Maintenance and Inspection

FM Global Property Loss Prevention Data Sheets
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January 1995 Revised May 2003 Page 1 of 13
MAINTENANCE AND INSPECTION
Table of Contents
Page 1.0 SCOPE ................................................................................................................................................... 2 1.1 Changes .......................................................................................................................................... 2 2.0 LOSS PREVENTION RECOMMENDATIONS ....................................................................................... 2 2.1 Introduction ...................................................................................................................................... 2 2.2 Operation and Maintenance ............................................................................................................ 2 2.2.1 General .................................................................................................................................. 2 2.2.2 Managed Maintenance .......................................................................................................... 3 2.2.3 Failure Analysis ..................................................................................................................... 6 2.3 Contingency Planning ...................................................................................................................... 6 2.4 Training ............................................................................................................................................ 6 3.0 SUPPORT FOR RECOMMENDATIONS ............................................................................................... 6 3.1 Loss History ..................................................................................................................................... 6 4.0 REFERENCES ....................................................................................................................................... 7 APPENDIX A GLOSSARY OF TERMS ....................................................................................................... 7 APPENDIX B DOCUMENT REVISION HISTORY ....................................................................................... 7 APPENDIX C SUPPLEMENTARY INFORMATION ..................................................................................... 7 C.1 Program Review .............................................................................................................................. 7 C.1.1 General ................................................................................................................................. 7 C.1.2 Equipment Related ............................................................................................................... 8 C.1.3 Facility Related ..................................................................................................................... 9 C.2 Contingency Planning ..................................................................................................................... 9 C.2.1 Facility Contingency Plan ..................................................................................................... 9 C.2.2 Equipment Contingency Plan .............................................................................................. 10 C.3 Risk Based Inspection (RBI) an FM Global Overview ................................................................. 10
List of Figures
Fig. 1. Log-log plot of consequence vs. likelihood with lines of constant risk. .......................................... 13
List of Tables
Table 1. Typical Boiler and Machinery (B&M) and Fire and Extended Coverage (F&EC) Exposures ......... 7 Table 2. Scenario Development, Consequence Measurement, and Risk .................................................. 12 Table 3. Semi-quantitative Risk Matrix ......................................................................................................... 13
2003 Factory Mutual Insurance Company. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, or transmitted, in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission of Factory Mutual Insurance Company.
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Maintenance and Inspection

1.0 SCOPE The purpose of this data sheet is to provide guidance for developing cost effective loss prevention maintenance and inspection programs for facilities, systems, and equipment. It also provides guidance for evaluating the adequacy of existing maintenance and inspection programs and is a reference for initiating programs or making needed improvements to existing programs. Guides for evaluating maintenance and inspection programs and contingency planning are provided in Appendix C. Design of equipment, systems, and facilities is beyond the scope of this data sheet. However, decisions made at the design stage can have a great impact on the structure, cost, and effectiveness of any maintenance and inspection program. Information on the design of maintainable assets (facilities, equipment, systems, etc.) can be found in data sheets and other documentation specific to the application. Recommended maintenance and inspection for specific equipment, systems, and facilities may be found in the data sheets for these items. 1.1 Changes May 2003. Revised section titled 3.1 Loss History. Also made minor editorial changes. 2.0 LOSS PREVENTION RECOMMENDATIONS 2.1 Introduction The basic philosophy of managed maintenance1 is to economically maintain equipment and facilities in proper condition identifying problems in their incipient stage, making appropriate adjustments, and correcting problems at the first opportunity while minimizing unplanned shutdowns. This requires attention to detail and considerable planned inspection and monitoring activity. For equipment, this includes idle, shutdown, and operating periods; for buildings, both occupied and unoccupied facilities. When purchasing new equipment, maintainability is a key consideration. 2.2 Operation and Maintenance 2.2.1 General 2.2.1.1 Every organization should have a clearly defined written maintenance program which includes: a) a policy statement and a maintenance manual, or equivalent, spelling out a definite assignment of responsibilities and accountabilities; and b) preventive maintenance practices and procedures. 2.2.1.2 Maintenance practices and procedures should address: a) Equipment records; b) Maintenance requirements for each piece of equipment critical to production2, valuable equipment3 and for the facility itself. 2.2.1.3 Facility personnel should ensure that equipment is operated within design parameters and preferably within control limits. Exceeding design parameters should not be done without concurrence of the manufacturer. All necessary testing and monitoring programs should be implemented in a logical manner (i.e., following manufacturers recommended practices and data sheets).
