate of this organization, who have helped me directly and indirectly during this period of project preparation.
Name- Sunil Kumar Pradhan Redg. No. 1302008570
COMPANY CERTIFICATE
This is to certify that Mr. SUNIL KUMAR PRADHAN, MBA student of Creative Institute of Management, Sikkim Manipal University has successfully completed the project as partial fulfillment of the MBA program from Dt. 01.01.2014 to Dt. 28.02.2014. The report entitled PROJECT RISK MANAGEMNT AT TATA PROJECTS LIMITED is his original work and the same has not been submitted prior to this in any form.
During the above period we found his to be sincere and hardworking. He followed the rules and regulations of the organization and was punctual in his attendance. His performance and conduct was good. He possesses the ability to transfer conceptual knowledge to practical situations.
For TATA PROJECTS LIMITED
Mr. Tarun Datta (V.P. Project) JAGDALPUR, CHHATISHGARH
INDEX Topic Name Chapter 1 Introduction Objectives of the study 3Need of the project Scope of the project Research methodology Limitations of the project Chapter 2 Company Profile Organization Structure Vision, Mission & Values Corporate Policies No of Project Sites Projects Executed-Domestic Projects Executed-Overseas Projects Under Executed-Domestic Projects Under Executed-Overseas Chapter 3 Concept of risk Concept of Risk management Determination of objectives Risk identification Risk analysis Risk assessment Implementation of the Decision Evaluation & review Importance of risk management Activities in Risk Management Risk Identification Risk analysis Risk Assessment Activities to Risk Assessment Activity One: Look for the hazards Activity Two: Decide who might be harmed and how? Activity Three: Evaluate the risk Activity Four: Record your findings Activity Five: Review your assessment Risk management in chemical manufacturing unit Data Analysis Risk management Process in the Chemical manufacturing Unit Chapter 4 Findings & suggestions Final recommendations Bibliography
CHAPTER - 1
INTRODUCTION
Project Risk management embraces the efforts taken to minimize the impact of uncertain events. Project Risk management can be defined as Identification, analysis & economic control of those risks which can threaten to the assets or the earning capacity of an enterprise.
The definition has focused three fold nature of risk management; firstly risk must be identified before measured; only after their impact has been evaluated, one can decide on the most effective method of control. Cost of control of risk must be commensurate with the benefit expected to be derived.
It also mentions the assets and the earning capacity of the organization. These assets can be human or physical; they are both important and risk management must be seen to have a part to play in both. However, risks do not strike at assets directly and for this reason the definition also mentions the earning capacity of an enterprise.
The emphasis of the project risk management is on reducing the cost of handling risk by whatever means that are considered most appropriate and insurance is viewed as simply one of the several approaches for minimizing the pure risks the firm faces.
OBJECTIVES OF THE STUDY
Objective of this report is to study concepts of project risk management and its importance. It also includes different activities involved in project risk management as well as project risk management process for Industrial manufacturing plant.
Additionally, report will include Potential risk analysis, controlling aspects of risk exposure key features of to be addressed in changing environment.
This report will be containing suggestions & recommendations
NEED OF THE PROJECT
Risk management is relatively new and its precise boundaries are still debated. Some basic concepts of risk to analyze the nature & the cost associated with it & to see how the risk can be managed.
Insurance company can perform much better if there are no claims or few claims. In order to minimize the claims company should accept the premium by proper analysis of the risks associated with the proposal.
Chemicals have become a part of our life, they sustain many of our day-to-day activities, preventing and controlling diseases, and increasing agricultural productivity. At least one thousand new chemicals enter the market every year, and about 100000 chemical substances are used on a global scale. These chemicals are mostly found as mixtures in commercial products. Over one million such products or trade names are available.
SCOPE OF THE PROJECT:
The study reveals all the major aspects of risk management and their implications. Study entangles possible factor for identifying a risk and its type. Research provides metrics to summarize specific activities in risk management which in-turn helps an organization to identify mitigate and avoid risk. Study covers all the major aspect of risk management in Construction Industries.
RESEARCH METHODOLOGY The information upon which the report has been based has mainly been collected from secondary sources. Most of the facts and figures originate from desk research of publicly available data. These sources were:
1. Books of Insurance Institute of India Risk Management -(IC-86) Principles of Insurance -(IC-01) General Insurance -(IC-36)
2. The Public liability Insurance act 1991
3. The Public liability Insurance act 1991.
4. Survey of the NUS business school under title Singapore companies recognize importance of the risk management but many not matching this with action. 5. Survey of Ernst & Young Risk management in India in 2008-09
LIMITATIONS OF THE PROJECT
The project is based purely on the literature survey and does not include any practical experiences of chemical company. I could not visit any construction company and was unable to get in touch with plant specific risks to which chemical plants are subjected to. Another major limitation of this project is that the author has reviewed publically available material and author could only peep through published materials.
Results of the project could be biased towards the construction manufacturing plants and since risk management is a universal phenomenon across all industries, generalization of results might become slightly difficult. Also, the risk analysis is based purely from the Insurance company point of view and does not involve any intangible risks. Study could not involve any technical analysis and was purely based on statistics.
CHAPTER 2
Company Profile: Tata Projects Limited (TPL) was established in 1979 as an Engineering, Procurement and Construction (EPC) Company in the Engineering Sector of the Tata Group. It is one of the earliest and very few Indian EPC companies which have acquired the triple certifications of ISO 9001, 14001 & OHSAS 18001. Today, TPL is one of the leading EPC Companies in India.
TPL operates through seven Strategic Business Units (SBUs) Power Generation, Transmission and Distribution, Railways, Water and Waste Water, Metals and Minerals, Quality Services and Oil, Gas and Hydrocarbon and these SBUs have the expertise in execution of EPC projects within timelines with high quality and cost consciousness. The Company has set up its own state-of-the-art Tower Manufacturing Unit near Nagpur. The SBU-QS is one of the leading third party inspection agencies with a pan India presence and substantial global coverage. It provides diversified inspection and certification services and has received several accreditations / approvals like ISO 17020, ISO 17021 by NABCB, Inspecting Authority by Central Boiler Board, Chief Controller of Explosives etc.
As a part of its corporate sustainability TPL serves the community in the areas of employability skill development, primary education, safe drinking water and health. In line with the Tata Group philosophy, it also takes up Affirmative Action initiatives. TATA Projects - JVs & Subsidiaries Joint Venture Company in Saudi Arabia Tata Projects Limited entered into a Joint Venture agreement in Saudi Arabia with M/s Abdullah Ibrahim Al-Towaijiri & Partners Co. (Al- Mashrik Contracting Co.), Riyadh, a reputed and established contracting agency for execution of power, infrastructure and industrial projects in the Kingdom of Saudi Arabia.
