Page 357 - Pipeline Risk Management Manual Ideas, Techniques, and Resources

151332 Risk Management
is to equip the practicing pipeline risk manager with concepts common applications of a pipeline risk management program
that will help him better understand risk issues and interact typically include the following:
more effectively with risk managers from other industries.
Many challenging questions are implied in risk management: 1. Identification of risks. This is simply the acquisition of
knowledge-such as levels of risk and changes in risk over
Where and when should resources be applied? time-as a first step toward applying the knowledge to
How much urgency should be attached to any specific risk improve pipeline safety.
mitigation? 2. Reduction of risks. Establishing baseline risk levels and risk
0 Should only the worst segments be addressed first? significance thresholds provides system parameters for
Should resources be diverted from less risky segments in evaluating multiple risk reduction projects.
order to better mitigate risks in higher risk areas? 3. Reduction of liabiliw. Having a comprehensive and effec-
How much will risk change ifwe do nothing differently? tive risk management program in place should reduce the
number, frequency, and severity of failures, as well as the
It must be recognized that a finite amount of resources can be severity of failure consequences. In addition to operating
spent on pipeline risk reduction. Beyond some point, expendi- cost savings, the company would expect to see a long-term
tures no longer make sense from a business or societal view- reduction of indirect liability-related costs, including insur-
point. An irony of the situation is that public safety can actually ance costs, third-party legal actions, government agency
be threatened by spending too much on pipeline safety! This enforcement actions, special interest group actions, etc.
occurs when costs of pipeline transportation are driven so high 4. Resource allocations. This entails optimizing, from a risk
that business is diverted to less safe modes of transportation. perspective, the choices of day-to-day expenditures of man-
In some sense, we have nearly complete control of the risk. power and dollars. A risk-based maintenance or capital
We can spend nothing on preventing accidents or we can spend budget cost effectively allocates limited funds to risk miti-
enormous sums of money over-designing facilities, employing gation measures with the greatest risk reduction per unit
an army of inspectors, and routinely shutting down lines for cost. The optimum allocation of resources is one of, if
preventive maintenance and replacement. Pragmatically, oper- not the, most pressing challenges to managers of pipeline
ators spending too little on preventing accidents will be out of operations.
business because of regulatory intervention or because of the 5. Project approvals. As part of a regulatory process or com-
cost of accidents. On the other hand, if an operator spends too pany internal process, this involves an examination of the
much on accident prevention, that company can be driven out levels of risk related to a proposed project and the judgment
of business by the competition--even if, perhaps, that competi- of the acceptability ofthose risks.
tion has more accidents! 6. Budget setting. Budgets are used to determine the value and
Risk management, to a large extent, revolves around the cen- optimum timing of a potential activity, project, or group of
tral process of making choices in the design and day-to-day projects from a risk perspective.
operations of a pipeline system. Many of these choices are 7. Due diligence. Due diligence is required to investigate and
mandated by regulations whereas others are economically evaluate assets that might be acquired, leased, abandoned, or
(budget) constrained. By assigning a cost to pipeline accidents sold from a risk perspective. An acquiring company can
(a sometimes difficult and controversial thing to do) and evaluate data from a pipeline of interest in its risk model and
including this in the cost of operations, the optimum balance compare the level of risk to its existing system, thereby iden-
point is the lowest cost of operations. tifying the potential cost and budget priority to meet estab-
No operator will ever have all of the relevant information he lished significance thresholds.
needs to guarantee safe operations. There will always be an ele- 8. Risk communications. This involves presenting risk infor-
ment of the unknown. Managers must control the “right” risks mation to a number of different audiences with different
with limited resources because there will always be limits on interests and levels of technical abilities. These audiences
the amount of time, manpower, or money available to apply to a can include new pipeline ROW-affected parties, existing
risk situation. Managers must weigh their decisions carefully in pipeline ROW-affected parties, corporate stakeholders,
light of what is known and unknown. employees, customers, general public, special interest
The deliverable most requested after risk assessment is groups, local emergency response parties, and local/state/
therefore a resource allocution model. In such a model, the out- federal governmental agencies.
put of the risk assessment would play a key role in evaluating
the benefits of any project or activity. The user would in essence The risk results can also be used to support specific tasks in risk
be performing “what-if‘’ scenarios to see the risk level that management, including
results after any proposed action.
0 Design an operating discipline
Assist in route selection
It. Applications Optimize spending
Strengthen project evaluation
Applications of risk management techniques range from sim- Determine project prioritization
ple “interesting to know” comparisons to the full basis ofbudg- Determine resource allocation
ets and operating disciplines. The latter may drive design, Ensure regulatory compliance
construction, operating, maintenance, and emergency response
decision making and associated resource allocation. The most and so on.