The risk management cycle and its importance

The risk management cycle and its importance

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Introduction

Physical dangers have been a feature of life since the beginning of Human history. In the initial days of Human history there are many natural hazards such as earthquakes, weather, and other living organisms diseases. As now a days we see a drastic change in increasing technology hazards and they have also become manmade- fire, explosions, chemical spills, drugs, pollution etc.

It was one of the doom's day in the history of India when on December 3, 1984, MIC (methyl isocyanate) gas leaked from the UCIL(Union Carbide India Limited) plant in Bhopal,Madhaya Pradesh ,India. According to the figures provided by state government of Madhya Pradesh, approximately 3,800 people died and a large number of other persons experienced permanent or partial disabilities. Shortly after the gas release, UCIL launched a serious effort to find the reason. In the Initial investigation of UCIL experts disclosed that a large volume of water had actually been introduced into the methyl isocyanate tank which caused a chemical reaction that enforced the chemical release valve to open and allowed the MIC gas to leak. All the experts, sent to Bhopal by Indian government, conducted their own investigation and concluded the same. Arthur D Little of engineering consulting firm launched an independent investigation and found that the water could only have been purposely introduced into the MIC tank, since all safety systems were operational and placed at the plant that would have stopped water from entering the MIC tank by accident.

Later in this assignment we will look forward to the Risk management cycle and also some strategies placed in relation with the corporate risk management.

Risk Management

It is an approach to minimizing any company's exposure to risk. It is a system which includes a large number of policies, procedures and practices which work place in context to classify. Along with corporate information's we introduce risk management information's. Risk management -information's such as feasibility. If we are able to transfer risk to another party or creating some efforts to reduce the risk or avoiding the risk are considered as the risk management strategies.

Generally, risk management identifies and analysis the problem of an organisation and put forwards the steps to reduce or eliminate the loss of company. This thing is made be possible by using practice risk management. Insurance, security system installation, to maintain cash reserves are the examples of risk management practices. In business there are mainly two types of risks possible predictable and unpredictable. For a small business theft, fire, flood, injury or disability are the things which can causes a large harm to business. This harm may be in the form of financial hardship -reduce of profit or bankrupt. These small companies do not have risk managers so responsibility of risk management in these companies falls on the owner. Instead large companies have their risk manager who identify the future risk and perform the task to protect the company from such possibility.

Background Study

It was one of saddest day in the human history when leakage of MIC gas causes the death of thousands of people on December 3, 1984 in a plant of UCIL at Bhopal, India.it can be considered as the world's worst industrial and environment disaster ever.one can understand its dangerous face that even after the 26 years of this accident there appears to be no end of woe of victims. In order to know the facts of this accident we look at the T perspective on the accident. The T perspective was created by the information's provided by the technical reports of risk analysts, safety specialists and UCIL engineers.

According to T perspective there were many of casual factors which include Human error at large. For examples cast iron pipes were used in place of specified stainless steel pipes; the entry of the water into the tank couldn't be identified and the biggest loose point was failure to pass information of gas leakage to near surroundings even after of three hours.

Chiefly the tragedy caused as a result of accidental chemical reaction which took place in the plant of UCLI at Bhopal.in the midnight when whole of the city was sleeping, leakage of MIC gas started and soon this poisonous gas spread into the city which turned almost whole of the city into a deathly gas chamber.

It took a long time for government as well as people of Bhopal to recover from the effects of this tragedy. All the tasks to help the victims of Bhopal gas tragedy were performed by chief minister office. The government of Madhya Pradesh created a department of Bhopal gas tragedy relief and rehabilitation in the year of 1985.

A large number of non-government organizations came up to support the victims. With the help of these organizations, government successfully come out from such a difficult situation.

Bhopal Gas Tragedy is remembered as one of the ugliest and worst industrial disasters which have ever taken place in human history.

Risk management Cycle

Source: Ayling, 2009

Risk management cycle

The risk management cycle shows that how the possible risk can be reduced. In case of industrial disaster like Bhopal gas tragedy the risk could be determined and further measures are determined so that such types of disaster cannot take place in future. Although the risk of natural hazards cannot be stagnated completely but we can safeguard in order to minimize them and try to reduce the impact. As a matter of fact the alleviation is a part of broad element leads to sustainable developments while commencing on different communities and other social networks.

Risk Identification

To identify the risk is first step in the risk management cycle. This cycle aims to identify what can go wrong and what might be reasons that may cause wrong. In simple words we say that risk identification are the instructions that should be followed to avoid any miss happening. According to Harrington, 2004. Risk identification includes the liability risks, resource risks, assets risks and earning risks.

All the experts concludes If risk would had been measured properly in case of Bhopal gas tragedy than such a huge dangerous disaster would had not taken place.

Measurement

After risk identification stage the measurement is second stage of risk management cycle. According to Harrington, 2004. risk measuring experts should provide the information's loss distribution probability. The method which measures probability of distribution is also expected to inform. These measurements help risk measuring experts to conclude the benefits and cost of loss control.

