FSMAS Seminar on the

Fundamentals of
Fire Risk Assessment

By Desmond Lee, PhD (Newcastle),

MBA & MTech (UNSW), B.Sc (Hons) (UWO)
Honorary Secretary, FSMAS
QHSE Director, Wood Group Pressure Control PLC, Asia
Pacific Region
 Fundamentals of Fire Risk Assessment

Risk – What is Risk?

Risk is the variation of outcomes that
could occur over a specified period in a
given situation. Speculative risk exists
when there is a chance of a gain or a
loss. Pure risk on the other hand, exists
only when there is a chance for a loss.
 Fundamentals of Fire Risk Assessment

Organizations and investors accept speculative risks if

the risk premium is high enough to provide for an
acceptable return over a less risky investment.

However, due to the uncertainty of the costs
involved, pure risks should be either avoided or
managed.

The costs of this uncertainty are composed of the
cost of the unexpected loss and the cost of
uncertainty itself. While the cost of the loss can be
calculated at some point in time, the costs of the
uncertainty are difficult (if not impossible) to quantify.
 Costs of Uncertainty
These costs of uncertainty results from

(1) diminishing marginal utility,

(2) over estimating the chance of loss or

(3) fear and worry;

and lead to less than optimum production, price levels
and price structures.

If you have experience and expert in estimating these
uncertainties, of course, you can have better judgment
and hence better optimized production, better pricing
and price structures for your products because you know
very well your costs and is good for your business

So, proper and adequate risk management process is
very necessary in the long run for your business.
 Risk Management Process

Minimizing an organization's pure risk is the objective of
the risk management process. Risk management is not
the purchase of insurance, and it is not the self insuring
of all exposures. Rather, it is the orderly process of risk
identification (what are the hazards) and measurement,
alternative analysis and implementation and monitoring
of the chosen alternative

The first steps in any effective risk management
program are to identify and measure the exposures to
loss that are present in the company's operations. Just
as important in identifying the exposure is the
understanding the conditions that create the exposure,
and the steps necessary to correct or minimize the
exposure.
 The steps in the risk
management process are:

1) Identifying exposures to fire loss that could
interfere with company's objectives;

2) Analyzing the potential impacts and
consequences of these identified exposures;

3) Selecting the various alternatives of handling
such a risk;

4) Implementing the chosen alternative (or
combination of alternatives);

5) Monitoring the effectiveness and
appropriateness of the chosen alternative(s).
 The steps in the risk
management process are:

Any organization can control a sizable portion of its
exposures by establishing and maintaining an effective
loss prevention program of avoiding as many risks as
possible. However, in some instances the purchase of
insurance or assumption of certain degree of the risk is
the inevitable.

After all efforts to avoid or to contractually transfer the
risk have been exhausted, the decision becomes
whether to assume the risk or transfer via insurance.
Whichever method is chosen (or a combination of the
two), effective loss prevention will be the key factor in
the final cost.
 Risk Identification - A Fire Risk
Perspective
This is the process of determining what can
happen, why and how. Major threats that give
rise to the risk can be classified into the
following types of risk:

Property Loss

Financial Loss

Liability Risks

Personnel Threats

Social Risks

Environmental Risks
 Methods of identifying fire loss
exposure

Completing a questionnaire / survey

Reviewing the loss histories of the company

Analyzing financial statement and accounting records

Examining other records, plans and documents

Studying operational flow chart and diagrams to
highlight hazards in each step of the process

Carrying out site inspection and interview of the site
personnel

Consulting with experts both within and outside the
organization
 Risk Analysis
For each identified exposures, the potential impacts and
consequences is analyzed, by determining:

Frequency of such loss

Severity of such loss

Potential financial impact

Business continuity

Stable earning / growth

Community / political concerns

Legal requirement / compliance
The next step of risk management process involves either
stopping loss from happening (risk control) or paying for
loss if it does occurs (risk financing).
 Risk Control Techniques
Aim to minimize the frequency and severity of a loss. These techniques
include:

Avoidance - eliminate entirely any possibility of a loss.

Prevention - reducing the frequency or the likelihood of a loss by
"engineering out" hazards that could cause a loss.

Reduction - lower the severity of a loss by removing part or all of the
hazard(s) before one is exposed.

Segregation - arranging activities and resources so that no single event
can destroy all. It may take one of the two forms;

Separation - entails the dispersal of a particular activity or asset over
separate location.

Duplication - rely on "back-up" of critical processes/spares or duplicate
use if primary assets or activities suffer a loss.