Managed maintenance includes not only planning the maintenance program, but also implementing and controlling it. Therefore, the term managed maintenance is preferred, over planned maintenance. Equipment critical to production is defined as that equipment which, regardless of its replacement cost, would inhibit production or otherwise adversely affect the operation of a facility. Valuable equipment, in the context used, is defined as equipment having a high replacement cost, but which will not necessarily impact production or facility operations.
2003 Factory Mutual Insurance Company. All rights reserved.

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2.2.1.4 Planned inspection and testing activities are an integral part of equipment condition evaluation and need the commitment and backing of both local and corporate management to ensure their success. When inspection and testing are necessary, there should be a commitment to perform a thorough evaluation using qualified personnel. When repair work is necessary, the personnel involved should be qualified for the work to be done. There are numerous tools and approaches for planning inspection and testing activities, many of which are integrated into maintenance scheduling and planning tools. Refer to Appendix C.3 for an FM Global overview of Risk Based Inspection, a methodology used at some facilities. 2.2.1.5 Building and support systems should receive visual inspection and routine servicing in accordance with recognized engineering practices (i.e., periodic examination of roof areas to determine condition, build-up of debris, condition of flashings, etc.). Special consideration should be given to seasonal concerns such as clearing roof drains, clearing snow from the lower areas of multilevel roofs, checking for freeze potential, and in wind-prone areas, checking the securement of roofs, wall panels, etc. 2.2.1.6 Equipment should be supervised to ensure that performance is within its design specifications and control limits. At a minimum, parameters critical to operations should be appropriately monitored. Operating personnel must also be aware of the proper response to prevent or control damage when operating parameters reach their limits or change drastically. They should be authorized to act accordingly. 2.2.1.7 Operating records should be regularly reviewed and evaluated by trained, qualified personnel who are empowered to take appropriate actions. 2.2.1.8 To ensure accuracy of machinery condition monitoring and control, supervisory and safety equipment, such equipment and systems should be regularly checked and calibrated in accordance with the equipment manufacturer s specifications. Calibration should be performed within prescribed time periods. All items requiring calibration should be identified by use of either dated calibration stickers or by listing them in a calendar-driven log. 2.2.1.9 Provide a maintenance schedule for all equipment and facilities requiring maintenance actions. The frequency and extent of activity should be determined on the basis of experience with similar equipment and buildings and of the recommendations of equipment manufacturers, user groups, data sheets and trade and technical associations. All abnormal occurrences should be documented and carefully evaluated; and corrective measures (repairs, modifications, improvements, etc.), completed in a timely manner. 2.2.1.10 All maintenance activity, operation history and equipment modifications, as well as the types and quantities of replacement parts (spares), should be recorded. 2.2.1.11 After completion of repair work, suitable testing should be carried out prior to operation to establish and record new baselines for monitoring. 2.2.1.12 To facilitate equipment identification, suitable tags should be permanently attached in visible locations, where applicable. 2.2.2 Managed Maintenance Managed maintenance applies to production equipment, support equipment, and facilities. Breakdown (unplanned) maintenance is generally unacceptable. However, it can be an acceptable part of managed maintenance when the equipment or facility: is low cost, is readily available in the market place, has negligible time element/business interruption (TE/BI) impact, and presents minimal potential for consequential damage (whether from mechanical or electrical breakdown, fire, collapse, etc.). The necessary sophistication of a managed maintenance program varies with the complexity and size of a facility. However, regardless of size, complexity or sophistication, to be effective, a program should embody certain basic elements, which are described in the section that follows:
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2.2.2.1 A written statement of commitment (maintenance policy) to preserve and protect the assets of a company should be generated on as high a management level as possible. It should mandate written procedures and adherence to them. The statement should be distributed to and be understood by all employees to whom it applies. A sample policy statement reads: It is the policy of XYZ Corporation to have a managed maintenance program. Written maintenance policies and practices based on sound engineering practices and economic principles describe the program. Documented maintenance decisions are to be made for all equipment, systems, and buildings with priority given to critical support systems and/or production equipment. 2.2.2.2 A written maintenance program describing the methods, policies and practices by which maintenance is to be conducted should include the following, plus background and support information where necessary: 1. A statement of scope, purpose and intent. 2. A description of the maintenance organization including functional descriptions and assignment of responsibilities. 3. In addition, the maintenance manual could address: a) equipment and building records, b) equipment and building maintenance requirements, c) the work order system, d) maintenance procedures, e) maintenance reports and records, f) maintenance schedules, g) one-line electrical diagrams, h) piping and instrumentation diagrams for mechanical systems; and i) design information (including method for controlling and tracking revision levels). 2.2.2.3 All facilities and equipment covered by the program should be listed on a master maintenance list or in program segment master lists as defined in the program. The list is the foundation of the maintenance system and should be kept up-to-date. The following data should be documented for each listed item: 1. Identification (item or building no.) 2. Equipment manufacturer s details (name, model, and serial number) 3. Technical details (rated speeds, rated power, capacities, frame size, etc.) 4. Location of building and systems plans, equipment manuals and drawings, technical manuals, and special maintenance procedures 5. Location and condition of major spare parts 6. Local supplier or agent information 7. Protective devices and their functions 2.2.2.4 Analysis of Operations 2.2.2.4.1 Operations should be analyzed to identify equipment, components, and support services whose failure would cause a complete or significant disruption of operations. Block or flow diagrams should be developed showing all important equipment, processes and support services, e.g., HVAC, air, electrical, etc. Equipment important to facility operation and support and any other equipment with a high replacement cost should be identified for priority attention. To aid in the decision making process, manufacturers technical manuals, industry standards, and data sheets should be consulted for recommended maintenance actions and frequencies. Input based on experience from maintenance personnel and operators should also be provided. Maintenance requirements should be documented for each system, piece of equipment, major component and building.

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2.2.2.5 Planning and Scheduling Maintenance can be scheduled either by manual or automated means, either of which will generate a work order. The required work order should be concise and clear to the worker and should provide adequate information for the task required. The work order should be designed to include feedback. Feedback is essential on each activity and should be entered into the equipment record. Employee identification and actual time used should be included. Unscheduled maintenance is normally handled via a maintenance work order. Provision for feedback on this form is also essential and, like scheduled maintenance, required information should be entered into the equipment record. The current status of all active work orders should be known. 2.2.2.6 Records Records (historical data) pertinent to equipment and facilities covered by the program should be maintained, including at a minimum: building blueprints, equipment nameplate data, purchasing information, age, design and installation information, acceptance test data, and applicable data from the manufacturer s technical manuals. Also record inspections and tests completed and their results, scheduled and unscheduled maintenance and cost, repair parts and materials used and cost, modifications and capital improvements completed, and application changes. A record of spare parts available on-site should be maintained. A list of names, addresses, and telephone numbers of parts and equipment suppliers, technicians available to service, and rental possibilities (if applicable) should also be maintained. 2.2.2.7 Audit An audit, including maintenance performance checks, should be performed on a planned basis by a knowledgeable person, preferably from outside the maintenance organization. The audit should include, but not be limited to the following: Equipment operating records Maintenance activity records Maintenance activity backlog lists Previously made recommendations (FM Global, maintenance, manufacturer, etc.) Letters and bulletins from equipment manufacturers and FM Global Equipment records Planned dismantle inspections of major equipment Periodic tour through the facility Audit activities should involve an intensive review of records to determine if maintenance activities or frequencies should be altered. 2.2.2.8 Contract Maintenance Where contract maintenance services are utilized, management should be clear on exactly what services and servicing equipment are provided. Also, management should identify which equipment and what activities remain the responsibility of the facility and how facility and contractor personnel will interface. Both the service requirements and completed work records should be provided to the facility in documented form and reviewed by the facility on a regular basis to ensure that contract requirements are met.