The Joint Venture Company named Al-Tawleed Energy & Power Company was registered in Saudi Arabia as a Limited Liability Company (LLC) on 19th February, 2006 with paid-up capital of 2 mn. Saudi Riyals. The local partner holds 70% of the equity and the balance 30% is held by Tata Projects Limited.
In April 2007, Al-Tawleed Engergy & Power Company signed its first contract with Siemens Power Generation Group for the installation of the electrical, mechanical and C&I work for the Power Plant for the 3 x 300 MW and a water desalination plant (800,000 cubic metres per day) for an independent Water and Power Plant (IWPP) being constructed at Shuaibah located 110 km south of Jeddah, to be completed in 24 months. Acquisition of Artson Engineering Limited, Mumbai Tata Projects Limited (TPL) acquired a majority stake of 75% in Artson Engineering Limited in Jan 2008.
AEL has successfully commissioned on turnkey basis, several fuel storage and handling facility systems and emerged as one of the foremost companies in the country which specialize in such systems. Its expertise has gradually expanded beyond the country and AEL has been executing prestigious overseas contracts also.
AEL has also developed its capabilities in multi disciplinary construction fields for the Hydrocarbon Process Industry and successfully executed many prestigious construction contracts such as FCCU, Double Walled Storage Tanks etc. in India & abroad. AEL is now one of the leading Design, Engineering, Procurement and Construction Companies in Petroleum Storage & Handling Systems.
The expertise of AEL would enhance the EPC business opportunities of TPL, especially in the Oil, Gas & Hydrocarbon Sector. This synergy is currently being demonstrated in the Project under execution, of a major Oil Terminal in the UAE. Joint Venture between Engineers India Limited and Tata Projects Limited Tata Projects Limited (TPL) and Engineers India Ltd (EIL) signed a Memorandum of Understanding (MoU) in July 2007 to incorporate a Joint Venture Company which would undertake Engineering, Procurement and Construction (EPC) projects in India and abroad. EIL is a leading engineering company in India providing consultancy and engineering procurement consultancy services to a broad range of industries which includes refineries, petrochemical industries, pipelines and metallurgical industries. The synergies of both companies would be leveraged for execution of EPC projects in the area of captive power plant generation sector upto 60 MW (Metal, Cement, Paper Industries & Cogen Plants) and special category high value EPC Projects in OGH viz. Grassroots Refineries, Petrochemical process units, Bottom up gradation process, HS crude processing facilities, Alumina Refinery projects, etc. The Joint Venture Company named TEIL PROJECTS LIMITED was incorporated on 15th July, 2008 in Delhi as a Public Limited Company.
Organization Structure:
Vision, Mission & Values
CORPORATE POLICIES
NO OF PROJECT SITES
PROJECTS EXECUTED-DOMESTIC 1 ONGC, Gandhar, Ankleshwar Turnkey construction of additional condensate recovery unit for LPG augumentation at CPF, ONGC, Gandhar, Gujarat 15 3 Feb- 06 2008 Gujrat 2 Tata Power Company Limited, Mumbai Fuel Oil Tanks/Chimney for 4 x10 MW DG Power Plant for TPCL at Khopoli(TPCL Lodhivali I), Maharashtra 10 2 Jan- 07 2008 Maharashtra 3 Tata Power Company Limited, Mumbai BOP for 4x10.56 DG set power plant(TPCL Lodhivali II) , Maharashtra 10 2 Apr- 07 2008 Maharashtra 4 Chemplast & Sanmar Ltd Supply and erection of Seawater Intake & Brine Reject Outfall System including all Civil work to Chemplast & Sanmar Ltd 15 3 Aug- 07 2008 Tamil Nadu
Cuddalore Tamil Nadu. 5 ISRO, SHAR Supply of equipments & fabrication and erection of SS piping for Propellent Bulk storage tank for ISRO, SHAR (ISRO2), AP 5 1 Sep- 07 2009 Andhra Pradesh 6 ISRO - Government of India, Department of Space Design, preparation of drgs., manufacture & erection, testing & commissioning of casting facility equipment at SHAR, Sriharikota, AP 20 4 Jan- 06 2009 Andhra Pradesh 7 ONGC, Ankleshwar EPC of Gas Collecting Station Expansion Project at Olpad near Surat, Gujarat 10 2 Jul- 08 2010 Gujarat 8 ONGC Ankaleshwar Supply, Installation and commissiong of Steam heater in CSU Train at CPF, Gandhar (ONGC, Gandhar 2) 5 1 Oct- 08 2009 Gujarat 9 TPCL Electro mechanical works of Malle Nallah Diversion near Bhira Hydro power station , Maharashtra 10 2 Apr- 07 2010 Maharashtra 10 Bharat Petroleum Corp Ltd (BPCL) Mechanical works for NHT/CCR Units (Part B) for CEMP II of BPCL- Kochi Refinery. The work includes Turnkey erection packages for the main refinery units. 45 10 Oct- 08 2010 Kerala 11 HPCL Duct fabrication for FCCU- II at Visakh Refinery, Vizag 10 2 Feb- 10 2010 Andhra Pradesh 12 Cairn Eneregy India Pty Ltd EPC of Radhanpur terminal for Mangala Development Pipeline project 80 18 Jan- 09 2010 Gujarat 13 HPCL Mechanical/Piping works for NIU,FCC-NHT units of Visakh Refinery clean fuel projects(HPCL I), AP. 30 7 May- 06 2011 Andhra Pradesh 14 HPCL Erection of equipment and 20 4 Nov- 2011 Andhra
machinery, fabrication and erection of piping etc for utilities and offsites of Visakh Refinery Clean Fuel Project. (HPCL- II), AP. 06 Pradesh 15 Bharat Petroleum Corp Ltd (BPCL) Mechanical works for VGO/HDS Units (Part A) for CEMP II of BPCL- Kochi Refinery. The work includes Turnkey erection packages for the main refinery units including erection services of two Main Reactors of 800 MT and 200 MT in the main package of the refinery unit. 55 12 Oct- 08 2011 Kerala PROJECTS EXECUTED-OVERSEAS 1 Thommassen Compression System, Netherlands Fabrication, Testing and Supply of Volume Bottles 10 2 Nov- 06 2007 Netherlands 2 ENOC, UAE Mechanical , piping, Fire fighting and Civil works (Excluding Storage tanks) on EPC basis 70 17 Jun- 07 2008 UAE 3 RAKGAS LLC EPC of Utico Zamil Steel gas distribution network at UAE 10 2 Aug- 08 2009 UAE 4 M/s RAKGAS LLC, UAE Revamping the controls of Bukha Gas Processing train, UAE 20 4 Oct- 08 2009 UAE 5 RAKGAS LLC, UAE Design, supply and installation of Gas Metering Skid and associated pipe works (4" underground gas pipeline) for supply of gas to Asian Ispat LLC at Ras Al Khaimah, UAE. 5 1 Apr- 10 2010 UAE 6 RAKGAS LLC, UAE Deployment of DC Engineer and supply operating spares for Bukha plant 1 0 Oct- 09 2010 UAE 7 UTICO , Detailed Engg Services for 1 0 Oct- 2011 UAE
