A STUDY ON

PROJECT RISK MANAGEMENT
AT TATA PROJECTS LIMITED



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.




Place: - Angul Name:- Sunil Kumar Pradhan
Date:- Redg. No. 1302008570





















EXAMINER’S CERTIFICATION


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.-

 Sociological -crime, civil disorder
 Technical - fire, structural collapse
 Transportation – Aviation, Rail, road disaster

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 management‟s
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 area‟s 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, management‟s 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
organization‟s 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 - don‟t
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 pool‟s 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
use„standard‟ 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 world‟s 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






















Web bibliography:
1. http://www.businesschemistry.org/article/?article=95
2. http://en.wikipedia.org/wiki/Risk_management
3. http://www.indianchemicalportal.com/chemical-industry-overview/
4. http://www.oracle.com/us/industries/oil-and-gas/019366.pdf
5. http://www.nasa.gov/pdf/293261main_62868main_1_pmchallenge_stama
telatos.pdf
6. http://www.usaid.gov/oig/public/fy04rpts/5-391-04-001-s.pdf
7. http://www.scoutbase.org.uk/library/hqdocs/facts/pdfs/fs120000
8. http://en.wikipedia.org/wiki/List_of_industrial_disasters#Chemical_indus
try
9. http://en.wikipedia.org/wiki/Work_breakdown_structure
10. http://en.wikipedia.org/wiki/Risk_breakdown_structure