FSMAS Seminar on the Fundamentals of Fire Risk Assessment

8/8/2019 FSMAS Seminar on the Fundamentals of Fire Risk Assessment

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FSMAS Seminar on theFSMAS Seminar on the

Fundamentals ofFundamentals ofFire Risk AssessmentFire Risk Assessment

By Desmond Lee, PhD (Newcastle),By Desmond Lee, PhD (Newcastle),

MBA &MBA &MTechMTech (UNSW),(UNSW), B.ScB.Sc ((HonsHons) (UWO)) (UWO)

Honorary Secretary, FSMASHonorary Secretary, FSMAS

QHSE Director, Wood Group Pressure Control PLC, AsiaQHSE Director, Wood Group Pressure Control PLC, AsiaPacific RegionPacific Region


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Fundamentals of Fire Risk AssessmentFundamentals of Fire Risk Assessment

RiskRisk What is Risk?What is Risk?

Risk is theRisk is the variation of outcomesvariation of outcomes thatthat

could occurcould occur over a specified periodover a specified period in ain a

given situation.given situation. Speculative riskSpeculative riskexistsexistswhen there iswhen there is a chance of a gain or aa chance of a gain or a

lossloss.. Pure riskPure riskon the other hand, existson the other hand, exists

only when there isonly when there is a chance for a lossa chance for a loss..


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Fundamentals of Fire Risk AssessmentFundamentals of Fire Risk Assessment

Organizations and investors acceptOrganizations and investors accept speculative risksspeculative risks ifif

the risk premium is high enough to provide for anthe risk premium is high enough to provide for anacceptable return over a less risky investment.acceptable return over a less risky investment.

However, due to theHowever, due to the uncertainty of the costsuncertainty of the costsinvolved, pure risks should be either avoided orinvolved, pure risks should be either avoided or

managed.managed. TheThe costs of this uncertaintycosts of this uncertainty are composed ofare composed ofthethe

cost of the unexpected losscost of the unexpected loss andand the cost ofthe cost ofuncertainty itselfuncertainty itself. While the cost of the loss can be. While the cost of the loss can be

calculated at some point in time, the costs of thecalculated at some point in time, the costs of theuncertainty are difficult (if not impossible) to quantify.uncertainty are difficult (if not impossible) to quantify.


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Costs of UncertaintyCosts of UncertaintyThese costs of uncertainty resultsThese costs of uncertainty results fromfrom

(1)(1) diminishing marginal utilitydiminishing marginal utility,, (2)(2) over estimating the chance of lossover estimating the chance of loss oror

(3)(3) fear and worryfear and worry;;

and lead to less than optimum production, price levelsand lead to less than optimum production, price levels

and price structures.and price structures. If you have experience and expert in estimating theseIf you have experience and expert in estimating these

uncertainties, of course, you can have better judgmentuncertainties, of course, you can have better judgmentand hence better optimized production, better pricingand hence better optimized production, better pricingand price structures for your products because you knowand price structures for your products because you knowvery well your costs and is good for your businessvery well your costs and is good for your business

So, proper and adequate risk management process isSo, proper and adequate risk management process isvery necessary in the long run for your business.very necessary in the long run for your business.


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Risk Management ProcessRisk Management Process Minimizing an organization's pure risk is the objective ofMinimizing an organization's pure risk is the objective of

the risk management process. Risk management is notthe risk management process. Risk management is notthe purchase of insurance, and it is not the self insuringthe purchase of insurance, and it is not the self insuringof all exposures. Rather, it is the orderly process of riskof all exposures. Rather, it is the orderly process of riskidentification (what are the hazards) and measurement,identification (what are the hazards) and measurement,alternative analysis and implementation and monitoringalternative analysis and implementation and monitoring

of the chosen alternativeof the chosen alternative The first steps in any effective risk managementThe first steps in any effective risk management

program are to identify and measure the exposures toprogram are to identify and measure the exposures toloss that are present in the company's operations. Justloss that are present in the company's operations. Justas important in identifying the exposure is theas important in identifying the exposure is theunderstanding the conditions that create the exposure,understanding the conditions that create the exposure,and the steps necessary to correct or minimize theand the steps necessary to correct or minimize theexposure.exposure.


