RBI: Defining Risk (COF/POF)

This is the second of four blog posts on Risk Based Inspection, or RBI. The first post covered a brief history and started the discussion on why you would want to use RBI. The next step is defining risk. BusinessDictionary.com defines risk as the “probability or threat of damage, injury, liability, loss, or other negative occurrence that is caused by external or internal vulnerabilities, and that may be neutralized through preemptive action.”

We all live with risk every day. It is impossible to remove all risks but we can remove some and mitigate others. We have to prioritize our risks and concentrate our attention and resources on those that present the highest potential losses or consequences. The challenge in doing this lies with the difficulty in establishing criteria that adequately defines risk and encompasses everything that should be included in a definition of loss. Logically, the next step is to begin grappling with the criteria for acceptable loss. Of course, certain losses are not considered “acceptable,” but they are a part of life. For our purposes, some of these losses are inherent and considered part of doing business.

In RBI and Risk Management, a typical and simple way to express risk is:

Consequence of Failure (COF) x Probability of Failure (POF) = RISK

For risk based inspection, the type of risk we identify and manage is relative risk. In essence, we recognize that we do not always have access to the absolute numbers needed to predict with 100% accuracy. However, the better or more accurate our models become, the more we understand the uncertainties and the more we are provided the tools to lessen the uncertainties in our predictions.

At the outset of using RBI, it is important to identify the adverse outcomes of interest, as this will have a bearing on the type of RBI models used. For example, undesirable events in API RBI, based on API Recommended Practices, such as API RP 581, typically revolve around loss of containment of the process fluid but could also include some degree of loss of functionality. Example negative consequences include but are not limited to:

1. Death or injury (e.g. blunt trauma, toxic exposure, burns)
2. Damage to the environment (and associated costs such as remediation)
3. Production loss (anticipated downtown is a major factor multiplied times the monies lost, typically per day)
4. Equipment damage (often calculated considering the outcome effects, e.g. pressure wave or heat exposure)
5. Brand damage or loss of reputation (how much income will be lost as a result)
6. Cost of lost or leaked material

The specific financial numbers and other metrics associated with the above would vary depending on the situation. Keep in mind that RBI is about relative risk, so even the financial numbers are not as accurate as what a full Risk Management Program type of approach would yield. It is important to build credible, effective models with credible, properly vetted algorithms, in order to calculate the probabilities of the occurrence of an event. The models should be built by teams that fully understand the dynamics of failure occurrence.

Next week’s post will continue our RBI discussion, with more on managing risk. Join our LinkedIn Discussion Group if you have any questions. And as always, you can get even more asset integrity intelligence when you sign up for our email newsletter, The Inspectioneer.