Managing risk is an important part of any business, but especially for those that work with refrigerants, which can create a safety hazard if they aren’t handled properly. However, the best ways to manage and estimate risk aren’t always clear cut.

“I think known, high-level risk is assessed regularly and most often effectively. The risk I see as being under-evaluated are small mechanical changes, as well as organizational change,” said Drew Hart, senior manager of environmental health and safety for E. & J. Gallo Winery.

Currently, there is a wide range in the ways the industry addresses risk mitigation. “For companies with established process safety culture, I think this is done at a high level,” he said. “New or non-existent management systems dramatically reduce the efficacy of risk mitigation efforts.”

“I think known, high-level risk is assessed regularly and most often effectively. The risk I see as being under-evaluated are small mechanical changes, as well as organizational change.”

Drew Hart, senior manager of environmental health and safety for E. & J. Gallo Winery.

Harold Streicher, Principal Innovation Officer for Hansen Technologies Inc., said a lot of ambiguity surrounding risks assessment remains. “In an effort to better understand how organizations identify and rank risk, it has revealed a very grey area around how they assign a (monetary) value to risk. and this is certainly worth understanding,” he said.

Streicher added that by building on the traditional PHA methodology for assessing the risk matrix/outcome, those in the industry can now conduct a “Financial Hazard Analysis (FHA)” to measure total risk exposure versus risk mitigation value and costs. “This will provide a simple risk over investment ratio to help rank and clarify the value of risk to financial decision makers,” he said.

ASSESSING RISK

Understanding risk usually involves asking three questions: what can go wrong, how likely is it and what are the impacts. The two primary ways that risk is assessed in the ammonia refrigeration industry is by completing a Process Hazard Analysis (PHA) and by performing a Hazard Assessment and Offsite Consequence Analysis (OCA), said Peter Thomas, president of Resource Compliance Inc. He added that PHA, mechanical integrity and other Process Safety Management recommendations can help companies determine the best way to mitigate risk.

“Often recommendations are the result of an unacceptable level of risk. Therefore, measuring the number of completed recommendations is one way to assess risk mitigation,” Thomas said.

When performing a PHA, risk is typically evaluated by considering both the severity or likelihood of a scenario occurrence. So, risk increases as either the severity or likelihood increases, Thomas explained.

PSM, an Occupational Safety and Health Administration program intended to protect workers, and the Environmental Protection Agency’s Risk Management Program, which is intended to protect the environment and the community, both list safety-related elements companies have to complete. “You have to do a process hazardous analysis to look at things that could cause harm and have a plan around mitigating those risks,” Streicher said. “In our arena, they do what-if analysis to say what could happen if and they’ll say how likely is that to happen. Then you can say, ‘How can you mitigate the risk?’”

Thomas said some facilities that operate systems with less than 10,000 pounds of ammonia and are not subject to RMP/PSM have voluntarily implemented mechanical integrity and training programs to mitigate risk. “This serves our industry well by reducing accidental releases,” he said.

The formal structure of PSM and RMP regulations help to ensure there isn’t a drop in the program efficacy, Hart said. “As an end user, much work has to be done to build the program past the skeleton of the regulation,” he explained. “That is precisely why companies that lack the institutional knowledge will struggle to implement effective management systems.”

Hart said a glaring deficiency in the regulations he sees is that there is no mention of control plan or evaluation of process health past compliance audits every three years. “Companies must develop a KPI platform to give the operation day-to-day confidence in process health,” he said.

When going beyond PSM and RMP, Hart said he appreciated the addition of IIAR standard 9 to address aging systems. “I think that was a big gap. In the future I would like to see more resources dedicated to General Duty management system best practices.”

EVALUATING NEAR MISSES

Near misses and data analysis should drive the vast majority of long-range planning, according to Hart. “We need to make the denominator as high as possible in terms of events analyzed to be highly confident in our data. That data then becomes the basis for capital justification,” he said. “Near misses are our gift to help fix deficiencies before they negatively impact a team member.”

Thomas agreed that applying the lessons learned from previous incidents is a great way to reduce the likelihood of a recurrence.

“We need to make the denominator as high as possible in terms of events analyzed to be highly confident in our data. That data then becomes the basis for capital justification,” he said. “Near misses are our gift to help fix deficiencies before they negatively impact a team member.”

Drew Hart, senior manager of environmental health and safety for E. & J. Gallo Winery.

Peter Jordan, an active member of IIAR’s many committees and the principal engineer at MBD Risk Management Services, published a technical paper for the 2020 IIAR Annual Meeting titled “Case History: A Study of Incidents in the Ammonia Refrigeration Industry.” The paper summarized the incident information described in RMPs submitted between 1994 and 2004, incident reports posted on the Chemical Safety Board’s website, and information gathered from web pages, newspaper articles, blogs, and other scientific research.

GAINING ADDITIONAL INSIGHTS

While the industry is familiar with the PHA risk assessment tool, Streicher said the cost of the consequence isn’t fully understood. “PSM is about risk reduction. PHA is risk assessment, and now we’re talking about risk valuation,” Streicher said. What is that risk that we’re absorbing or not absorbing and the value of that vs the cost of mitigation?”

Streicher is currently putting a model together to assign a monetary value for risks associated with relief valve events and mitigation efforts. “I tried to put a comprehensive range of costs to those risks. For example, consider the small, but typical fine for a lack of fall protection is $15,625. Then, jump down to if it is a PRV (pressure relief valve) event that can shut down a plant for a day, that could be as high as $1 million in the loss of product and loss of productivity,” he said.

If there is a catastrophic event that shuts a facility down for 10 days or more, it could result in $10 million dollars or more in losses, Streicher added. “The exercise of thinking through what it could mean to employees and the business is important,” he explained. “Risk Valuation is not about the probability of an accident but the possibility of an accident.” This understanding of Risk Valuation can become an important way to communicate and justify investments in process safety improvements to those who are responsible for financial decisions.

Striecher said he has also drawn on OSHA tools, including https://www.osha.gov/safetypays/estimator, when creating his model.

LOOKING IN

People outside of the industry, such as insurance companies, look at risk at a much higher level and tend to be very black and white, Hart said. “PSM/RMP are performance-based regulations for a reason,” he explained. “A good example is flammables. Insurance companies largely look at water miscible flammable liquids the same way OSHA does—by flashpoint and volume of the mixture. Temperature of the mass of liquid is a major variable for vapor creation but is not part of the analysis.”

Jordan added that insurance companies and government agencies tend to rely on IIAR standards in assessing risk. “They will often view compliance with minimum standards and a measuring stick for risk,” he said.