UAE 20 MW captive Power Plant at UAE 09 8 UTICO , UAE RAK GAS L.L.C, UAE Deployment of DCS Engr and supply of Spares to Bukha, Atlantis, Utico & Asian Ispat plants 1 0 Oct- 09 2011 UAE
PROJECTS UNDER EXECUTION-DOMESTIC 1 ONGC L.P. Gas Processing and Compression Facilities at Rajahmundry , AP 140 31 Feb- 08 Jan-12 Andhra Pradesh 2 NPCIL- Kudankulam, O&M O&M of desalination Plant for 5 years at Kudankulam, Tamilnadu 50 11 Oct- 09 Aug-14 Tamil Nadu 3 ONGC EPC Work for Fire water network at Uran plant on turnkey basis, Maharashtra 125 28 Nov- 11 Nov-13 Maharashtra 4 Cairn Energy India Pty Ltd EPC of well Pads at Aishwarya Oil Field of Rajasthan block, Barmer, Rajasthan. 225 50 Dec- 11 Phase1 : Dec - 12 Phase 2: Apr - 13 Rajasthan PROJECTS UNDER EXECUTION-OVERSEAS 1 Emarat Expansion of Petroleum Product Storage & Distribution terminal (except Storage tanks) at Fujairah, UAE. 230 51 Jan- 10 Dec-11 UAE 2 RAKGAS , UAE Upgradation of fire water system at RAK GAS Plant 15 3 June- 10 Mar-12 UAE
CHAPTER - 3
CONCEPT OF RISK: Risk: Project risk management is an important aspect of project management. Risk management is one of the ten knowledge areas defined in PMBOK. Project risk can be defined as an unforeseen event or activity that can impact the project's progress, result or outcome in a positive or negative way. A risk can be assessed using two factors: impact and probability.
If the probability is 1, it is an issue. This means that risk is already materialized. If the probability is zero, this means that risk will not happen and should be removed from the risk register.
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risk can be defined as the combination of the probability of an event and its consequences (ISO/IEC Guide 73). In all types of undertaking, there is the potential for events and consequences that constitute opportunities for benefit (upside) or threats to success (downside) OR Uncertainty event at future that not only influence the income of a business entity but also can determine the alive or die it entity
Characteristics of risk Uncertainty Concerning Loss Classification of Risk:
Pure risk : It is used to designate those situations that involve the chance of loss Or no loss e.g. - Fire, Robbery & disaster Speculative risk : It is the situation where there is possibility of gain e.g. - gambling, investment & decision Fundamental risk : These involve losses that are impersonal in origin .They are group risks, these risks leads to many consequences e.g.- unemployment , Inflation, Earthquake Particular risk : These include losses that are arise out of individual events & are felt by rather than individuals rather than by entire group e.g. - burning of house & robbery of a bank. Dynamic risk: Dynamic risks are those resulting from the changes in the economy. These dynamic risks normally benefit society over a long period of time since they are result of adjustments to the misallocation of resources. Static risks: It involves those losses that occur even if there is no change in the economy. Static losses tend to occur with degree of regularity over time & are predictable. Unlike dynamic risk, static risk is not a source of gain to the society. Some individuals suffer financial loss due to perils of nature & dishonesty of the individuals. Transferable risk : These include all the risks which can be transferred to another person or entity e.g. Pure risks Non transferable risk : These include all the risks which cannot be transferred to another person or entity e.g. Speculative Risks Internal risk: It includes all the risks within organization e.g. - In 2006 July Associated Press reported that a secretary working at Coke's head office in Atlanta." is accused of helping two men steal trade secrets from her employer and try to sell them to rival PepsiCo Inc."
External risk: These include all the risks that are produced by a non human source and are beyond human control. (Source - Giddens, Anthony (1999). Risk and Responsibility. Modern Law Journal, Vol. 62 No. 1, p. 4)
Peril and Hazard:
Peril: A Peril is a cause of loss or a situation of serious and immediate danger. e.g. - fire, windstorm, theft.
Hazard: It is a chance of suffering from danger or peril which may increase profitability of loss. There are two types of hazard:
1. Physical Hazard: It consists of those physical conditions that increase the chance of loss from any Peril e.g.-
2. Moral Hazard: This refers to increase in profitability of those results from the dishonesty in the character of the insured person.
CONCEPT OF RISK MANAGEMENT: Every Organization across the world is working with a goal to maximize profits & maximization of Shareholder's wealth. Due to the advanced technologies life is very comfortable now a day but at the same time risk & uncertainties are increased in same or greater proportion. Organizations can increase their profit margins by two ways:
By increasing profits & maintaining risk at the constant level By reducing risk to a lower extent.
Risk management is a scientific approach to the problem of dealing with the pure risks faced by individuals and business. Definition of Risk Management:
IDENTIFICATION, ANALYSIS & ECONOMIC CONTROL OF THOSE RISKS WHICH CAN THRATEN THE ASSETS OR THE EARNING CAPACITY OF AN ENTERPRISE
Three folded nature of Risk Management is highlighted in the definition. Risk must be identified before they can be measured, & only after their impact has been evaluated & at same time Cost of control must be commensurate with the benefits to be derived.
It also mentions the assets & earning capacity of organization .These assets can be physical or human. However, risk does not strike at assets directly & for this reason the definition also mentions the earning capacity of an Enterprise.
Nature of risk management:
It is scientific approach to the problem of dealing with the pure risks faced by individuals & business. It deals with insurable & uninsurable risk & appropriate techniques for dealing with them. Basic difference between insurance management & risk management is that insurance management includes all the techniques other than insurance [e.g. non insurance, retention etc].
