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Risky Business PUBLIC ACCESS

Practitioners Say that the Techniques for Managing Industrial Risk also Protect the Bottom Line.

[+] Author Notes

Associate Editor

Mechanical Engineering 124(07), 42-44 (Jul 01, 2002) (3 pages) doi:10.1115/1.2002-JUL-3

This article reviews risk analysis in process engineering. Process plants must be inspected and maintained more diligently as they age. Risk analysis methods, along with post-construction standards currently being developed, are evolving tools aimed at helping companies maintain plants better and save money. Risk analysis is routinely used in the nuclear power industry to identify areas of a plant that have the highest likelihood of failure and pose the most serious consequences. Post-construction standards, a current project of ASME, are focused on mechanical integrity, and will provide guidelines on what, when, and how to test and inspect. Risk assessment has proven itself to be a useful tool in making industries safer and more reliable, and could have larger societal benefits as well.

One thing that process plants and people have in common is that aging and maintenance go hand in hand . As we get older, we need to make more trips to the doctor to keep up our physical health. Process plants, too, must be inspected and maintained more diligently as they age. Risk analysis methods, along with post-construction standards currently being developed, are evolving tools aimed at helping companies maintain plants better and save money.

Risk analysis is routinely used in the nuclear power industry to identify areas of a plant that have the highest likelihood of failure and pose the most serious consequences. Post-construction standards, a current project of ASME, are focused on mechanical integrity, and will provide guidelines on what, when, and how to test and inspect. They are specifically intended for the chemical, petrochemical, pharmaceutical, and power industries. Proponents say that, although risk analysis practices and the post-construction standards are separate developments, they can provide similar benefits in increased reliability and safety of industrial equipment.

Why Risk Matters

Large chemical companies may own and operate well over 1,000 facilities, containing an enormous amount of pressure vessels, valves, and piping. Looking at process risk can help make plants safer, according to Joseph Balkey, chair of ASME's Safety Engineering and Risk Analysis Division. Balkey, who is now retired, was an analyst of process risk and human factors with the Process Safety Group of Union Carbide, now Dow Chemical Co., in Charleston, W. Va.

The traditional watchdog over plant safety is the federal government. The Environmental Protection Agency mandates that catastrophic risks be reduced outside the plant's fence line, and the Occupational Safety and Health Administration covers workplace risks inside the plant.

But there are other reasons, besides compliance with regulations, to keep risks down, Balkey said. Risk analysis tools are providing companies with economic benefits as well as better safety records, he said.

The Safety Engineering and Risk Analysis Division, which calls itself SERAD, was formed in 1991 by merging ASME's Safety Division and the Risk Analysis Task Force. The merged division covers three major categories: catastrophic loss outside a plant, workplace injuries and fatalities, and reliability-making things work longer and better.

In Balkey's view, industries are increasingly using risk analysis tools, such as fault tree analyses or failure modes and effects analyses, to cut costs as well as to improve plant safety and reliability of equipment. "People are doing these things on their own, to reduce costs by using these tools," he said.

David Mauney, an associate with Structural Integrity Associates in Rockville, Md., sees a correlation among risk analysis, safety, and economic benefits. Mauney has spent most of his career involved in failure analysis, first at Alcoa Research studying fracture surfaces and then at Carolina Power and Light, a utility, doing failure analysis of nuclear and fossil fuel components.

Mauney argues that combining risk analysis with financial tools can benefit a company's bottom line and contribute to safety. In a paper presented to the Center for Process Safety of the American Institute of Chemical Engineers in 1998, Mauney and a co-author, Michael Schmidt of GE Global Asset Protection Services in Hartford, Conn., wrote that safety benefits would develop in two ways: by improving reliability and avoiding upsets that could result in injuries and equipment failures; and by encouraging focused inspection based on reducing production loss from failures.

Although the paper is addressed to the process industries, Mauney said that it could apply to any type of manufacturing business. He raised arguments, too, about the increasing importance of risk analysis when industries cut back.

"The equipment is getting older, and they are pushing it," he said. Mauney observed that, in the past, it was easier to get money for maintenance, especially by declaring that something was safety-related. Now, however, there is not as much money for maintenance, limiting the safety budget.

"We are getting into some big safety concerns because the stuff is running longer than anyone planned," he said. "This raises the question of where and when you replace things, both from the financial and safety standpoints."

Essentially, the paper argues that by keeping an eye on downtime costs and making appropriate maintenance expenditures over an appropriate time, plants will improve safety and reduce the exposure of employees to injury. Mauney believes that process plants can maximize their net present value-the value of future cash flow streams-by risk-ranking assets, and scheduling inspections and replacements.

Mauney believes that companies must look at the loss in sales of potential downtime, as well as taking into consideration reducing their maintenance costs. "If I reduce downtime costs by making maintenance investments in a way that minimizes production downtime, then I will automatically want to reduce the probability of failure. And that takes care of the safety problem," he said.

He acknowledges that taking a financial approach to safety issues may be tough for engineers, "who have an aversion to bean counters." According to Mauney, what engineers view as risk in terms of equipment failure is similar to what financial analysts term decision analysis, based on expected value. "Engineering calls it risk; financial guys call it expected value. The equation is the same. We're saying the same thing," Mauney said.

Risk analysis can take different approaches. It can be quantitative; that is, assigning numeric values to probabilities and consequences, or qualitative, or some combination of the two. The difference between the two is in the clarity they present in the analysis, explained Mauney, who compares the two approaches to the resolution of a photograph. " Qualitative or even quantitative approaches, can give you a kind of foggy picture," he said. "The fully quantitative approach provides the clearest picture possible, in terms of potential equipment failures and consequences. To find an object, we use the foggier picture, qualitative, to get the object in view and then refine the picture with quantitative and then fully quantitative approaches. We use qualitative and quantitative approaches to screen and focus where we apply fully quantitative approaches."

