Operations Risk Management

Cut your industrial risk with a holistic, process-based, data-driven approach to operational risk management.

Whether you work in power generation, oil and gas, chemicals or another industrial sector – risk management is always on your mind. It shapes every thought, guiding each decision, and persisting in all meetings – from project planning to maintenance and operations.

“There’s an old saying that if you think safety is expensive, try an accident. Accidents cost a lot of money. And, not only in damage to [the] plant and in claims for injury, but also in the loss of the company’s reputation.” —Trevor Kletz (Chemical Processing)

Over the years, companies have invested tremendous sums of money, time and resources to implement safety systems to mitigate operational risk, yet minor incidents and major accidents still occur daily. Here are a few examples of industrial accidents over the years:

Dupont La Porte Toxic Chemical Leak

A U.S. Chemical Safety and Hazard Identification Board investigation found a series of mistakes – that began five days before the incident – leading to the release of nearly 24,000 pounds of methyl mercaptan, a toxic chemical. Four employees were killed after inhaling the fumes from the leak. The Occupational Safety and Health Administration fined the company $273,000 for safety violations at the La Porte plant following the fatal incident and put the company in its Severe Violator Enforcement Program.

BP Texas City Refinery Explosion

A U.S. Chemical Safety and Hazard Investigation Board report found that supervisors and operators poorly communicated critical information regarding the startup procedure during the shift turnover and that BP did not have a shift turnover communication requirement for its operations. In addition to the shift handover, there were issues surrounding the alarm system, operator HMI and out-of-date procedures. Explosions and fires killed 15 people and injured another 10, alarming the community and resulting in financial losses exceeding $1.5 billion.

Occidental Piper Alpha Explosion

The Piper Alpha Public Inquiry concluded that many factors contributed to the disaster. Details about replacing a pressure safety valve with a blank flange, and instructions not to use it, failed to be communicated. An explosion and the resulting fires destroyed the platform, killing 167 men. At the time, the accident was the worst offshore oil disaster of lives lost and industry impact.

Kleen Energy Natural Gas Explosion

A U.S. Chemical Safety and Hazard Investigation Board report found that a lack of timely and complete information regarding working conditions in and around the plant while natural gas blow activities were taking place led to confusion and inconsistency of workforce safety. Some contractors were instructed to continue working inside the plant during the activities, while other groups were directed to leave. In the end, six workers were killed with 50 others injured.

In each incident cited, there were several ineffective protection layers that resulted in catastrophe. So why aren’t significant investments into safety systems eliminating operational dangers? Without real-time communication, awareness, and visibility into the health of various protection layers, it is difficult for plant management to maintain the highest levels of employee safety with constant issues such as:

• Human Error – Human error is inescapable. As Brent Kedzierski – Principal Consultant at Hexagon Asset Lifecycle Intelligence and Former Head of Learning & Strategy at Shell – said in our recent online seminar: “The first principle of the human condition is that humans are fallible.” No matter what businesses do – from improving processes to investing in automation – human error creeps back in.

• A skills shortage – Downsizing and employee retirements have resulted in fewer experienced control system engineers, operators, and technicians in the workforce. Meaning that fewer skilled personnel are available to keep safety systems running smoothly, fewer people are available to monitor and evaluate systems and, in some cases, crucial knowledge and experience may be lost forever.

However, to help lessen the impact of these challenges, companies are turning to a more holistic, efficient, and effective approach: operational risk management.

What is operational risk management?

Operational risk is generally defined as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.”

In other words, ORM is the process of reducing the probability of these losses occurring.

ORM has always been central to running any industrial facility; however, for a long time, it was seen as a discrete process, overseen by specific job roles.

Yet anyone who has worked in a plant knows that a single layer of protection isn’t enough to shield employees (and the public) from a catastrophic failure. It takes multiple layers of protection with various levels of education, technological barriers, appropriate authorizations and other fail-safes to provide a true sense of security.

That is why, in recent years, ORM has adapted and evolved. Instead of being a discreet process overseen by a safety officer or other frontline roles, ORM is now seen as a universal process that spans across functions, from planning through engineering design and construction, commissioning, operations, and maintenance.

It’s designed to analyze risk – and the consequences that will arise if those risks occur – from every angle and to support the implementation of protection at every level. In addition, each element should work together seamlessly to keep your people and the public safe and your business running smoothly.

How to address ORM in your plant or facility

It is easy to be overwhelmed by the prospect of ORM at first. However, if you take a methodical approach, using solid Recognized and Generally Accepted Good Engineering Practices (RAGAGEP) methodologies, the path ahead becomes much clearer.

Step one: Review your site and run a Process Hazard Analysis

If your site is greenfield, ORM should already be built into its structure (although, unfortunately, this is not always the case). If it is, this means it is built into your processes too. Most (or all) of your equipment should have the necessary fail-safes and controls. If this is the case, a review should be conducted to keep an eye on any potential risks that could develop, to ensure you are starting from solid ground.

If you are working on a brownfield site, you will have been required by law to conduct a process hazard analysis (PHA) on everything from your human capital to your equipment and routines to help you identify two things:

• The potential cause of risks

• The consequences of these risks if they occur

One crucial thing: this analysis needs to dig deep into what causes losses. As Bob Hooper, a Senior Industry Consultant at Hexagon, said in our recent ORM online webinar:

As good as modern sensors and associated monitoring systems are you cannot take people out of the analysis process. A sensor only does what it is told to do. A human must be there to think the problem through and respond to what the sensor, alarm or loop management system is telling you. We must train people to work with technology by selecting the right technology.”

