MGMT6019 Engineering Risk Management: Disaster Plan Analysis Report

This report provides a comprehensive analysis of the Tianjin explosion in 2015 from an engineering risk management perspective. It identifies and discusses various risks associated with the disaster, including financial, legal, environmental, and human resource risks. The report outlines principles for managing risks, such as identification, planning, implementation, and monitoring, and examines the impacts of the explosion on businesses and the nation. It further explores risk management techniques like avoiding and minimizing risks, and preventing further risks. A cost analysis for engineering risk management is presented along with a detailed risk management plan. The report concludes that the Tianjin explosion was caused by various factors and had significant negative effects, emphasizing the importance of effective risk management strategies to mitigate future disasters. Desklib offers a range of solved assignments and past papers to aid students in their studies.

Running Head: ENGINEERING RISK MANAGEMENT
ENGINEERING RISK MANAGEMENT
Name of Student
Name of University
Author’s note

1ENGINEERING RISK MANAGEMENT
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Risk management...................................................................................................................2
Principles for managing risks.................................................................................................4
Impacts of the explosion........................................................................................................5
Techniques of Risk management...........................................................................................6
Cost analysis for engineering risk management.....................................................................7
Risk management plan...........................................................................................................8
Conclusion..................................................................................................................................9

2ENGINEERING RISK MANAGEMENT
Introduction
In 2015, 12th of August various explosions took place in China. These explosions
caused 173 deaths and injured many people. This incident took place specifically at the Port
of Tianjin. Two explosions occurred at an interval of 30 seconds. Fires resulted by the first
explosion kept burning for several days (Zhao, 2016). This uncontrollable fire caused eight
explosions in addition. These explosions took place on 15th of August. The explosions caused
various risks and the risks are to be managed in a proper manner. The risks that were faced
due to the explosions are mentioned below in the discussion part. It further discusses some
risk management strategies.
Discussion
Risk management
Risk management is a process of identifying risks, accessing them and controlling the
threats. Threats can be of various types’ financial, legal, environmental, human resource and
many more. The risks after the Tianjin explosion in China are mentioned below.
Financial risks
The explosion occurred in China has caused various risk on the financial condition of
government as well as people. This was recorded to be the worst disaster caused until date.
Overall, financial loss caused was approximately $3.25 billion (Bao, Qu and Zeng et al.,
2017). It was reported to be the costliest manmade disaster that has been recorded in the
history. The biggest victims of financial loss are the insurance providers. It was estimated that
the insurance premium caused due to the blast might go up to $1 billion-$1.5 billion. If it hits
a higher number, it would be approximately 88% of total premiums. Tianjin’s port is
responsible for about 40% of foreign vehicles that come to China. The international

3ENGINEERING RISK MANAGEMENT
automobile manufacturers have lost around $312.5 million because of the blast. The brands
were Volkswagen, Toyota and Renault. According to reports 1,500 cars of Renault has been
damaged in the blast.
Legal risks
Some legal risks faced due to the blast are reported as very serious. Along with illegal
construction as well as issues regarding operations there were many problems regarding
control failures and the violation of industry and national standards such as storing
ammonium nitrate illegally at the harbor, illegal transportation, packing, unpacking, loading
and unloading and some other operations (Lu and Xue, 2016). They also failed in filing and
registering the hazardous sources that are majorly harmful.
Environmental risks
According to the environmental rules, factories should be built far away from the
public buildings, other enterprises and main traffic. The factories and industries that indulge
in using or manufacturing hazardous resources that can be harmful to people as well as
environment should not be anywhere around residency (Xu and Webb, 2015). The Ruihai
warehouse that had been exploded contained around thousand ton of harmful materials like
sodium cyanide, which is a very toxic chemical resource. This was situated about 600 meters
far from the nearest residence. One company did not agree in making safe assessment report
for the factory because of its short distance from the residence. This might not help the
project in getting approval. According to some sources, it was found that the Ruihai
Warehouse provided inappropriate information regarding its distance from the resident and
the quantity of dangerous goods stored in it (Xu and Webb, 2015). Every company needs to
go through onsite investigations, so it is never possible that they were unknown regarding this
matter. This might be the case that the company wrote a false assessment report regarding

4ENGINEERING RISK MANAGEMENT
this information. After the assessment report is made, it gets crosschecked in very rare cases.
As a result false report would not get caught very easily.
HR risks
The human risks faced by companies after the blast is that people denied from
working in these companies that consist hazardous resources (Zhou and Fu, 2017). Especially
the companies that were said to have no legal permission for the presence of hazardous
materials.
Principles for managing risks
Identification
The higher authority of the factories or industries should identify the risks faced by
the industries. The risks faced should be categorized according to their types like human
resource risk, financial risks, legal risks and many more (Aitao and Lingpeng, 2017). This
identification of risks is the vital part of managing risks.
Planning
Planning is the most important part of risk management. The mitigation of risks is to
be planned. The mitigations are planned according to the risks (Wang, Gao and Dong et al.,
2017). Different types of risks need different mitigations to be planned.
Implementation
The planned mitigation of various risks needs to be implemented in a systematic
manner. The areas with legal risks should have its respective mitigations (Fu, Wang and Yan,
2016). Every risk is dependent on other so their mitigations are to be carried out properly.