According to Williams, et al 1998 there are two types of approaches for risk measurement. These are qualitative and quantitative. Qualitative risk verifies the possible risk which an organization might face. Quantitative approach calculates accurate probability of mistakes and its harshness. These two approaches can be related to the Disaster made by the Bhopal Gas tragedy

Analysis

Analysis of risk is the third important stage of this cycle.in this stage there are four things we should be kept in mind to analysis the risk. These are risk can be avoided, retained, controlled or transferred. (Crook frod 1991).

In case of Bhopal gas tragedy the risk could be avoided if risk managers at UCIL would have taken proper steps before.

In order to reduce the risk experts should had a very keen eye at the plant. To reduce the risk state government of Madhya Pradesh should had taken proper investigatory steps.

Transferring the risk means State government transferred risk by giving responsibilities to different non-government organizations and other departments of government. In order to cope up with the aftermath of the tragedy rehabilitation was made by the Bhopal government to ascertain different tasks. Proper administrations are introduced formulating a medical district for the victims of the tragedy. There are many voluntary agencies joining hands providing reliefs. Some amendments have made under the factories act as the top level of the management will be legally responsible for the health and medical safety of the workers at a particular workplace.

Decision-making

Decision making is fourth stage of risk management cycle. Investigations have shown that this whole incident was caused by the entry of the water to the MIC tank through a hose connected to the tank directly. During the mid-night when MIC operator came to know that there was some problem in the tank. They ran to the tank and found that water hose connected to the tank. Immediately they called supervisor and tried to find out some alternative. They decided to transfer one ton of the tanks content to other unit which was only possible way to get out water from the tank at the moment.

Implementation

Risk implementation is the fifth stage of the risk management cycle. It is important to stress the limitations of the available procedures, as well as implement risk analysis in order to achieve the target of policy Hertz, 1993. For example proper training and development techniques are introduced towards the chemical process safety by the Indian authorities helps undertaking latest technology so, they can handle the preventive measures and stagnates the risk of chemical accidents after working on such techniques.

Monitoring

Monitoring is the sixth important stage of risk management cycle. As different experts have shown that the Bhopal gas disaster was caused due to lack of attention or in in simple words it could have been avoided if proper steps had been taken by UCIL staff. Just after this dangerous disaster, state government took the rapid actions to over-come the problem. Union government of India immediately stood with state government and announced to help with every possible regard. A large number of non-government organizations came forward to support victims of this disaster. Their task made the state government to monitor all the relief works easy.

The government of Madhya Pradesh created a department of Bhopal gas tragedy relief and rehabilitation in the year of 1985.

One of the most important steps towards monitoring after this disaster state government of Madhya Pradesh has recently announced 750 million rupees compensation for the 5.25 lakh victims of this disaster. PTI, 2010

Risk management strategy

Risk management strategy means all the functions and activities which aim to identify the mission of any government or organization to achieve their goals that are associated with their strategic plans. Effects can be seen even after of 26 years of this disaster .According to a very recent serve of state government of Madhya Pradesh more than 5.25 lakhs people have become the victim of this disaster till date.PTI, 2010 Government of Madhya Pradesh has set up a group of ministers from the state government to look into the matter of Bhopal gas tragedy and to enact all the underlying issues that are almost buried during that span of time. Government of Madhya Pradesh has come out with a well organised structure which aims to help victims of Bhopal gas tragedy. Present chief minister of Madhya Pradesh and Bhopal gas tragedy relief and rehabilitation minister of his government have announced a relief of 750 million rupees help for the victims of this dangerous disaster. Implementation of all the strategies is one of the most important aspects so for this purpose government involved a group of government ministers to look after all the activities carrying out. Government of Madhya Pradesh has set up a large number of schools and college for the victims of this disaster. To ensure that the right person is approaching, Government has asked to show any proof of been a victims. If a person is not able to provide any documentary proof of being a victim, he is treated according to his condition.

Overall, government of Madhya Pradesh is now more energetic to support and help victims of Bhopal gas tragedy. It is trying to do justice with the victims of this disaster at every possible way. It is now more sincere that such a disaster might not happen in future.

Conclusion

Through the detailed analysis of the risk management cycle and with the help of secondary data the government can estimates the degree of risk and can help reducing or stagnating the risk. As the management cycle works on the process of gathering data and therefore one can figure out up to what degree they can overcome the risk factors. The identification, measure, analyse, decision-making, implementing and monitoring the factors giving rise to risk. The risk management cycle can hinder the possibility of risk emergence in a particular sector. Monitoring policy plays a vital role as in case of Bhopal gas tragedy the government have to monitor the technology and development while training people towards health-safety measure schemes. As the Risk management cycle of Bhopal gas tragedy. However, some strategies have applied to manage risk in best possible way. Now a day's government and the people make joint efforts to fight against the tragedy.

This is recommended through this analysis that the disasters like Bhopal gas tragedy could be avoided if risk would have been measured and proper steps had been taken at the right time. Government should now try to setup a body responsible for governing risk measuring department of all the industries regularly so that such a disaster could not repeat in future. Further, government of Madhya Pradesh should be more sincere towards providing health and medical services to the victims, as the effects of disaster are seen even today.