The distinction is important when it comes to applying financial analysis to maintenance decisions and priorities. Mauney acknowledges that fully quantitative risk analysis is often viewed as overly complex and expensive, requiring too many resources. A fully quantitative analysis can cost 10 times as much as a qualitative analysis, he said.

Yet Mauney said that using fully quantitative risk analysis can optimize maintenance and simultaneously improve safety across a range of industries-in discrete manufacturing as well as in process industries. In his view, after screening with qualitative and quantitative approaches, fully quantitative risk analysis provides the best bet for optimizing plant performance and corporate value for the inspection/maintenance investment while addressing safety concerns.

Mauney acknowledges that the price of components plays a role here. The cost of equipment in the fossil power industry is far higher, on average, than in petroleum refining, for example. The higher the cost of components, the more justifiable the use of the quantitative approach may be, he said.

Mauney, who serves on ASME's Research Committee on Risk-Based Technologies, is co-author with Michael Schmidt of an ASME publication, Risk-Based Methods for Equipment Life Management: An Application Handbook, which focuses on using probability and financial risk optimization to identify the best time, economically, to repair or replace components or equipment.

While ASME publishes codes and standards covering materials, design, manufacturing, and fabrication of nuclear and non-nuclear plants, post-construction standards-those dealing with operation and maintenance after a plant is built-have mostly been missing. The one exception has been nuclear plants, which have had post construction standards for decades.

In the works for some eight years and still under development, post-construction standards for non-nuclear plants have been a long time in coming. Non-nuclear industries now comply with an OSHA Process Safety Management Standard known as 29 CFR 1910.119. This is a broad standard that consists of 14 elements.

The OSHA standard has a section on mechanical integrity, which deals with periodic inspection of components, training, and procedures for maintaining equipment. Yet beyond specifying that facilities handling hazardous materials must have a mechanical integrity program in place, it stops short of spelling out how to do it.

Every industry has its own approach on how to maintain a plant after it's built. This is the gap that the post construction standards are intended to fill.

The standards include two basic areas. One is inspection planning, which provides a framework for using risk analysis and risk-based methods for optimizing inspection activities. The other covers repair techniques, or how to keep the equipment up and running. The standards are not mandatory requirements, but are intended to provide extra guidance for the chemical, petrochemical, pharmaceutical, and power industries on what, when, and how to test and inspect, Balkey explained.

Jerry Rodriguez is a professional engineer and a senior engineering specialist in the mechanical and electrical integrity group of FM Global in Johnston, R.I., an insurance company that specializes in property loss. In his view, post-construction standards that focus on the evaluation of failures are very much needed.

"For a long time, people said a crack is a crack in a vessel, and all cracks are bad," Rodriguez said. "But, in some cases, a crack may not be a major problem. You have to evaluate the process and do a failure mode analysis to see where that crack will go. Is it something you need to address immediately, or do you have time, or is it something you need to be concerned about?"

Joseph Balkey's brother, Kenneth, who is a technical advisor to SERAD and works as a fellow engineer at BNFL Westinghouse Electric Co., a supplier of nuclear power products and services in Pittsburgh, expects the post-construction standards to provide consistency to ensure mechanical integrity. ASME post-construction standards are intended to "provide non-nuclear industries tremendous value in managing degradation of vital equipment in those facilities," he said.

Both the post-construction codes and the ASME handbook on risk analysis methods are tools that can help plants reduce costs and increase safety, according to Joseph Balkey.

"There is an economic incentive that people may not have been aware of before," he said. "If you are going to spend time on safety issues, you can also be watching what you can do to improve your reliability."

While at Union Carbide, Balkey used risk analysis tools such as fault tree analyses to measure the likelihood of a major failure. The company had databases recording how often pipes, vessels, and instrumentation failed, and tools for calculating the chances that people would make mistakes. The same databases could be used-and were-for getting extra life out of equipment-that is, for controlling cost, he said.

"The tools were exactly the same," Balkey said. "We would go through the studies because they made economic sense." The incentive went beyond meeting EPA or OSHA regulations.

ASME is taking the tool of risk analysis a step further. The Society's Board of Governors produced a position paper in March of this year on the role that risk analysis could play in decision-making by industry, government, and the general public. Kenneth Balkey chaired a task force in 1988 that examined how risk analysis could improve plant inspection. (This magazine devoted an entire issue to risk management in 1984.)

In speaking of the potential impact of risk analysis, Kenneth Balkey observed that process plants are running better today than they were 15 years ago. "That's not by coincidence," he said. "A lot of people have thought about risk assessment and safety engineering, and how to make things much safer for society at large."

Risk assessment, he said, has proven itself to be a useful tool in making industries safer and more reliable, and could have larger societal benefits as well.

This devastation is from a boiler explosion on the floor above. Risk analysis can help to identify the areas of a plant that have the highest likelihood of failure and can result in the most serious consequences.

Grahic Jump LocationThis devastation is from a boiler explosion on the floor above. Risk analysis can help to identify the areas of a plant that have the highest likelihood of failure and can result in the most serious consequences.

The damage to a wall was due to a boiler explosion. Post-construction standards under development by ASME are intended to provide extra guidance for testing and inspecting non-nuclear process plants.

Grahic Jump LocationThe damage to a wall was due to a boiler explosion. Post-construction standards under development by ASME are intended to provide extra guidance for testing and inspecting non-nuclear process plants.

Copyright © 2002 by ASME.
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