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2.2.3 Failure Analysis As an aid to preventing recurrence of similar incidents and for revision of the maintenance program, investigations should be made into the root causes of significant equipment breakdowns or building problems. The investigation should result in a report which should contain specific recommendations to prevent recurrence. Application of these recommendations to similar equipment and facilities should be evaluated. Records concerning failures should be reviewed. Items pertinent to failure analysis include: Equipment records Problem reports and repair/alteration history Statement of maintenance requirements Systems and equipment dismantle inspection reports Original equipment manufacturer (OEM) technical letters and bulletins Maintenance records, including procedural details. These should be examined carefully to ensure that there are no flaws or omissions in the procedures that would allow a similar occurrence in the future The backlog of related maintenance items Any report(s) produced in connection with the failure, i.e.,: Analysis/inspection of failed parts Description of symptoms Troubleshooting report 2.3 Contingency Planning 2.3.1 A contingency plan should be developed for any equipment or support service that is used, directly or indirectly, in the production process or facility operation, whose being out of service could result in significant interruption of operations and/or damage to itself or other equipment. The plan should be used whenever such equipment is out of service. It can also be used to expedite maintenance outages. 2.4 Training 2.4.1 Maintenance and operating personnel should be appropriately trained. Programs should be designed to familiarize personnel with the performance characteristics of the equipment, as well as with mechanical components and the work of other disciplines. Training must be an ongoing process to maintain acceptable levels of competence. 3.0 SUPPORT FOR RECOMMENDATIONS 3.1 Loss History Loss experience with maintenance related incidents is extensive. FM Global experience shows that, all too often, maintenance is not effectively applied. Typical B&M and F&EC exposures are shown in Table 1.

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Table 1. Typical Boiler and Machinery (B&M) and Fire and Extended Coverage (F&EC) Exposures B&M Exposures Mechanical breakdown Electrical breakdown (primary) Pressure vessel breakdown Service interruption F&EC Exposures Escaped liquids Fires Collapse Molten materials Explosion Freeze-ups Windstorm damage
Most frequently reported reasons for the occurrences were: Testing/inspections not performed Maintenance not performed Inadequate maintenance Failure to document maintenance actions Electrical failures Improper installation or construction Failure to adapt to change of function or use 4.0 REFERENCES There are no references for this document. APPENDIX A GLOSSARY OF TERMS FSE: Facilities, Systems, and Equipment. Managed maintenance: includes not only planning the maintenance program, but also implementing and controlling it. RBI: Risk Based Inspection. APPENDIX B DOCUMENT REVISION HISTORY September 2002. An FM Global overview of Risk Based Inspection was added as Appendix C.3, Risk Based Inspection an FM Global Overview, and a reference to this Appendix has been added to Recommendation 2.2.1.4. Also, the title and Scope of this Data Sheet have been editorially changed from Maintenance to Maintenance and Inspection to highlight the importance of inspection in any maintenance program. May 2001. Editorial changes only. No technical changes were made. January 2000. The January 1995 edition of this document was reorganized to provide a consistent format. No technical changes were made. APPENDIX C SUPPLEMENTARY INFORMATION C.1 Program Review The following questions are suggested as a guide to evaluate an overall maintenance program. Based upon response to the questions, improvements may be needed. C.1.1 General C.1.1.1 Is there a written Maintenance Policy Statement? If yes,: 1. Does it mandate written procedures and adherence to them 2. Is it understandable 3. Has it been distributed to all employees to whom it applies
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C.1.1.2 Is there a Maintenance Management Program? If yes, does it address: 1. A work order and follow-up system 2. A maintenance system or system, 3. Planning and scheduling 4. Organization 5. Training C.1.1.3 Is the written Maintenance Program: 1. Usable (understandable) 2. Used 3. Up-to-date C.1.1.4 Are there Master Maintenance Lists for facilities and/or equipment? Are there complete building plans available? If yes, have the lists and plans been updated within the last five years? C.1.1.5 Is the location of all building systems plans and equipment technical manuals known? C.1.1.6 Are technical manuals and/or written procedures readily available to operating and maintenance personnel? If yes, are they current and are they understandable? C.1.1.7 Is there a work order system in place for: 1. Routine corrective maintenance 2. Planned maintenance C.1.1.8 Do planned maintenance work orders contain: 1. Location of systems and/or equipment 2. Procedure (or reference) 3. List of required tools, parts, materials, test equipment 4. Adequate space for feedback 5. Expected time to complete task C.1.1.9 Are persons doing maintenance required to document feedback information on the work order? C.1.2 Equipment Related C.1.2.1 Do equipment maintenance records contain: 1. Nameplate data 2. Modifications 3. Test information 4. Description of repairs, including frequency 5. Repair cost C.1.2.2 Is equipment availability documented for all critical equipment, processes, and systems? If yes, is this information used to adjust maintenance requirements? C.1.2.3 Have breakdowns of critical and valuable equipment been thoroughly investigated and the results documented? Was the root cause determined, and was corrective action taken to prevent recurrence? C.1.2.4 Concerning equipment operating records: 1. Are they kept up-to-date 2. Are operating limits indicated on logs

