09/06/2013
OCCUPATIONAL SAFETY HEALTH AND ENVIRONMENTAL MANAGEMENT
RISK MANAGEMENT ASSSIGNEMNT - CASE STUDY
Introduction
Whilst browsing through a safety magazine, you read of a series of explosions in a neighboring country. As a result of the explosion, the factory was completely gutted down by fire and the company ceased business, having been declared insolvent.
The factory premises were insured but the claim, which was settled by the insurance company, was not settled in full, as the company was proved to have been negligent. Subsequently, the company had to bear the first thirty percent (30%) of the assessed damage. Furthermore, public liability costs were awarded against the firm (three members of the public were killed). The toxic chemicals polluted the air as well as a nearby river from which the community draws its water resulting in further considerable fines.
The costs were such that the cash requirements to resume production were not available.
Official inquiry
The inquiry revealed that two explosions occurred. The first one resulted from ignition of flammable liquids caused by a spark generated by a time switch, approximately an hour before the starting time of the factory. It was felt that this small fire could have been controlled if the workforce had been present at that time. The first explosion occurred in the assembly shop and the resultant fire quickly spread (due to open plan configuration of the factory) to an adjoining area where highly flammable and toxic liquids were stored in bulk. The resultant major explosion ripped throughout the entire factory complex, bringing down the boiler stack which demolished a private dwelling nearby, killing the three occupants.
Problem
By coincidence, the factory which you have just joined produces identical end product, using the same raw materials. On inspecting the factory, you discover that there is a great similarity in the layout!!
From the statements above, it can be noted that there is a “pure” risk threatening the company. From your evaluation of the probability of the incident occurring and the financial consequences if the incident occurs, one can only conclude that the chances of loss under existing circumstances is very real. Such a loss would affect the company’s financial resources, owing to a restricted cash flow, tight monetary policies, high interest rates etc. The consequence, a state of insolvency.
Risk Management
As a newly appointed Safety/Risk manager, you have been tasked to analyze the incident and compile a comprehensive risk management report of your findings and recommendations for top management’s consideration. In the report identify at least seven (7) risk exposures and comment on the risks impact ie safety health and environment and outline sound practical recommendations
NOTE:
The entire viability of the company depends on the sale of one end product
Less volatile liquids are available but more expensive
The insurance premiums are subject to discount if potential losses are minimized be implementing risk management and precautionary methods
Your policy also includes a “negligence” clause which, if invoked, would reduce the sum of assured by 30%.
The additional premium required to cover all aspects of public liability would constitute a considerable fraction of the total operational expenses thus affecting the profit margin