(Ref no.1 NFEC’s Fire Risk Assessment Guide book at
http://www.nfec.gov.sg/publication_fire_risk.html)
The following are broad outlines of the prevention and reduction measure
applicable to fire risk.
 Fire Prevention
Eliminating potential fuels:

Remove unnecessary flammable substances;

Safe storage of necessary flammable substances;

Good house keeping to isolate potential fuels from ignition sources;

Carry out regular fire prevention inspection;

Ensure employees are trained on fire safety awareness and conduct
fire drill exercise.
Removal of Ignition Sources:

Eliminate open flames and other heat sources (i.e: hot work permit;
contractor control; etc.);

Comply with code of practices to control electricity as a source of
heat or

flame;

Remove sources of spontaneous combustion;

Enforce "no smoking" regulation.
 Fire Reduction

Erect firewalls or otherwise establish fire divisions so
that spread of any

fire would be contained;

Reduce fire intensity by removing or storing any
flammables materials or

contents in fire resistive compartment;

Cooperate with the fire department to establish a pre-
fire plan;

Develop a emergency plan for immediate actions in
the event of a fire;

Where justified, install and maintain suitable fire
detection and suppression system;

Draw up post-fire salvage plan to mitigate the loss.
 EXHIBIT 1 - FIRE LOSS CONTROL
CHART
PRE-EVENT SEPARATION & REDUCED ENERGY

Ignition Control
1)Flameproof equipment
2)Hazardous process enclosure
3)Matches/lighters
4)Safety operating system (temperatures, pressure control
and relief system)

Fire Load Control

1)Reduce volume stored at one point
2)Review materials used
3)Separate storage and processes
4)Limit storage areas
 FIRE LOSS CONTROL CHART

DURING REDUCED ENERGY & PROTECTION

EVENT
Detection Systems Provision
1)Smoke/heat detectors
2)Fire alarm

Fire Fighting Systems Provision

1)Extinguishers
2)Hose-reels / hydrants
3)Sprinklers / deluge / special
4)Removal access for goods & equipment
5)Removal of smoke
6)Protection against water
7)Fire wall / fire door / fire shutter
FIRE LOSS CONTROL CHART
POST EVENT EMERGENCY RESPONSE PLAN

1)Protect assets exposed to further damages

CONTINGENCY PLANNING

1)Alternative means of production to restore normal working

 EXHIBIT 2 - FACTORS TO BE ASSESSED IN
FIRE RISK MANAGEMENT
1. Property Damage

A. Property

Size, height and shape of area potentially exposed to a
single fire

Construction of roof, walls, and floors

Presence of combustible linings to walls, roofs, ceilings
and partitions

Nature, distribution and combustibility of contents (fire
load)

Susceptibility of contents to damage by smoke, heat and
water

Concentrations of values within a small area
 FACTORS TO BE ASSESSED IN FIRE
RISK MANAGEMENT
B. Hazard

Presence of any normal source of ignition

Use of hazardous processes and substances
and their degree of separation

Hazards arising from gas, toxic / corrosive
materials or pollutants

Risk of explosion from any sources

Proximity to other buildings or hazards

Any special topographical or geographical
features
 FACTORS TO BE ASSESSED IN FIRE
RISK MANAGEMENT
C. Control

Standards of management and housekeeping

Horizontal and vertical separation

Fire resisting doors

Existence of installation of fire detection,
suppression or extinguishing arrangement
including sprinklers and the water supplies,

Distance to nearest fire station and its
response time

Security precautions.
 FACTORS TO BE ASSESSED IN FIRE
RISK MANAGEMENT
2. Business Interruption

A. Financial

Nature of business

Gross profit forecast

Allocation of gross profit by business unit and/or
product group

Susceptibility of the business to loss of market share
following interruption, and the ability to recover it

Trend and seasonality of business

Buffer stock; inventory
 FACTORS TO BE ASSESSED IN FIRE
RISK MANAGEMENT
B. Operational

Size, height and shape of area potentially exposed to a
single fire risk

Reconstruction and reinstatement period

Replacement lead time for critical machinery, plant and
toolings

Replacement lead time for raw materials, components,
work-in-progress and finished stock

Bottlenecks and critical path of flow

Duplication / back up of plant production and critical
spare
 FACTORS TO BE ASSESSED IN FIRE RISK
MANAGEMENT
C. Dependencies

External dependencies - customers, suppliers,
utilities

Inter-dependencies group; sister company;
supply chain
D. Recovery

Assistance available from sister companies,
mutual alliance

Business contingency & recovery plan

Increased cost of working and saving in
variable cost
FIRE RISK ASSESSMENT -
Factory Layout
 Costing (Example)
Description Building cost Plant & Stock Total
machinery

Raw Material $800,000 $0.000,000 $4,100,000 $4,900,000

store

Primary $4,200,000 $2,000,000 $3,100,000 $9,300,000

Processing

Main $3,700,000 $1,200,000 $400,000 $5,300,000

Processing

Final $2,500,000 $2,000,000 $1,300,000 $5,800,000

Processing

Finished Good $2,600,000 $1,300,000 $12,000,000 $16,000,000

warehouse
 Operation Cost (Example)
Turnover Cost $50,000,000

Variable Cost $20,900,000

Fixed Cost $20,300,000

Pre-Tax Earning $ 7,000,000

 Factory - TABLE (1) FIRE RISK ASSESSMENT WITH
PROBABLE QUANTIFIED EXPOSURE

PREMISES AT TYPE OF CLASS OF IMPACT EFFECT EXPOSURE

RISK RISK RISK (Quantified)

