MeetingsRoundtable Meeting — June 2-3, 1999The 21st Century: Process Safety and Factory Mutual Briefing Paper No. 5 Paris Stavrianidis Abstract This paper presents a brief history of safety in the process industries during the 20th century. It identifies the emergence of performance-based standards and regulations and discusses the potential impact of these on industry. In parallel, the paper gives a brief history of Factory Mutual, and discusses the business challenges of the insurance industry in the 1990’s. Finally, the paper describes what the author sees as the technical and business challenges of the 21st century both for industry and Factory Mutual. Process Industries There has been phenomenal growth in the Process Industries in the 20th century. This growth has been driven by timely opportunities, entrepreneurial leadership, advancing skills and technology, profitable operations and safety responsibility. With the advent of the industrial revolution new hazards arose resulting in disabling injuries and fatalities. The process industries found this unacceptable and continue to transition to safer processes. The speed at which this transition occurs is a function of technology, operating experience and cost. The focus on safety in the 20th century can be characterized by a few significant milestones [2]:
Factory Mutual In its 164 years of existence FM has continually provided industry with property and business interruption insurance and prudent risk management services, called Highly Protected Risk (HPR). For most of our history, risk management focused on developing and applying scientifically sound loss prevention and mitigation techniques to provide practical and cost-effective solutions that reduce industrial risk to manageable levels. Some highlights of FM’s history are [3]:
Insurance Activities in the 1990’s Factory Mutual offers industrial and commercial property related insurance programs to industry. These programs focus on property related loses and business interruption. What characterizes and separates FM insurance from most competitors is our focus on joint prudent underwriting with effective risk management. In the past, pre 1990, when an insured had an acceptable risk management program, they would expect and often received a reduction in their premiums. Industry has changed significantly in the last decade. There is more competition in the insurance business from international companies and from brokers that offer industry a "whole package" that includes industrial, commercial, casualty insurance and workmen’s compensation. The industrial insurance market of the 1990’s can be characterized as extremely competitive with significant over capacity. As a result, industry has many choices (e.g., insurance, insurance and risk management, self-insurance, other risk transferal vehicles) and premiums have dropped significantly with smaller profit margins. Industry has a choice to make: Purchase
inexpensive insurance or purchase a slightly more expensive insurance
that also includes risk management services. FM believes that risk
management coupled with sound loss prevention technology is a prudent
and complementary service to industrial insurance. Avoiding industrial
accidents, particularly in a very competitive business environment, helps
profitability. Insurance (either from an insurance company or through
self-insurance) will cover the cost associated with property damage and
business interruption. What it does not cover is the "uninsurable
losses" such as damage to a company’s reputation and image,
loss of market share, customer dissatisfaction [4]. Engineering and Research Activities in the 1990’s FM provides five engineering and research services to industry:
To predict the future, always a risky undertaking, we should evaluate and understand the past. The past can be easily understood by examining Figures 1 and 2 [2 and 5]. It is clear from Figure 1 that the industrialized world, that is where risk management techniques and performance-based standards and regulations are used, has made significant improvements in process safety over the last 20 years. However, the few accidents that have occurred have had significant consequences (e.g., Pasadena, Texas with 23 fatalities in 1989). Industry has to diligently continue its focus on safety and to pursue the involvement of all major stakeholders. The problem is different in developing countries. The need to quickly industrialize and expand their economies has perhaps occurred at the expense of safety. Figure 2, even with limited data, does show a lack of a downtrend on the occurrence of major accidents. The same international companies that have had success in North America and Europe have to transfer the lessons learned over the last 20 years to their operations in the developing world. The process industries truly made remarkable advances in the 20th century; a defining difference in going forward into the 21st century is the almost universal interdependence among businesses on a global scale, the fast-paced technological advances, the very competitive business environment, and the sensitivity of governments and communities. What industry needs is to continue the development of performance-based standards and regulations that follow the systemic approach and employ life-cycle models that include the process itself, all safety/control equipment, and people (operators and community). The approach must rely on risk metrics to support prudent business decisions and be supported by a safety culture nurtured and directed by top management. The success of this approach does not depend on compliance to a minimum set of requirements. If done properly, it requires a culture change that relies on a continuous and long-term commitment to understanding, evaluating and improving the process.
Figure 1. Major Accidents in Europe and North America Figure 2. Major Accidents in Asia/Pacific and Middle East Therefore, the focus on performance-based standards and regulations will continue. Table 2 gives some expected standards and regulations in the next few years.
What we may eventually create are more performance-based standards, regulations, directives, guidelines, and practices. Industry may find a worldwide promulgation of different performance-based regulations and standards. Very similar to the problem facing industry with prescriptive standards. Without clear policies and procedures that are accepted by key stakeholders, this may in fact increase manufacturing costs and create confusion. As a result those not staying at the state-of-the-art are likely to fall behind. They will find it difficult to catch up and lose competitiveness. A possible solution is reliance on international standards and regulations. In a highly competitive global market with varying economic forces at work, it makes good business sense to have uniform and consistent requirements and comply with international standards such as the IEC 61508 or in the future the IEC 61511 for the process industries. However, traditional compliance to the requirements of international standards is not enough. Compliance should also be practical and cost-effective. That is, it should be achieved by combining common safety elements from different standards into one program to allow practitioners to perform a task once and claim compliance to the same or very similar requirements in a set of performance-based standards and regulations. Factory Mutual Beyond 2000 – An Integrated Approach to Risk Management As FM moves into the 21st century as FM Global, we will continue advancing loss prevention technology and supporting the development of performance-based standards and regulations. However, FM will use an integrated approach to risk management. For example, the four standards/regulations shown in Table 1, (IEC, ANSI/ISA, OSHA and EPA) have some common Process Safety Management elements (see Table 3); however, not all the elements are addressed by all the regulations/standards. For sound process safety management (PSM), we believe one has to address all the elements, preferably through an integrated PSM approach [6]. This integrated approach avoids redundancy and overlap while complying with safety elements of all four standards/regulations.
Table 3. Elements of Process Safety Management
An overall sound risk management approach should also include certain accepted activities/steps as listed in Table 4 [6]. Again, the requirements of these activities/steps vary among the standards/regulations but can be integrated into a single program.
Table 4. Integrated Risk Assessment Approach
Summary The process industries have made great strides in the 20th century, and recently demonstrated that prudent risk management is the direction of the future. For the global economies and markets of the 21st century, an integrated approach to prudent risk management using international performance-based standards and regulations can be a significant competitive advantage to the leaders of the industry. The "integrated risk assessment" approach, shown in the last column of the Tables 3 and 4, allows one program to be established and managed for practitioners to comply with these standards using a range of techniques that afford practicality and cost-effectiveness. References
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