But insurance management is restricted to the area of those risks that are considered to be insurable. Risk management on the other hand is concerned with pure risks regardless of whether they are insurable or not, it has emphasis on reducing the cost of handling risk by any means they are considered as appropriate. Risk management process: It is comprised of 6 steps:
I
CONSEQUENCE EVALUATE THE RI SKS Monitor / Review Stakeholde r Consultati on / Communic ation I DENTI FY GOALS & OBJ ECTI VES Analyse Risks
Estimate Risk Level Likelihood Consequence TREAT THE RI SKS I DENTI FY RI SKS
DETERMINATION OF OBJECTIVES:
The primary objective of risk management is to preserve the operating effectiveness of the organization, to make sure that it is not prevented from attaining its other goals by the losses arising from pure risks. A second objective may be humanitarian goal of protecting employees from accidents that might be result in death or serious injury. Other goals may focus on cost, use of resources social responsibility & preservation of good public relations. RISK IDENTIFICATION:
Risk identification is the first step in the Risk management process. It gives answer to the question 'How can the assets be or earning capacity of an organization can be threatened? For this risk manager must dig into the operations of the organization & discover the risks to which organization is exposed. He must be armed with 'tools of trade ' & must make use of them.
These tools include insurance policy checklists; risk analysis questionnaires, analysis of financial statements, hazard & operability studies, physical inspections of operations, flow charts and organizational charts but no method can replace diligence & imagination of the risk manager in discovering risk. RISK ANALYSIS:
It is defined as systematic use of available information to identify hazards and to estimate the risk [ISO/IEC Guide 51:1999, definition 3.10]
Once the risk is identified then the steps have to be taken to measure potential impact of that risk on the organization. Hence, this step includes statistical analysis
& measurement of risk. In practical sense measurement starts with gathering of information, followed by analysis of past experience and then move to look at what the data tells us about level of severity of risk & periodicity to which organization is exposed.
Risk assessment:
It is defined as overall process comprising a risk analysis and a risk evaluation [ISO/IEC Guide 51:1999, definition 3.12]
The risk manager must evaluate the risk that are identified .This means that measuring the potential size of loss associated with risk .The cost of risk can be looked from different perspectives like:
a) Frequency of risk b) Monetary cost or financial harmfulness c) Human cost in terms of pain & suffering
These risks may therefore be grouped as:
Critical risks: All the risks in which possible losses are of magnitude that would result in bankruptcy for e.g. - Bhopal (1984) Hillsborough, Mexico. Important risks: These include those exposures in which the possible losses would not lead to bankruptcy, but would require the firm to borrow in order to continue operation. Unimportant risks: These include those exposures in which the possible losses could be met out of the existing assets or current income of the firm without imposing undue financial strain. Also size of the organization would
influences the above categorization for example a risk which is important to a small organization may be reckoned as unimportant risk by a large organization
IMPLEMENTATION OF THE DECISION:
The decision for dealing with risk may be
a) To retain risk this may be attained with or without a reserve or fund. b) To deal with the risk through loss prevention the proper loss prevention program must be designed and implemented. c) To transfer risk through insurance and this must be followed by the selection of an insurer.
EVALUATION & REVIEW:
This is an essential to the risk management program because of two reasons
1. The risk management process does not tales place in vacuum. Things change, new risk arises and old ones disappear. The techniques that were appropriate last year may not be most advisable this year, and constant attention is required. 2. Mistakes occur sometimes .Evaluation and review of risk management programs permits the manager to review decisions and discover mistakes hopefully, before become costly. For this purpose an independent risk management consultant may also be hired to evaluate the entire risk management to provide an independent outside review.
IMPORTANCE OF RISK MANAGEMENT:
1. Risk management suggests or provides a framework for an organization that enables future activity to take place in consistent and controlled manner. 2. Risk management helps to improve decision making, planning and prioritization by comprehensive and structured understanding of business activity, volatility and project opportunity/threat. 3. Risk management contributes to efficient use/allocation of capital and resources within the organization. 4. It reduces volatility in the non essential areas of the business. 5. Risk management helps in protecting and enhancing assets and company image 6. Employee safety and protection is an important part of safety and risk management. 7. Most warehouses use expensive equipment, including forklifts, conveyors, and transport trucks, in their operations. Using strict license requirements and employee training will protect this equipment from improper use 8. Proper safety and risk management policies help companies keep their general and liability insurance premiums low. Low overhead costs allow companies to employ more workers and focus on profitable business operations. 9. Companies may be sued if they are deemed liable for employee or third- party injuries from negligent warehouse operations. Lawsuits arise when companies do not have strong safety management policies or violate their current safety policies.
ACTIVITIES IN RISK MANAGEMENT: 1 RISK IDENTIFICATION: Risk Identification ascertains which risks have the potential of affecting the project and documenting the risks' characteristics. Risk Identification begins after the Risk Management Plan is constructed and continues iteratively throughout the project execution. The Risk Identification process naturally progresses into the Qualitative Risk Analysis or the Quantitative Risk Analysis Process. Sometimes it is wise to include the identification of a risk and its response in order for it to be included in Risk Response Planning.
At the beginning of the Risk Identification process it is a good idea to have gathered all of the inputs you and your team will need. The inputs to the Risk Identification Process are:
The Project Management Plan - The Project Management Plan is used in gain an understanding of the project's mission, scope, schedule, cost, Work Breakdown Structure (WBS), quality criteria, and other elements. Risk Management Plan - The Risk Management Plan provides the blueprint of overseeing risk management throughout the project describing who, what, when, where, why, and how. The Risk Management Plan provides the following four critical inputs to Risk Identification: Assignment of roles and responsibilities - Identifying people for risk management by assigning the handling of specific tasks and roles to specific individuals. Budget provisions for risk-management activities - The approved funds available for risk-management activities. You will need to track your actual costs against these approved budget numbers.
Schedule for risk management - The revised schedule including the time needed for risk-management activities over the duration of the project's life cycle. Categories of risk - The risk categories are used during Risk Identification to organize and prioritize risks as they are identified. Alternatively, the Risk Breakdown Structure (RBS) may be the source of risk categories. . Enterprise environmental factors - These factors include any and all external environmental factors and internal organizational environmental factors that surround or influence the project's success, such as organizational culture and structure, infrastructure, existing resources, commercial databases, market conditions, and project management software. After gathering all necessary inputs, it is to tie employ the recommended tools and techniques of risk identification.
The tools and techniques used for risk analysis are: Documentation reviews - Documentation reviews involve comprehensively reviewing the project documents and assumptions from the project overview and detailed scope perspective in order to identify areas of inconsistency or lack of clarity. Missing information and inconsistencies are indicators of a hidden risk. Information gathering techniques - Information gathering techniques are used to develop lists of risks and risk characteristics. Each technique is helpful for collecting a particular kind of information. The five techniques are: Brainstorming - Brainstorm is employed as a general data-gathering and creativity technique which identifies risks, ideas, or solutions to issues. Brainstorming uses a group of team members or subject-matter experts spring boarding off each others' ideas, to generate new ideas.