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The steps in the riskThe steps in the risk

management process are:management process are:

1) Identifying exposures to fire loss that could1) Identifying exposures to fire loss that could

interfere with company's objectives;interfere with company's objectives; 2) Analyzing the potential impacts and2) Analyzing the potential impacts and

consequences of these identified exposures;consequences of these identified exposures;

3) Selecting the various alternatives of handling3) Selecting the various alternatives of handlingsuch a risk;such a risk;

4) Implementing the chosen alternative (or4) Implementing the chosen alternative (orcombination of alternatives);combination of alternatives);

5) Monitoring the effectiveness and5) Monitoring the effectiveness andappropriateness of the chosenappropriateness of the chosen alternative(salternative(s).).


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The steps in the riskThe steps in the risk

management process are:management process are: Any organization can control a sizable portion of itsAny organization can control a sizable portion of its

exposures by establishing and maintaining anexposures by establishing and maintaining an effectiveeffectiveloss prevention programloss prevention program of avoiding as many risks asof avoiding as many risks aspossible. However, in some instances the purchase ofpossible. However, in some instances the purchase ofinsurance or assumption of certain degree of the risk isinsurance or assumption of certain degree of the risk isthe inevitable.the inevitable.

After all efforts to avoid or to contractually transfer theAfter all efforts to avoid or to contractually transfer therisk have been exhausted, the decision becomesrisk have been exhausted, the decision becomeswhether to assume the risk or transfer via insurance.whether to assume the risk or transfer via insurance.

Whichever method is chosen (or a combination of theWhichever method is chosen (or a combination of thetwo), effective loss prevention will be the key factor intwo), effective loss prevention will be the key factor inthe final cost.the final cost.


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Risk IdentificationRisk Identification -- A Fire RiskA Fire Risk

PerspectivePerspective

This is the process of determining what canThis is the process of determining what can

happen, why and how. Major threats that givehappen, why and how. Major threats that giverise to the risk can be classified into therise to the risk can be classified into thefollowing types of risk:following types of risk:

Property LossProperty Loss Financial LossFinancial Loss

Liability RisksLiability Risks

Personnel ThreatsPersonnel Threats Social RisksSocial Risks

Environmental RisksEnvironmental Risks


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Methods of identifying fire lossMethods of identifying fire loss

exposureexposure Completing a questionnaire / surveyCompleting a questionnaire / survey

Reviewing the loss histories of the companyReviewing the loss histories of the company Analyzing financial statement and accounting recordsAnalyzing financial statement and accounting records

Examining other records, plans and documentsExamining other records, plans and documents

Studying operational flow chart and diagrams toStudying operational flow chart and diagrams to

highlight hazards in each step of the processhighlight hazards in each step of the process Carrying out site inspection and interview of the siteCarrying out site inspection and interview of the site

personnelpersonnel

Consulting with experts both within and outside theConsulting with experts both within and outside theorganizationorganization


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Risk AnalysisRisk AnalysisFor each identified exposures, the potential impacts andFor each identified exposures, the potential impacts and

consequences is analyzed, by determining:consequences is analyzed, by determining:

Frequency of such lossFrequency of such loss

Severity of such lossSeverity of such loss

Potential financial impactPotential financial impact

Business continuityBusiness continuity Stable earning / growthStable earning / growth

Community / political concernsCommunity / political concerns

Legal requirement / complianceLegal requirement / compliance

The next step of risk management process involves eitherThe next step of risk management process involves eitherstopping loss from happening (risk control) or paying forstopping loss from happening (risk control) or paying forloss if it does occurs (risk financing).loss if it does occurs (risk financing).


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Risk Control TechniquesRisk Control TechniquesAim to minimize the frequency and severity of a loss. These techAim to minimize the frequency and severity of a loss. These techniquesniques

include:include:

AvoidanceAvoidance -- eliminate entirely any possibility of a loss.eliminate entirely any possibility of a loss. PreventionPrevention -- reducing the frequency or the likelihood of a loss byreducing the frequency or the likelihood of a loss by

"engineering out" hazards that could cause a loss."engineering out" hazards that could cause a loss.