Bob cited the example of a gas plant with six turbine generators. A high-temperature alarm was continually being set off. Assuming there was a fault with the software or the sensor, the operator kept dismissing the alarm – and a week later, a turbine running at 30,00 rpm flew apart, causing a million-dollar failure.

Before the turbine exploded, a basic analysis might have concluded that there was something wrong with the alarm. But a deeper investigation would have shown that the error lay with the operator - human error creeping into the process once again.

This is where analysis techniques like Root Cause Failure Analysis, using a tool like a fault tree analysis (FTA), can be invaluable; they help you work backward from potential failures to get to the root cause of an issue so that you can address it as effectively as possible.

Step two: Use criticality indicators to prioritize

Even the best-run plant is vulnerable to a vast number and variety of risks.

It is impossible to eliminate all those risks, and difficult to address all of them at once. You only have so much time and budget, after all – and your plant needs to continue running efficiently while you are implementing these new protections.

This is why it is essential to be methodical with your ORM. You cannot do everything all at once, so you will need to focus on the most critical areas first. That is why your PHA should also weigh the relative probability that each process will go wrong and the severity of the consequences if each process did go wrong.

Using this information, you can create a heat map of your risk – a clear, intuitive picture of your risk that will instantly show you which areas need to be prioritized and which can afford to wait.

As a rule of thumb, around 20% of your equipment is likely to end up in the red, indicating that a failure could be catastrophic. You will need to focus on those areas first.

Step three: Take action

Now that you know where to focus your time and budget, you can implement controls to help you start managing operational risk.

Some of this will involve mechanical improvements, such as finding ways to engineer fail-safes into machinery or adjusting the layout and arrangement of your plant to address accident hot spots.

But, nowadays, a considerable proportion of ORM takes place in the digital world.

The heart of ORM lies in processes and procedures, which add to those crucial layers of protection we discussed earlier. And paper-based systems simply cannot handle the complexity of those processes.

That is why digital transformation is an essential component of ORM. The right technology can help you:

• Enhance safety-critical processes – inadequate data collection might not seem inherently risky. Still, it can cause major problems during procedures like handovers when workers need accurate and up-to-date information on what is happening on-site to make safe decisions. The best operations management systems digitalize things like logbooks, handovers and near misses, ensuring everyone always has the information they need to stay safe.

• Improve high-risk operational procedures and work processes – a sound knowledge management system (KMS) is invaluable, especially in a skills shortage. By making process documentation, equipment manuals and training content accessible anywhere, anytime, a KMS makes it easy for your people to always follow and communicate best practices.

• Visualize operations with clear, consistent process documentation and procedures – Digital Twins are taking the industry by storm, thanks to their ability to support collaboration and keep everyone – from the plant floor to the C-suite – up to date on the progress of large projects. But they can also provide crucial safety information by highlighting potential risk areas and updating risk assessments in real time.

• Centralize plant asset information – a centralized asset management system can give you information on everything from asset structures to work orders. This makes it much easier to schedule predictive maintenance and enact proper and timely safety procedures – both of which also help your equipment last longer, reducing your costs in the long term.

• Reduce human error by increasing operator situation awareness – introducing a raft of sensors, control loops and alarms is a good start, but equipment like this is useless if your people cannot keep track of what it is doing. They need to be able to see the big picture if you want them to act effectively. Instrumentation management systems can give you a holistic view of your operations, supporting everything from alarm management to control loop monitoring in one place.

Time to take control of your risk

If you are truly dedicated to reducing risk in your business, then a holistic, digital-first approach to managing operational risk is essential. It is the only way to give you the kind of control, understanding and insight you need to cover all your bases and protect your people and the public to the best of your ability.

Looking back at the incidents mentioned above, you see that the common thread in all of them was the failure to appreciate the risk of what it was they were doing. When reading the final reports, the indicators of risk were there, but they did not put them all together. Take the DuPont investigation cited earlier. The design of the ventilation fans was insufficient to mitigate a toxic atmosphere (incorrect design), the toxic gas sensor alarms were set higher than the permissible exposure limits (design), a ventilation fan had a “PSM Critical” work order submitted over a month prior to the incident (maintenance), toxic gas sensor alarms were not treated as safety critical in the days leading up to the incident (operation). Each one of these were layers of protection that were ineffective, but the site did not piece together the total risk from having so many layers of protection effectively out of service.

We understand that ORM can feel intimidating and complex and truthfully, it can be; however, that is where Hexagon, as a strategic partner, can help you tackle it effectively throughout your digital transformation journey.

Still trying to figure out where to begin? We gathered three experts in operational risk management together to break down the challenge, using their extensive experience in the field to help you kick-start ORM at your organization.

In our online webinar, “Optimizing Operations and Mitigating Risks in the Chemical Industry through Digital Transformation,” we discuss:

• Why do so many control loops fail

• How you can use AI and machine learning to reduce your risk without getting stuck under an avalanche of data

• Why the way you train and recruit your people can make or break your digital transformation.

Head here to watch the webinar and start taking control of your risk. Then check out additional in-depth operational risk management content or take a brief survey to assess your operations management system today.

And remember, think holistically, plan comprehensively and act accordingly to protect your industrial facility with operational risk management.