Delphi technique - The Delphi technique gains information from experts, anonymously, about the likelihood of future events (risks) occurring. The technique eliminates bias and prevents any one expert from having undue influence on the others. Interviewing - Interviewing in a face-to-face meeting comprised of project participants, stakeholders, subject-matter experts, and individuals who may have participated in similar, past projects is a technique for gaining first- hand information about and benefit of others' experience and knowledge. Root cause identification - Root cause identification is a technique for identifying essential causes of risk. Using data from an actual risk event, the technique enables you to find out what happened and how it happened, and understand why it happened, so that you can devise responses to prevent recurrences. Strengths, weaknesses, opportunities, and threats (SWOT) analysis - A SWOT analysis examines the project from the perspective of each project's strengths, weaknesses, opportunities, and threats to increase the breadth of the risks considered by risk management. Checklist analysis - Checklists list all identified or potential risks in one place. Checklists are commonly developed from historical information or lessons learned. The Risk Breakdown Structure (RBS) can also be used as a checklist. Just keep in mind that checklists are never comprehensive, so using another technique is still necessary. System or process flow charts - Flow charts illustrate how elements and processes interrelate. Influence diagrams - Influence diagrams depict causal influences, time ordering of events and other relationships between input variables and output variables.
The tools and techniques used for the Risk Identification process are designed to help the project manager gather information, analyze it, and identify risks to and opportunities for the project's objectives, scope, cost, and budget. The information gathered is entered on the Risk Register, which is the primary output of Risk Identification.
Risk Register - The Risk Register containing the results of the Qualitative Risk Analysis, Quantitative Risk Analysis, and Risk Response Planning. The Risk Register illustrates all identified risks, including description, category, and cause, probability of occurring, and impact on objectives, proposed responses, owners, and current status. While the risk register will become the comprehensive output.
Risk Identification process results in four entries in the Risk Register: 1. Lists of identified risks - Identified Risks with their root causes and risk assumptions are listed. 2. List of potential responses - Potential responses identified here will serve as inputs to the Risk Response Planning process. 3. Root causes of risk - Root causes of risk are fundamental conditions which cause the identified risk. 4. Updated risk categories - The process of identifying risks can lead to new risk categories being added. 2 RISK ANALYSIS: There may be some terminology and definition differences related to risk analysis, risk assessment and business impact analysis. Although several definitions are possible and can overlap:
1. Risk analysis involves identifying the most probable threats to an organization and analyzing the related vulnerabilities of the organization to these threats.
2. Risk assessment involves evaluating existing physical and environmental security and controls, and assessing their adequacy relative to the potential threats of the organization.
3. Business impact analysis involves identifying the critical business functions within the organization and determining the impact of not performing the business function beyond the maximum acceptable outage. Types of criteria that can be used to evaluate the impact include: customer service, internal operations, legal/statutory and financial.
Most businesses depend heavily on technology and automated systems, and their disruption for even a few days could cause severe financial loss and threaten survival. The continued operations of an organization depend on managements awareness of potential disasters, their ability to develop a plan to minimize disruptions of mission critical functions, and the capability to recover operations expediently and successfully. The risk analysis process provides the foundation for the entire recovery planning effort. A primary objective of business recovery planning is to protect the organization in the event that all or parts of its operations and/or computer services are rendered unusable. Each functional area of the organization should be analyzed to determine the potential risk and impact related to various disaster threats.
Risk analysis process:
Regardless of the prevention techniques employed, possible threats that could arise inside or outside the organization need to be assessed. Although the exact nature of potential disasters or their resulting consequences are difficult to determine, it is beneficial to perform a comprehensive risk assessment of all threats that can realistically occur to the organization. Regardless of the type of threat, the goals of business recovery planning are to ensure the safety of customers, employees and other personnel during and following a disaster. The relative probability of a disaster occurring should be determined.
Items to consider in determining the probability of a specific disaster should include, but not be limited to: geographic location, topography of the area, proximity to major sources of power, bodies of water and airports, degree of accessibility to facilities within the organization, history of local utility companies in providing uninterrupted services, history of the areas susceptibility to natural threats, proximity to major highways which transport hazardous waste and combustible products.
Potential exposures may be classified as natural, technical, or human threats. Examples include:
1. Natural Threats: internal flooding, external flooding, internal fire, external fire, seismic activity, high winds, snow and ice storms, volcanic eruption, tornado, hurricane, epidemic, tidal wave, typhoon. 2. Technical Threats: power failure/fluctuation, heating, ventilation or air conditioning failure, malfunction or failure of CPU, failure of system
software, failure of application software, telecommunications failure, gas leaks, communications failure, nuclear fallout. 3. Human Threats: Robbery, bomb threats, embezzlement, extortion, burglary, vandalism, terrorism, , hazardous waste, vehicle crash, airport proximity, work stoppage (Internal/External), computer crime.
All locations and facilities should be included in the risk analysis. Rather than attempting to determine exact probabilities of each disaster, a general relational rating system of high, medium and low can be used initially to identify the probability of the threat occurring. The risk analysis also should determine the impact of each type of potential threat on various functions or departments within the organization. A Risk Analysis Form, found can facilitate the process. The functions or departments will vary by type of organization.
The planning process should identify and measure the likelihood of all potential risks and the impact on the organization if that threat occurred. To do this, each department should be analyzed separately. Although the main computer system may be the single greatest risk, it is not the only important concern. Even in the most automated organizations, some departments may not be computerized or automated at all. In fully automated departments, important records remain outside the system, such as legal files, PC data, software stored on diskettes, or supporting documentation for data entry. An impact can be rated as: 0= No impact or interruption in operations, 1= Noticeable impact, interruption in operations for up to 8 hours, 2= Damage to equipment and/or facilities, interruption in operations for 8 - 48 hours,
3= Major damage to the equipment and/or facilities, interruption in operations for more than 48 hours.
All main office and/or computer center functions must be relocated. Certain assumptions may be necessary to uniformly apply ratings to each potential threat. Following are typical assumptions that can be used during the risk assessment process:
1. Although impact ratings could range between 1 and 3 for any facility given a specific set of circumstances, ratings applied should reflect anticipated, likely or expected impact on each area. 2. Each potential threat should be assumed to be localized to the facility being rated. 3. Although one potential threat could lead to another potential threat (e.g., a hurricane could spawn tornados), no domino effect should be assumed. 4. If the result of the threat would not warrant movement to an alternate site(s), the impact should be rated no higher than a 2. 5. The risk assessment should be performed by facility.