ReductionReduction -- lower the severity of a loss by removing part or all of thelower the severity of a loss by removing part or all of thehazard(shazard(s) before one is exposed.) before one is exposed.

SegregationSegregation -- arranging activities and resources so that no single eventarranging activities and resources so that no single eventcan destroy all. It may take one of the two forms;can destroy all. It may take one of the two forms;

SeparationSeparation -- entails the dispersal of a particular activity or asset overentails the dispersal of a particular activity or asset overseparate location.separate location.

DuplicationDuplication -- rely on "backrely on "back--up" of critical processes/spares or duplicateup" of critical processes/spares or duplicateuse if primary assets or activities suffer a loss.use if primary assets or activities suffer a loss.

(Ref no.1(Ref no.1 NFECNFECss Fire Risk Assessment Guide book atFire Risk Assessment Guide book athttp://http://www.nfec.gov.sg/publication_fire_risk.htmlwww.nfec.gov.sg/publication_fire_risk.html))

The following are broad outlines of the prevention and reductionThe following are broad outlines of the prevention and reduction measuremeasureapplicable to fire risk.applicable to fire risk.


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Fire PreventionFire PreventionEliminating potential fuels:Eliminating potential fuels:

Remove unnecessary flammable substances;Remove unnecessary flammable substances;

Safe storage of necessary flammable substances;Safe storage of necessary flammable substances; Good house keeping to isolate potential fuels from ignition sourGood house keeping to isolate potential fuels from ignition sources;ces;

Carry out regular fire prevention inspection;Carry out regular fire prevention inspection;

Ensure employees are trained on fire safety awareness and conducEnsure employees are trained on fire safety awareness and conductt

fire drill exercise.fire drill exercise.

Removal of Ignition Sources:Removal of Ignition Sources:

Eliminate open flames and other heat sources (Eliminate open flames and other heat sources (i.ei.e: hot work permit;: hot work permit;

contractor control; etc.);contractor control; etc.);

Comply with code of practices to control electricity as a sourceComply with code of practices to control electricity as a source ofof

heat orheat or flame;flame;

Remove sources of spontaneous combustion;Remove sources of spontaneous combustion;

Enforce "no smoking" regulation.Enforce "no smoking" regulation.


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Fire ReductionFire Reduction Erect firewalls or otherwise establish fire divisions soErect firewalls or otherwise establish fire divisions so

that spread of anythat spread of any

fire would be contained;fire would be contained;

Reduce fire intensity by removing or storing anyReduce fire intensity by removing or storing anyflammables materials orflammables materials or

contents in fire resistive compartment;contents in fire resistive compartment;

Cooperate with the fire department to establish a preCooperate with the fire department to establish a pre--fire plan;fire plan;

Develop a emergency plan for immediate actions inDevelop a emergency plan for immediate actions inthe event of a fire;the event of a fire;

Where justified, install and maintain suitable fireWhere justified, install and maintain suitable firedetection and suppression system;detection and suppression system;

Draw up postDraw up post--fire salvage plan to mitigate the loss.fire salvage plan to mitigate the loss.


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EXHIBIT 1EXHIBIT 1 -- FIRE LOSS CONTROLFIRE LOSS CONTROL

CHARTCHART

SEPARATION & REDUCED ENERGY

Ignition Control

1)Flameproof equipment

2)Hazardous process enclosure

3)Matches/lighters4)Safety operating system (temperatures, pressure control

and relief system)

Fire Load Control

1)Reduce volume stored at one point

2)Review materials used

3)Separate storage and processes

4)Limit storage areas

PRE-EVENT


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FIRE LOSS CONTROL CHARTFIRE LOSS CONTROL CHART

REDUCED ENERGY & PROTECTION

Detection Systems Provision

1)Smoke/heat detectors

2)Fire alarm

Fire Fighting Systems Provision

1)Extinguishers

2)Hose-reels / hydrants

3)Sprinklers / deluge / special

4)Removal access for goods & equipment5)Removal of smoke

6)Protection against water

7)Fire wall / fire door / fire shutter

DURING

EVENT


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FIRE LOSS CONTROL CHARTFIRE LOSS CONTROL CHARTEMERGENCY RESPONSE PLAN