5ENGINEERING RISK MANAGEMENT
Any mistake in the implementation of mitigations can result in affecting the other
mitigations.
Monitoring
The implementation of the risks should be monitored with the help of supervisors.
The supervision or monitoring the implementation is very important. This is done in order to
prevent the factors that affect the implementation of the mitigations (Zhang, Duan and Zuo et
al., 2017). Monitoring also helps in smooth functioning of risk management.
Impacts of the explosion
The explosion had various impacts on the companies as well as the nation. The blast
had a force of 21 tons, which killed people more than 100. It also ripped apart various
warehouses, cargo and numerous cars (Huang and Zhang, 2015). Businesses have faced their
worst nightmare. The insurers faced a claim of around $3 billion. The overall damage went
up to $6 billion. This made the explosion the most dangerous one ever recorder in history.
This disaster not only affected the city where it occurred but also the ones that bought
resources from the city. This explosion destroyed a huge number of cars which included
10,000 Toyota, Range Rovers and Hyundai. It also stopped the shipments of other cars from
their nearby factories (Li and Ma, 2018). The explosion affected companies starting from
John Deere to the drug companies. This explosion has affected their supply chains hugely.
This had also risked the shipping industries even more than they expected.
Techniques of Risk management
Some important techniques that should be followed in risk management are as follows

6ENGINEERING RISK MANAGEMENT
Avoiding
The industries faced various risks after the blast. Most of them were major risks that
cannot be avoided, but some minor risks can be avoided. It should be noted that the risks that
are being avoided should not be major (Lam, Lun and Bell, 2018). In case a major risk is
avoided, it would affect the other risks and their mitigations. As a result, it would have a
negative impact on the industry.
Minimizing
The risks should be minimized by taking proper steps. The steps need to be planned
well. The mitigations required in reducing the risks should be according to the risks (Huang,
Wu and Wan, 2018). The minimization of risks has positive impact on the industry. It is quite
time taking so it should be carried out carefully.
Preventing further risks
The present risks should be noted down along with their mitigations. This helps in
reducing the risk of further risks. Suppose after the blast the industries faced financial, legal
and many more risks (Huang, Wu and Wan, 2018). These risks are overcome with the help of
their respective mitigations. These risks along with their mitigations should be noted so that
they can be used further in order to prevent risks in the same fields. These steps would help in
reducing the chances of further risks.

7ENGINEERING RISK MANAGEMENT
Cost analysis for
engineering risk
management
Year of
Project
year 0 year1 year 2 year 3 year 4 year 5
TOTAL
S
Net economic
benefit $36,00
0.00
$36,000.
00
$36,00
0.00
$36,00
0.00
$36,00
0.00
Discount Rate 6% 1 0.8567 0.6784 0.9746 0.4987 0.7398
PV Of Benefits $0.00
$30,84
1.20
$24,422.
40
$35,08
5.60
$17,95
3.20
$26,63
2.80
NPV of all
BENEFITS $0.00 $30,84
1.20
$55,263.
60
$90,34
9.20
$108,3
02.40
$134,9
35.20
$134,9
35.20
One Time Costs ($70,000.0
0)
Recurring Costs $0.00
($14,4
00.00)
($14,400
.00)
($14,4
00.00)
($14,40
0.00)
($14,40
0.00)
Discount Rate 6% 1.0000 0.9434 0.8900 0.8396 0.7921 0.7473
PV Of Recurring
Costs $0.00
($13,5
84.91)
($12,815
.95)
($12,0
90.52)
($11,40
6.15)
($10,76
0.52)
NPV Of All Costs ($60,000.0
0)
($73,5
84.91)
($86,400
.85)
($98,4
91.37)
($109,8
97.52)
($120,6
58.04)
($120,6
58.04)
Overall NPV $14,27
7.16
ROI 0.15

8ENGINEERING RISK MANAGEMENT
Risk management plan
Risk description Impact Reason for
explosion
Measures
taken to
control the
explosion
Strategy to
mitigate the
risks
Prevention
plan
The explosion
that took place
in Tianjin China
was one of the
most disastrous
explosions until
now (Zhang,
Teixeira and
Guedes et al.,
2016). It was
recorded that
the explosion
took place due
to
mismanagement
in the
industries. It
took place at
the port of
Tianjin. It took
many lives and
injured more.
The explosion
had many
negative
impacts on
the people
and country.
The impacts
were even
worse than
expected. The
environment
was affected
in a very
negative way.
The explosion
caused a huge
loss to the
companies
that relied on
the supplies
and products
that were
The blast had
killed nearly
165 people. The
explosion was
said to be the
result of an
action of
mismanagemen
t at one of the
chemical
warehouse
(Zhang,
Teixeira and
Guedes et al.,
2016). The
disaster was
recorded to be
an incident of
manmade
events.
The
explosion
was caused
due to the
mishap
caused by
various
chemicals. As
a result water
did not help
much in
controlling
the disaster
(Zhang,
Teixeira and
Guedes et al.,
2016). Rather
it triggered
the explosion
even more.
The strategies
in order to
mitigate the
risks are as
follows
(Zhang,
Teixeira and
Guedes et al.,
2016). The
assessment of
the storage of
hazardous
substances
should be
done. Update
the
protection,
emergency
responses and
mitigation
accordingly.
A prevention
plan has to be
made in order
to make sure
that the risks
are no more
dangerous for
the port as
well as the
government.
The
prevention
plan include
noting down
the
mitigations
taken for the
risks so that
the risks do
not take place
any more.

9ENGINEERING RISK MANAGEMENT
Due to the
explosion the
country, people
and the
government had
faced many
risks such as
legal risks,
financial risks
and many more.
exported from
the city
(Zhang,
Teixeira and
Guedes et al.,
2016). The
people
working at the
port were
affected
hugely.
Conclusion
From above report, it can be concluded that the Tianjin China explosion was caused
due to various factors. The explosion had negative effects on the ports as well as the
government. The cities that were dependent on the products imported from the ports were
hugely affected. The city had faced many risks due to the explosion. These risks and their
mitigations have been discussed in the discussion part.

10ENGINEERING RISK MANAGEMENT
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