To measure the potential risks, a weighted point rating system can be used. Each level of probability can be assigned points as follows:
Probability Points high - 10 Medium - 5 Low - 1
To obtain a weighted risk rating, probability points should be multiplied by the highest impact rating for each facility. For example, if the probability of hurricanes is high (10 points) and the impact rating to a facility is 3 (indicating that a move to alternate facilities would be required), then the weighted risk factor is 30 (10 x 3). Based on this rating method, threats that pose the greatest risk (e.g., 15 points and above) can be identified. Considerations in analyzing risk include:
Investigating the frequency of particular types of disasters (often versus seldom). Determining the degree of predictability of the disaster. Analyzing the speed of onset of the disaster (sudden versus gradual). Determining the amount of forewarning associated with the disaster. Estimating the duration of the disaster. 1. Considering the impact of a disaster based on two scenarios; a. Vital records are destroyed b. Vital records are not destroyed. 2. Identifying the consequences of a disaster, such as; a. Personnel availability b. Personal injuries c. Loss of operating capability Determining the existing and required redundancy levels throughout the organization to accommodate critical systems and functions, including; a. Hardware b. Information e. Services. 3. Estimating potential dollar loss; a. Increased operating costs
b. Loss of business opportunities c. Loss of financial management capability d. Loss of assets e. Negative media coverage f. Loss of stockholder confidence g. Loss of goodwill h. Loss of income i. Loss of competitive edge j. Legal actions. 4. Estimating potential losses for each business function based on the financial and service impact and the length of time the organization can operate without this business function. The impact of a disaster related to a business function depends on the type of outage that occurs and the time that elapses before normal operations can be resumed. 5. Determining the cost of contingency planning.
DISASTER PREVENTION
Because a goal of business recovery planning is to ensure the safety of personnel and assets during and following a disaster, a critical aspect of the risk analysis process is to identify the preparedness and preventive measures in place at any point in time. Once the potential areas of high exposure to the organization are identified, additional preventative measures can be considered for implementation. Disaster prevention and preparedness begins at the top of an organization. The attitude of senior management toward security and prevention should permeate the entire organization. Therefore, managements support of disaster planning can
focus attention on good security and prevention techniques and better prepare the organization for the unwelcome and unwanted.
Disaster prevention techniques These include two categories: procedural prevention and physical prevention.
1. Procedural prevention relates to activities performed on a day-to-day, month-to-month, or annual basis, relating to security and recovery. Procedural prevention begins with assigning responsibility for overall security of the organization to an individual with adequate competence and authority to meet the challenges. The objective of procedural prevention is to define activities necessary to prevent various types of disasters and ensure that these activities are performed regularly. 2. Physical prevention and preparedness for disaster begins when a site is constructed. It includes special requirements for building construction, as well as fire protection for various equipment components. Special considerations include: computer area, fire detection and extinguishing systems, record(s) protection, air conditioning, heating and ventilation, electrical supply and UPS systems, emergency procedures, vault storage area(s), archival systems.
Insurance considerations:
Adequate insurance coverage is a key consideration when developing a business recovery plan and performing a risk analysis. Having a disaster plan and testing it regularly may not, in itself, lower insurance rates in all circumstances. However, a
good plan can reduce risks and address many concerns of the underwriter, in addition to affecting the cost or availability of the insurance.
Most insurance agencies specializing in business interruption coverage can provide the organization with an estimate of anticipated business interruption costs. Many organizations that have experienced a disaster indicate that their costs were significantly higher than expected in sustaining temporary operations during recovery. Most business interruption coverage includes lost revenues following a disaster. Extra expense coverage includes all additional expenses until normal operations can be resumed. However, coverage differs in the definition of resumption of services. As a part of the risk analysis, coverage should be discussed in detail with the insurer to determine their adequacy.
To provide adequate proof of loss to an insurance company, the organization may need to contract with a public adjuster who may charge between three and ten percent of recovered assets for the adjustment fee. Asset records become extremely important as the adjustment process takes place.
CONCLUSION
The risk analysis process is an important aspect of business recovery planning. The probability of a disaster occurring in an organization is highly uncertain. Organizations should also develop written, comprehensive business recovery plans that address all the critical operations and functions of the business.
The plan should include documented and tested procedures, which, if followed, will ensure the ongoing availability of critical resources and continuity of operations.
A business recovery plan, however, is similar to liability insurance. It provides a certain level of comfort in knowing that if a major catastrophe occurs, it will not result in financial disaster for the organization.
Insurance, by itself, does not provide the means to ensure continuity of the organizations operations, and may not compensate for the incalculable loss of business during the interruption or the business
Risk Assessment:
In the many activities we can offer, we provide challenges that seek to encourage the development of young people. These are often challenges they do not face every day and young people can experience a great sense of achievement in completing them. Some degree of risk is unavoidable if the sense of adventure and excitement is to be achieved, but it is - and should be - much less than the participant perceives.
Accordingly we need to assess and control the risks associated with activities in order to minimize the chance of injury.
It is not that difficult. A risk assessment is simply a look at what could go wrong - both before and during the activity - and then deciding on ways to prevent - or minimize - these potential problems.
Hazards and Risks two terms are frequently used during a risk assessment:
A hazard is anything that could cause harm. In the context of adventurous activities, a hazard could be extreme cold, a fall from a height or hypothermia. A risk is the chance - high or low - that someone will be harmed by a hazard. The most important part of a risk assessment, is to decide whether a hazard is significant.
This determines what measures you can take to minimize the risk to an acceptable level. It could be considered that hypothermia is a significant risk when taking part in mountain activities, canoeing or sailing. However the risk can be reduced, for example, by wearing appropriate windproof clothing or wet suits -depending upon the activity!
ACTIVITIES TO RISK ASSESSMENT: 1 ACTIVITY ONE: LOOK FOR THE HAZARDS: It is necessary for you to stand back from the activity, and look afresh at what could cause harm. It is important to concentrate on the significant hazards. These are hazards which harm or affect several people. It might be a good idea to ask others what they think; they may have noted things that were not immediately obvious to you. 2 ACTIVITY TWO: DECIDE WHO MIGHT BE HARMED AND HOW? These could be young people taking part (or waiting to do so), the instructors, others supervising the activity, those in the area of the activity or casual observers.
In identifying the hazards (Step One) you have already identified the potential of how these people might be harmed. 3 ACTIVITY THREE: EVALUATE THE RISK AND DECIDE WHETHER EXISTING PRECAUTIONS ARE ADEQUATE OR WHETHER MORE SHOULD BE DONE: You have already identified the hazards. Now consider the likelihood of each of these hazards causing harm. This will determine whether or not you need to do more to reduce the risk. It is possible that even after all reasonable precautions have been taken some degree of risk will remain. What you have to decide, for each significant hazard, is whether the remaining risk is high, medium, or low.