1)Protect assets exposed to further damages

CONTINGENCY PLANNING

1)Alternative means of production to restore normal working

POST EVENT


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EXHIBIT 2EXHIBIT 2 -- FACTORS TO BE ASSESSED INFACTORS TO BE ASSESSED IN

FIRE RISK MANAGEMENTFIRE RISK MANAGEMENT

1. Property Damage1. Property Damage

A. PropertyA. Property

Size, height and shape of area potentially exposed to aSize, height and shape of area potentially exposed to asingle firesingle fire

Construction of roof, walls, and floorsConstruction of roof, walls, and floors Presence of combustible linings to walls, roofs, ceilingsPresence of combustible linings to walls, roofs, ceilings

and partitionsand partitions

Nature, distribution and combustibility of contents (fireNature, distribution and combustibility of contents (fireload)load)

Susceptibility of contents to damage by smoke, heat andSusceptibility of contents to damage by smoke, heat andwaterwater

Concentrations of values within a small areaConcentrations of values within a small area


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FACTORS TO BE ASSESSED IN FIREFACTORS TO BE ASSESSED IN FIRE

RISK MANAGEMENTRISK MANAGEMENT

B. HazardB. Hazard

Presence of any normal source of ignitionPresence of any normal source of ignition Use of hazardous processes and substancesUse of hazardous processes and substances

and their degree of separationand their degree of separation

Hazards arising from gas, toxic / corrosiveHazards arising from gas, toxic / corrosivematerials or pollutantsmaterials or pollutants

Risk of explosion from any sourcesRisk of explosion from any sources

Proximity to other buildings or hazardsProximity to other buildings or hazards Any special topographical or geographicalAny special topographical or geographical

featuresfeatures


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C. ControlC. Control

Standards of management and housekeepingStandards of management and housekeeping Horizontal and vertical separationHorizontal and vertical separation

Fire resisting doorsFire resisting doors

Existence of installation of fire detection,Existence of installation of fire detection,suppression or extinguishing arrangementsuppression or extinguishing arrangementincluding sprinklers and the water supplies,including sprinklers and the water supplies,

Distance to nearest fire station and itsDistance to nearest fire station and itsresponse timeresponse time

Security precautions.Security precautions.


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2. Business Interruption2. Business Interruption

A. FinancialA. Financial

Nature of businessNature of business

Gross profit forecastGross profit forecast

Allocation of gross profit by business unit and/orAllocation of gross profit by business unit and/orproduct groupproduct group

Susceptibility of the business to loss of market shareSusceptibility of the business to loss of market sharefollowing interruption, and the ability to recover itfollowing interruption, and the ability to recover it

Trend and seasonality of businessTrend and seasonality of business

Buffer stock; inventoryBuffer stock; inventory


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B. OperationalB. Operational

Size, height and shape of area potentially exposed to aSize, height and shape of area potentially exposed to asingle fire risksingle fire risk

Reconstruction and reinstatement periodReconstruction and reinstatement period

Replacement lead time for critical machinery, plant andReplacement lead time for critical machinery, plant and

toolingstoolings Replacement lead time for raw materials, components,Replacement lead time for raw materials, components,

workwork--inin--progress and finished stockprogress and finished stock

Bottlenecks and critical path of flowBottlenecks and critical path of flow

Duplication / back up of plant production and criticalDuplication / back up of plant production and criticalsparespare


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FACTORS TO BE ASSESSED IN FIRE RISKFACTORS TO BE ASSESSED IN FIRE RISK

MANAGEMENTMANAGEMENT

C. DependenciesC. Dependencies

External dependenciesExternal dependencies -- customers, suppliers,customers, suppliers,utilitiesutilities

InterInter--dependencies group; sister company;dependencies group; sister company;supply chainsupply chain

D. RecoveryD. Recovery Assistance available from sister companies,Assistance available from sister companies,

mutual alliancemutual alliance

Business contingency & recovery planBusiness contingency & recovery plan Increased cost of working and saving inIncreased cost of working and saving in

variable costvariable cost


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FIRE RISK ASSESSMENTFIRE RISK ASSESSMENT --

Factory LayoutFactory Layout


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Costing (Example)Costing (Example)