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3. Are completed logs reviewed by supervisors C.1.2.5 Is all valuable equipment and equipment vital to operations on a documented maintenance schedule? If not, briefly describe priorities used. C.1.2.6 For each piece of equipment receiving managed maintenance, is there documentation listing: 1. All required maintenance and testing 2. Frequencies for maintenance and testing 3. Craft and skill level required 4. Any related maintenance and testing C.1.2.7 Are equipment inspections geared toward validating the maintenance effort and assessing equipment operating condition? C.1.3 Facility Related C.1.3.1 Is there a documented maintenance, inspection and testing program for all property loss prevention/control systems and equipment (e.g., sprinkler systems, CO2, fixed suppression)? If yes, are all systems and equipment entered in the Master Maintenance list? C.1.3.2 Are there documented records of completed maintenance actions, inspections, and tests (including findings and results)? C.1.3.3 Does the facility have an active Emergency Response Organization (ERO)? If yes, is the ERO call list and list of assigned personnel current? C.1.3.4 Does a freeze exposure potential exist? If yes, does a freeze prevention plan exist? C.1.3.5 Does a roof overload potential exist from either snow, rainwater, or product? If yes, is there a plan for drainage or accumulation removal? C.1.3.6 Does a flood potential exist for this facility? If yes, is there a plan to minimize flood damage to buildings and equipment (e.g., closing off ground level openings)? If provided, are berms, dikes, floodgates, flood shields, pumps, equipment hoists, etc. considered in the maintenance plan? C.1.3.7 Are all planned building occupancy changes evaluated for impact on existing structures, roof load potential, and/or adequacy of fire protection? C.1.3.8 Are the building roof systems regularly evaluated for leakage and wind damage potential. If yes, are the results documented? C.1.3.9 Is there a regular inspection and maintenance plan in place to ensure the continued structural integrity of the buildings at the facility? C.1.3.10 Is existing security adequate to deter theft and arson? C.2 Contingency Planning The purpose of a contingency plan is to prepare for an incident or loss so that a minimal amount of time and expense is incurred to restore operations. With a properly prepared contingency plan, minimal time, expense and frustration are spent recovering from the incident. The plan contains information needed to expedite recovery and reduce the loss exposure. C.2.1 Facility Contingency Plan A facility contingency plan contains two parts: (1) an itemized index of the processes and equipment at the location (a copy of the master maintenance list would be acceptable) and any associated hazard potential, and (2) a contingency plan for each process or piece of equipment listed in the index. To be effective, a facility contingency plan must also consider handling of fires, explosions, and the effects of naturally occurring phenomena.
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C.2.2 Equipment Contingency Plan To be effective an equipment contingency plan should contain at least the following for each listed piece of equipment: Identification. Name plate data, plant equipment name and number, location (building number, floor, etc.). Installation, removal and dismantle specifications and requirements. Name(s) of employee(s) responsible and/or knowledgeable about or qualified to work on the equipment. Location of technical manuals and owners information. Supplier information (names, addresses, telephone and fax numbers, agreements concerning spares availability and service. Transportation constraints (weight and height limits for roads, bridges, etc., special conveyance vehicle requirements). Plans/agreements with carriers and shipping companies (possible/potential shipping problems, agreements to expedite). Building structural modifications required (removal of roof, walls, etc.). Special rigging requirements (crane, helicopter, bridging, etc.). Foundations, supports, frame sizes and partial disassembly requirements. Can available (not identical) spares be installed on existing foundation or support structure without major modifications? C.3 Risk Based Inspection (RBI) an FM Global Overview Risk Based Inspection (RBI) is a methodology used to prioritize inspections and was founded on the premise that the most effective use of inspection activity and dollars is to focus first on those facilities, systems or equipment (FSE) that present the highest risk. The following is an overview of RBI. Key features of RBI are presented including those aspects that are crucial if a customer s RBI program is to be an effective tool in focussing loss prevention and control efforts. As used in RBI, risk is a qualitative, semi- quantitative, or fully quantitative measure determined by multiplying the consequences of an event scenario by the likelihood of its occurrence. Used this way, an event that has low consequences but a high likelihood of occurring can have the same or even higher