For some activities you have to ask yourself if everything has been done to comply with the law - and, in our context, the requirements also of Policy, Organization and Rules. Everything reasonably practicable must be done to reduce and control the risk. Your aim is to minimize risks by adding such precautions as may be necessary. Likewise, the competence of instructors/leaders and adherence to good practice play a vital role in the provision of safe activities. There are many ways in which risks can be minimized. This might be a change in venue, additional training, an increased staff/participant ratio and properly equipped participants. Likewise, plans may have to be modified during the activity, based on an on-going risk assessment. Later in this fact sheet, we will relate this to typical Scout activities. 4 ACTIVITY FOUR: RECORD YOUR FINDINGS: You must inform those who will be taking part in the activity of your findings and what action should be taken. The recording of your findings might vary depending upon circumstances. A risk assessment for the use of a permanent climbing tower on a campsite should be a document that each instructor has to read (and sign) prior to the start of each session. It should cover the points you have identified in
Steps one-three above. The risk assessment must be suitable and effective and must show that
A proper check was made. You decided who might be affected. You dealt with all the significant hazards, taking into account potential users. The precautions are reasonable, and the remaining risk is judged acceptable.
The recording of the assessment should be in a format which is easily read - dont write a book! Risk assessments are not operating procedures -they inform and determine key aspects of the operating procedures. At the campsite your risk assessment may have determined that no more than 30 people may be admitted to the swimming pool at any one time due to the size of the pool and the need to avoid overcrowding.
This assessment will then be reflected in the pools operating procedure and a requirement placed on the lifeguard and those controlling bookings for the pool to count. A risk assessment for a day in the hills or on water that you have not visited before cannot be formalized in exactly the same way. In these cases, refer to the examples later in the fact sheet . 5 ACTIVITY FIVE: REVIEW YOUR ASSESSMENT AND REVISE IT IF NECESSARY: In all cases, it is good practice to review your risk assessments from time to time, to ensure that the precautions are still working effectively. If there are any significant changes, review and revise the assessments to take account of the new hazard. For those risk assessments for a
Composite, and activities on site, it is important to ensure that when carrying out a risk assessment the date is also set for the next review. Make sure that all relevant documentation is changed.
Risk Assessment - In Practice So far we have looked at theory, with a few examples to illustrate the key points. There has sometimes been a tendency to usestandard risk assessments for outdoor activities. We must remember however that as the environments we explore are constantly changing, such assessments cannot be set in stone. Also, although you may have visited the area before, the chosen route on land or water may be a new one. Or the weather conditions may be dramatically different. So how do we start?
Sample risk assessment sheet:
AS THERE ARE MANY INDUSTRIAL UNITS ARE IN EXISTENCE RIGHT FROM CHEMICAL, PLASTIC, STEEL, CEMENT ETC. BUT AMONG ALL THE INDUSTRIES EXISTS CHEMICAL INDUSTRY IS ONE OF THE GROWING INDUSTRY. THEREFORE WE WILL CONCENTRATE ON CHEMICAL MANUFACTURING UNIT. RISK MANAGEMENT IN CHEMICAL MANUFACTURING UNIT Chemical industry is one of the worlds largest manufacturing industries, producing more than 50,000 chemicals and formulations. Starting from raw materials such as oil, coal, gas, water, air and minerals, the chemical industry produces a vast array of substances that form the basis for almost every other manufacturing activity. It operates on a global scale; it exists in nearly every country in the world, and contributes 7% of global income and accounts for 9% of international trade. Supply chains in the electronics, automobile and other industries have received much attention in literature. Although some of these lessons can be partly extended to the chemical industry, supply chains in the chemical and process industry have distinctive features and require special attention. Risk management is needed in chemical manufacturing unit.
History of disasters due to chemical units
1932-1968: The McNamara disaster was caused by the dumping of mercury compounds in McNamara Bay, Japan. The Chisso Corporation, a fertilizer and later petrochemical company, was found responsible for polluting the bay for 37 years. It is estimated that over 3,000 people suffered various deformities, severe mercury poisoning symptoms or death from what became known as McNamara disease.
April 16, 1947: Texas City Disaster, Texas. 1948: The explosion of a tank wagon within a BASF site loaded with chemicals, in Ludwigshafen, Germany causes 207 fatalities. June 1, 1974: Flixborough disaster, England. An explosion at a chemical plant near the village of Flixborough kills 28 people and seriously injures another 36. July 10, 1976: Seveso disaster in Seveso, Italy December 3, 1984: The Bhopal disaster in India is the largest industrial disaster on record. A faulty tank containing poisonous methyl isocyanides leaked at a Union Carbide plant. About 20,000 people died and about 570,000 suffered bodily damage. The disaster caused the region's human and animal populations severe health problems to the present. October 23, 1989: Phillips Disaster. Explosion and fire killed 23 and injured 314 in Pasadena, Texas. Registered 3.5 on the Richter scale. Bhopal Gas Tragedy The Bhopal disaster, also known as the Union Carbide disaster or the Bhopal gas tragedy, was an industrial catastrophe that took place at a Union Carbide pesticide plant in the Indian city of Bhopal, Madhya Pradesh on December 3, 1984. Thousands died immediately from the effects of the gas and many were trampled in the panic. The government of Madhya Pradesh confirmed a total of 3787 deaths related to the gas release. Another source says that a few days later the death toll had doubled. Over the next few years, the lingering effects of the poison nearly doubled the toll again, to about 15,000, according to government estimates. Factors leading to this huge gas leak include: The use of hazardous chemicals (MIC) instead of less dangerous ones Storing these chemicals in large tanks instead of over 200 steel drums.
Possible corroding material in pipelines Poor maintenance after the plant ceased production in the early 1980s Failure of several safety systems (due to poor maintenance and regulations). Safety systems shut down to save money including the MIC tank refrigeration system which alone would have prevented the disaster.
Data analysis:
RISK MANAGEMENT PROCESS IN THE CHEMICAL MANUFACTURING UNIT
Risk management
The chemical industrial sector is highly heterogeneous encompassing many sectors like organic, inorganic chemicals, dyestuffs, paints, pesticides, specialty chemicals, etc. Some of the prominent individual chemical industries are caustic soda, soda ash, carbon black, phenol, acetic acid, methanol and ago dyes. Chemical manufacturing sector in India is well established and has recorded a steady growth in the overall Indian industrial scenario. The Chemical and allied industries have been amongst the faster growing segments of the Indian industry. It
1. Contributes to 3% of GDP in the same report*. 2. One of the fastest growing sectors of Indian economy. 3. Chemical Industry in India is fragmented and dispersed - multi product and multi faceted. 4. Chemicals sold directly to large customers and through distribution channels. Distribution channels mostly consist of stockiest and dealers spread all over India addressing small segments and retail market.