$16,000,000$12,000,000$1,300,000$2,600,000Finished Goodwarehouse

$5,800,000$1,300,000$2,000,000$2,500,000FinalProcessing

$5,300,000$400,000$1,200,000$3,700,000MainProcessing

$9,300,000$3,100,000$2,000,000$4,200,000PrimaryProcessing

$4,900,000$4,100,000$0.000,000$800,000Raw Materialstore

TotalStockPlant &machinery

Building costDescription


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Operation Cost (Example)Operation Cost (Example)

$ 7,000,000Pre-Tax Earning

$20,300,000Fixed Cost

$20,900,000Variable Cost

$50,000,000Turnover Cost


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FactoryFactory -- TABLE (1) FIRE RISK ASSESSMENT WITHTABLE (1) FIRE RISK ASSESSMENT WITH

PROBABLE QUANTIFIED EXPOSUREPROBABLE QUANTIFIED EXPOSURE

$4.2mil

$0.5mil

$0.1mil

$2.0mil

$3.1mil

Reconstruction takes 2

months.Interruption due tore-constructionactivities.

Debt servicing.Fire fighting & clean up

expenses.

Replacement of criticalmachines takes upto 18 months.

Disruption of processflow; bottleneck.

Change of technology;obselete, outdatedmodel

Total loss of StockNon-delivery of

customers' orders,penalty

Lost of key customers &market share

Abandoned by suppliers

of high demandsupply

Building $4.2mil

Plant & Machinery$2.0mil

Stock $3.1mil

Property LossFirePrimary

ProcessingBuilding

EXPOSURE(Quantified)

EFFECTIMPACTCLASS OFRISK

TYPE OFRISK

PREMISES ATRISK


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$0.45mil

$0.75mil

Death or Injury toemployee

Lost of skill workers

Workers' Compensation/ sued byemployees

Continued incurringordinary payroll

Straining of labourresources

20 workers /wages$0.45mil p.a.

5 supervisors /salary $0.3milp.a.

PersonalThreats


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$50.0mil

$3.5mil

$23.0mil

-$20.0mil$0.2mil

Takes as long as 12months to resumenormal operation

Potential loss of 50%gross profit over 12months

Continued incurring fixedcost and standingchanges

Saving in variable costIncrease in cost of

working extraexpenses

Inter-dependencies ofgroup companies

Annual turnover$50.0mil

Gross Profit

$7.0mil

Financial Loss


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$4.9mil

$5.3mil

$5.8mil

$16.0mil

Possible spread of fireDamaged by smoke,

heat & water

Prevention of access,disruption of utilitysupplies, electricity,water, gas

Non-delivery, qualityimpairment

inventory shortfall

Adjoining:Raw material store

$4.9mil

Main Processing$5.3milFinal process

$5.8mSurrounding

Finishedgoodwarehouse

$16.0m

SecondaryLoss


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$??$??

Possible spread of firePossible damaged by

smoke, heat &

waterPrevention of accessDisruption of utility

supplies, electricity,water , gas

Death or injury tovisitors, customers,contractors

Damage to property notowned but in care &custody

Adjacent PrintFactory $?

Adjacent

Warehouse$?

Liability Risk


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$??$??$??

Pollution andcontamination ofair, land & water

affecting the livingof neighbouringcommunity

Breach of law,regulations

Bad publicity and lost ofconfidence

Breach of fudiciary duty

of directors &officers

Discharge ofchemical,forced

evacuation

Environ-mental& SocialRisk


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FREQUENCY & SEVERITY LEVEL IDENTIFIEDFREQUENCY & SEVERITY LEVEL IDENTIFIED

High

High

High

High

High

Medium

Medium

Medium

Medium

Medium

Medium

Medium

Medium

Medium

Poor maintenance &check

Rule difficult toenforce

No control overcontractor'sworkers

No hot workprocedure

No program to checkon the reliabilityof safety

devicesNo self extinguishing

deviceNo fuel flow rateNight shift workers

areinexperience

Materials are notproperlylabelled and noMSDS

Recent retrenchmentupset someemployees

Electrical installationcomply withcode

Smoking is prohitedWelding, cutting,

grindingseldomperformedinside

Open flames arefully enclosed

Temperature control/ infraredthermo

detectionFuel supply areautomaticshut-off inemergency

No fuel storage inthe processarea

No such materials /

substancesused

Security check at allentry and exit.