risk than an event that has greater consequences but a lower likelihood. [This risk is somewhat different than the way the term is used by FM Global and the insurance industry where risk is a qualitative or quantitative measure of the consequences if the scenario identified as a Hazard occurs. Such risk doesnt have to be expressed in dollars, and often isnt. It could be the time duration or extent of business interruption; area of impact, the number of buildings involved; the loss of market share; etc.] While the ASME Center for Research and Technology Development (CRTD) provided Development Guidelines in the early 1990s, the petroleum/chemical industries have led RBI application. API RP 581, Base Resource Document on Risk-Based Inspection, first published in 1996 as a preliminary draft and API RP 580, Risk-Based Inspection, published as a second draft in May 2000, are leading documents for using this methodology. Additionally, ASME has created a draft document Inspection Planning Standard Guidelines for Post Construction Pressure Containing Equipment that tracks much of the API material but expands it beyond the petroleum and petrochemical industries. When properly applied, RBI can meet its primary goal of overall plant budget reduction while at the same time accomplishing the synergistic goal of focussing and enhancing loss prevention. RBI is a performance based methodology. As such, guidelines created to assist users in applying RBI tell what has to be done, but not how to do it. And while it is possible to provide both cost savings and higher availability, it is also possible for RBI to reduce inspection costs but at the expense of larger loss exposures and higher likelihoods of occurrence. This happens when an analysis understates or fails to fully quantify an exposure, uses inappropriate methods for measuring consequence, makes incorrect assumptions when establishing likelihood, or uses an inappropriate rating scheme.

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RBI is a comprehensive program requiring long-term commitment from senior management to implement and support. Each of the following ten steps are essential to a successful program: 1. Define Scope of RBI program The FSE covered by RBI have to be identified. In addition the impact boundaries, which may include both on and off-site property, have to be defined. 2. Create database of operating history, current conditions, and future plans. Current and past operating history (including normal operation, transients, startups, shutdowns, and non- routine/upset conditions) is essential to understanding the present condition of FSE. Also, if changes to the process or operating conditions are anticipated or inspection frequencies are being changed, these factors have to be taken into account and be included in the database. 3. Develop event scenarios. There are many ways to develop event scenarios and consequences and many practitioners of RBI have very little exposure to or understanding of losses. Most significant losses propagate from a chain of events that were often not considered prior to the loss. 4. Establish a cost estimate of the scenario consequences. Here again, there are many ways to calculate cost. It is very important for the consequences to fully represent the property damage and business impact effects of the event scenarios. 5. Determine the likelihood of occurrence. Along with generic, manufacturer, and industry data, the likelihood of occurrence is strongly influenced by the current condition and operating history of the FSE. The likelihood of a scenario involving a cascade of events is the product of the likelihood of the initiating event times the probability of occurrence for each cascading event in the scenario. Factors to be considered in the cascade of events include fire or explosion following, human error, failure of a safety system, failure of the fire protection system, operating and maintenance history, local factors, etc. 6. Calculate the event risk. Risk is determined by the consequence and likelihood values. If consequences are expressed as $/occurrence and the likelihood as number of occurrences/location-year, then risk (the product of consequence times likelihood) is expressed as $/location-year. 7. Take corrective action to mitigate unacceptable risk. Corrective actions (process changes, additional controls and/or safety devices, increased inspection methods, scope, and/or frequency, etc.) are applied to FSE with unacceptably high risk levels to bring the risk to an acceptable level. 8. Perform inspection ranking. Inspections priorities are ranked from highest risk to lowest. 9. Conduct inspections. Jurisdictional equipment may require more frequent inspections than dictated by risk ranking. These need to receive special assessment and any departures from jurisdictional inspection frequencies requires acceptance from the authority having jurisdiction. 10. Plan and conduct periodic reassessment and validation. Reassessment and validation are vital to determine if actual conditions match expectations or if changes in inspection frequency are needed to maintain an acceptable level of risk. Management of Change is an important part of this step. Equipment at the lowest and highest risk levels need to be periodically reassessed to confirm the calculated risk is still valid. The following example illustrates different ways the RBI methodology can be applied to calculate risk. All of these are considered completely valid approaches by RBI purists, but clearly the approaches give very different results and can provide very misleading indications of risk and loss potential.