Chemical Industry is highly heterogeneous with following major sectors: Petrochemicals Inorganic Chemicals Organic Chemicals Fine and specialties Bulk Drugs Agrochemicals Paints and Dyes
1. Process safety management: Hazard & Operability (HAZOP) studies
Failure Tree Analysis (FTA) Event Tree Analysis (ETA) Primary Hazard Analysis (PHA) using Dow Index Risk Assessment (with risk ranking technique)
2. Electrical risk assessment: Review of Hazardous Area Classification Lightning Protection Risk Assessment Identification & Control of Electro-Static Hazards Review of electrical Preventive Maintenance System Electrical Risk Assessment (fire, shock explosion) using Semi-Quantitative Risk Ranking (SQRR) technique
3. Fire risk assessment: Identification & assessment of fire risks during operations in receipt, storage, transfer and handling of chemicals (raw materials and finished products) Identification & control of ignition sources in areas where flammable chemicals are stored / handled / transferred Review of chemical compatibility in storage areas and to suggest appropriate fire loss control measures Review of fire detection measures adopted in the plant & to suggest suitable improvement measures Review of the various active (fire hydrant, sprinkler, portable fire extinguishers) and passive fire protection requirements for chemical storage and handling areas and to suggest improvements as necessary Review of contractor safety awareness (chemical spill, fire fighting, emergency communication, knowledge of plant hazards & safety
regulations) and to recommend suitable improvement measures to enhance contractor safety Review of safety awareness and safety training requirements ( training identification and efficacy) of plant employees with respect to hazards present in the plant
Fire risk assessment will be carried out based on techniques like 1. Matrix method, 2. Hani Arafat Risk Calculator. The consequence, likelihood and exposure of each hazard are arrived using a systematic approach and will help to determine the relative importance of hazard and focus on significant risks.
4. Risk analysis & emergency plan: Identification of scenarios of potential disasters / emergencies leading to loss of life, property damage etc. and qualitative assessment of their likelihood. Quantitative risk assessment for selected scenarios of major credible events. Recommendations for risk control measures wherever applicable. Preparation of onsite emergency preparedness plan
5. Risk Management & Insurance planning: Identification of all major internal and external pure risks including the natural risks and analysis of the impact of above risks Review of existing risk control measures and offering comments Scrutiny of all existing major insurance policies in respect of:
Rationalization of basic rate of premium and widening of covers Applicability / eligibility of discounts in premium Application of suitable clauses, warranties and conditions Identification of possible areas for refund of premium and suggestions regarding procedure for the same Selection of insurance coverage on the basis of risk analysis Providing guidelines for fixation of sum insured and illustrate the same on a selected equipment Evaluation of business interruption exposure due to identified risks Providing guidelines on documentation requirements, procedures for claims under various policies, evaluation of insurers
6. Risk Management Training
Specialized and focused training, if imparted effectively, can contribute significantly to Risk Management. Expert faculty carefully selected training module, interactive and participate approach, useful training material, case studies and syndicate exercises could help in having effective risk management system in place. The training topics for bulk drug industry could be:
Chemical Safety Safety with Compressed gases Solvent Safety Hazard Identification Techniques Industrial Risk Management Fire Prevention and Protection Electrical Risk Management Emergency Preparedness
Safety Management system Accident Prevention Personal Protective Equipment
Potential risk analysis: Risk manager should be continuously working on the potential risk analysis as these risks have capacity to affect organization to considerable extent. Also things change; new risk arises and old ones disappear. The techniques that were appropriate last year may not be most advisable this year, and constant attention is required Potential Risk can be divided into 4 types: 1. Financial risk : Credit plays an important role in financing of the businesses, and a firm may find it in difficulties owing to factors affecting either credit received or credit extended. An increased rate of interest on borrowing will cut the profit margin but more important is availability of credit. A firm that is heavily dependent upon bank credit to finance its working may be forced to curtail its activities severely if its overdraft facilities are cut for any reason. 2. Legal risk: Legal aspects are important for enterprises as legal issue can raised by government, public, employee, stakeholders in the form of Public litigation. 3. Physical risk : It is also important risk that should be addressed by risk manager because it will take charge of life many individuals if not treated properly. Also it may reduce the productivity of the workforce over the period of time. 4. Environmental risk:
Risk manager should take necessary actions for the waste treatment or other environment issue so that government bodies such as Pollution control board of that state.
CHAPTER - 4
FINDINGS & SUGGESTIONS: 1. It has been found that 85% companies recognized importance of risk management. 2. Only 60% companies have enterprise wide risk management. 3. Only 66% Companies describe the risk faced by their company in their annual report. 4. It has been found that companies believe in Insurance brokers for risk management advice. 5. It has been discovered that most of the enterprises are showing great concern about competitive risk or risk associated with the managing of business. 6. This survey also reveals that primary goal of the chemical companies is growth at a faster rate which is causing intense rivalry within industry. 7. It is found that there is room for improvement in risk information which will facilitate management in decision making. 8. Companies in India have documented risk management strategies in place, but there is substantial room for improvement. 9. It has been found that near about 1000 chemicals are added to the market every year from all the sectors like petrochemical, inorganic, organic, paint& dyes and agrochemicals. 10. It is found that Chemical sector is one of the fastest growing sectors of Indian economy. 11. It is found that Chemical Industry in India is fragmented and dispersed - multi product and multi faceted.
FINAL RECOMMENDATIONS
There should be sound co-operation between industries, Government and other interested stakeholders of the industry. There should be scientifically sound risk assessment methods. THERE SHOULD BE TRANSPARENCY IN THE REVIEW AND UTILIZATION OF RISK ASSESSMENT DATA. THERE SHOULD BE SUPPORT FOR THE PRECAUTIONARY APPROACH. There should be proper maintenance of plant. There should be separate section in the company for risk management. There is need of standardization of risk assessment principles and methodologies.
Bibliography: 1. Risk Management -(IC-86) 2. Principles of Insurance -(IC-01) 3. General Insurance -(IC-36) (All above books are of Insurance Institute of India) 4. The Public liability Insurance act 1991 5. Survey of the NUS business school under title Singapore companies recognize importance of the risk management but many not matching this with action 6. Survey of Ernst & Young Risk management in India in 2008-09 7. Policy, Organization and Rules - current edition. 8. Disaster Recovery World 1997, and Disaster Recovery Journal 1997, are copyrighted by Systems Support, Inc. All rights reserved. Reproduction in whole or part is prohibited without the express written permission form Systems Support, Inc. 9. Interoperability Montana by NORTHROP GRUMMAN