Surveilliancecamera andfoot patrol byguards

24 hours manned

operation

INCEPTION-Electrical fault-Smoking-Hot work

-Process perils-Spontaneouscombustion

-Arson / sabotage

FIRE -Primary

Processing Building

SEVERITYFREQUENCYAGGRAVATINGFACTORS

LIMITINGFACTORS

CAUSESRISK


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High

Medium

Medium

High

High

High

High

High

High

High

High

High

High

High

Medium

Medium

Medium

Medium

Medium

High

High

High

High

High

High

High

Ceiling covered by fiberglass insulation lining,improper type usedNot easily accessible andno clear signageModerate quantity offlammable liquids usedFlammable liquids not

safely handled or storedNo sprinkler protectionNo fire detection systemNo fire fighting team atnight shiftNo pre-fire planAnnual shut down for 2weeks during New YearWall not extended above

roofOpening / penetration notsealedFire door self closing

jammed and door alwayswedged openNo fire wall or firedivisionNo sprinkler in main

processingNo fire wall or firedivisionNo sprinkler in finalprocessingEmpty wooden palletsstored in betweenNot 24 hours mannedHigh Inventory storage

Walls and roofs areconstructed of steel& concreteAdequate no.of fireextinguishers as perbldg codeAdequate no. of firehosereels as per

bldg codeLimit storage ofcombustiblematerialsGood housekeping24 hours mannedAll employeesunderwent firefighting and safety

trainingThere is a trainedfire fighting teamFire station within5Km and responsetime is 7 minutesFire wall of 225mmthickEntrance to main

processing are clearof storageEntrance to finalprocessing are clearof storageClear distant greaterthan 25mSprinkler provided inthis building

SPREAD-Interior-Fire loading-Raw Material store-Main Processing-Final Processing-Exterior-finished goodwarehouse


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Low

High

Medium

Medium

Storage of large quantityof flammablematerials

Storage of large quantity

of flammablematerials

Clear distant greaterthan 100m

Clear distant greaterthan 35m

OUTSIDE-Adjacent Warehouse-Adjacent Paint

Factory


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RISK MATRIXRISK MATRIX

(High Risk is unacceptable-must be reduced to Medium or Low Risk)

(Ref no.2 MOMs Risk Assessment Guidelines http://www.mom.gov.sg/publish/momportal/en/communities/workplace_safety_and_health/maintaining_a_safe_workplace/occupation_safety/risk_management.html)


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FM Global Experience:FM Global Experience: USE SPRINKLER SYSTEMS ALWAYSUSE SPRINKLER SYSTEMS ALWAYS

FOR YOUR PREMISES NO MATTERFOR YOUR PREMISES NO MATTERWHAT KIND OF COMMERCIAL ORWHAT KIND OF COMMERCIAL ORINDUSTRIAL PREMISES YOU HAVE,INDUSTRIAL PREMISES YOU HAVE,

ITITS A GUARANTEE YOU WILLS A GUARANTEE YOU WILLMINIMIZE YOUR LOSS DURING ANYMINIMIZE YOUR LOSS DURING ANYFIRE INCIDENT OR EVENT!FIRE INCIDENT OR EVENT!

Read FMGLOBAL P0037Read FMGLOBAL P0037 (Ref no.3 FM Global(Ref no.3 FM Global NewletterNewletter P0037P0037 --

http://http://www.fmglobal.com/page.aspx?idwww.fmglobal.com/page.aspx?id=03030000=03030000))


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REFERENCESREFERENCES Ref no.1Ref no.1

Ref no.2Ref no.2

Ref no.3Ref no.3Adobe Acrobat

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FSMAS Seminar on the Fundamentals of Fire Risk Assessment