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Assume there is a pressure vessel containing a flammable material produced in a plant. The vessel is located near process furnaces and a major separation process where finished materials are produced. The vessel is estimated to have a leak frequency of once every 10 years. When there is a leak, there is a one in 10 chance of an ensuing fire that affects 10 workers in the area and engulfs the separation equipment. In the event of such a fire, ten homes near the plant will be evacuated as a precaution. There are no environmental impacts as the combustion products dissipate into the atmosphere and escaping liquid is contained in a properly designed drainage area.
Table 2. Scenario Development, Consequence Measurement, and Risk Consequence (Assumed values for example Likelihood purposes 1/100 $100 million years 1/100 years 1/10 years 1/100 years 1/100 years 1/100 years $25 million
Scenario Initiating Event with Fire Following
Initiating Event with Fire Following Initiating Event Only
Method of Consequence Measurement PD & TE (deductibles and limits of liability do not apply) PD Only PD & TE (no deductibles and no limits of liability considered) Worker Safety Community Health
Risk $1 million/ year
$0.25 million/ year $10 thousand $1 thousand/ year 10 workers affected 10 families (32 people) evacuated None 0.1 workers/ year 0.1 families/ year Zero
Initiating Event with Fire Following Initiating Event with Fire Following
Initiating Event with Fire Following
Environmental Impact
Observations about Risk based on the example: All of these approaches to calculating risk are acceptable in terms of published RBI methodologies. Also acceptable is an approach where PD and TE costs are limited to the deductible; from the standpoint of the customer, all costs beyond the deductible are borne by the insurance company and therefore are not a cost to the owner/user. Clearly, use of any approach that does not fully quantify the PD & TE costs has limited or no value to loss prevention and risk improvement. Worker Safety, Community Health, and Environmental Impact (often abbreviated as SHE) are legitimate measurements of risk that are independent of PD & TE. As such, they can (and should) be independently evaluated. Some practitioners advocate assigning dollar values to SHE risks and then combining them with PD & TE to get a total risk. While theoretically attractive, assigning dollar values to worker safety/lives and community health is highly subjective. And even environmental impact becomes subjective if an effort is made to quantify costs beyond remediation costs and fines paid for exceeding allowable limits. By keeping these categories separate, there is no possibility of having one cost/risk mask or overshadow another. Inspection prioritization and ranking, at least in a semi-quantitative standpoint (very low, low, medium, high, very high) can be based on the highest risk category for each measurement basis using a semi-quantitative risk matrix. The example is very simplified. In an actual evaluation it would be necessary to look not just at the probability of a leak with a fire following, but also an evaluation of the probability of how big a fire is likely to develop along with the probability of fire control systems functioning/not functioning properly. Almost any initiating event can cascade to MFL proportions if enough things go wrong. However, in many cases the likelihood/probability of this occurring is so small that the risk is less than that for a less severe event that has a greater probability of occurring. As each step in the cascade of events is evaluated (consequence and likelihood), the step producing the highest risk is the risk that should be associated with the initiating event. Very, very low likelihood is not zero. Some practitioners of RBI declare any likelihood less than some threshold to be zero. This is not acceptable because the risk associated with many high consequence cascades of events will not be considered.

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In order for the risk matrix, as shown in Table 3, to be semi-quantitative, a numerical range needs to be assigned to each likelihood and consequence level. This is often done on an order of magnitude basis.
Table 3. Semi-quantitative Risk Matrix
Likelihood
A B C D E
5 6 7 8 9 V
4 5 6 7 8 IV
3 4 5 6 7 III
2 3 4 5 6 II
1 2 3 4 5 I
Consequence or Severity Rank
Likelihood (letters) Most Likely: Category A Least Likely: Category E
Consequence (Roman Numerals) Most Severe: Category I Least Severe: Category V
Risk (Arabic Numbers) Greatest: Category 1 Lowest: Category 9
For fully quantitative measurements, a log-log plot as shown in Figure 1 can be used to plot risk. The diagonal lines are lines of constant risk.
Fig. 1. Log-log plot of consequence vs. likelihood with lines of constant risk.

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FM Global Property Loss Prevention Data Sheets