Primary Fire Property Loss Building $4.2mil Reconstruction takes 2 $4.2mil

Processing Plant & Machinery months.
Building $2.0mil Interruption due to
Stock $3.1mil re-construction
activities.
Debt servicing. $0.5mil
Fire fighting & clean up
expenses.
Replacement of critical $0.1mil
machines takes up
to 18 months.
Disruption of process
flow; bottleneck.
Change of technology; $2.0mil
obselete, outdated
model
Total loss of Stock
Non-delivery of
customers' orders,
penalty
Lost of key customers &
market share $3.1mil
Abandoned by suppliers
of high demand
supply
Factory - TABLE (1) FIRE RISK ASSESSMENT WITH
PROBABLE QUANTIFIED EXPOSURE

Personal 20 workers / Death or Injury to $0.45mil

Threats wages employee
$0.45mil p.a. Lost of skill workers
5 supervisors / Workers' Compensation $0.75mil
salary $0.3mil / sued by
p.a. employees
Continued incurring
ordinary payroll
Straining of labour
resources
Factory - TABLE (1) FIRE RISK ASSESSMENT WITH
PROBABLE QUANTIFIED EXPOSURE

Financial Loss Annual turnover Takes as long as 12 $50.0mil

$50.0mil months to resume
Gross Profit normal operation
$7.0mil Potential loss of 50% $3.5mil
gross profit over 12
months
Continued incurring fixed $23.0mil
cost and standing
changes
Saving in variable cost -$20.0mil
Increase in cost of $0.2mil
working extra
expenses
Inter-dependencies of
group companies
Factory - TABLE (1) FIRE RISK ASSESSMENT WITH
PROBABLE QUANTIFIED EXPOSURE

Secondary Adjoining: Possible spread of fire $4.9mil

Loss Raw material store Damaged by smoke,
$4.9mil heat & water
Main Processing Prevention of access, $5.3mil
$5.3mil disruption of utility
Final process supplies, electricity,
$5.8m water, gas
Surrounding
Finished Non-delivery, quality $5.8mil
good impairment
warehouse inventory shortfall $16.0mil
$16.0m
Factory - TABLE (1) FIRE RISK ASSESSMENT WITH
PROBABLE QUANTIFIED EXPOSURE

Liability Risk Adjacent Print Possible spread of fire $??

Factory $? Possible damaged by $??
Adjacent smoke, heat &
Warehouse water
$? Prevention of access
Disruption of utility
supplies, electricity,
water , gas
Death or injury to
visitors, customers,
contractors
Damage to property not
owned but in care &
custody
Factory - TABLE (1) FIRE RISK ASSESSMENT WITH
PROBABLE QUANTIFIED EXPOSURE

Environ-mental Discharge of Pollution and $??

& Social chemical, contamination of $??
Risk forced air, land & water $??
evacuation affecting the living
of neighbouring
community
Breach of law,
regulations
Bad publicity and lost of
confidence
Breach of fudiciary duty
of directors &
officers
 Factory - TABLE (2) FIRE RISK ASSESSMENT WITH
FREQUENCY & SEVERITY LEVEL IDENTIFIED
RISK CAUSES LIMITING AGGRAVATING FREQUENCY SEVERITY
FACTORS FACTORS
FIRE - INCEPTION Electrical installation Poor maintenance & Medium High
Primary -Electrical fault comply with check
code
Processin -Smoking Smoking is prohited
Rule difficult to
g Building -Hot work Welding, cutting, enforce
-Process perils grinding No control over Medium High
-Spontaneous seldom contractor's
combustion performed workers
inside
-Arson / sabotage Open flames are
No hot work Medium High
fully enclosed procedure
Temperature control No program to check Medium High
/ infrared on the reliability
thermo of safety
detection
Fuel supply are
devices
automatic No self extinguishing Medium High
shut-off in device
emergency No fuel flow rate Medium Medium
No fuel storage in Night shift workers
the process
area
are
No such materials / inexperience
substances Materials are not Medium Medium
used properly
Security check at all labelled and no
entry and exit.
Surveilliance
MSDS
camera and Recent retrenchment
foot patrol by upset some
guards employees
24 hours manned
operation
Factory - TABLE (2) FIRE RISK ASSESSMENT WITH
FREQUENCY & SEVERITY LEVEL IDENTIFIED
SPREAD Walls and roofs are Ceiling covered by fiber High High
-Interior constructed of steel glass insulation lining,
-Fire loading & concrete improper type used
-Raw Material store Adequate no.of fire Not easily accessible and Medium Medium
-Main Processing extinguishers as per no clear signage
-Final Processing bldg code Moderate quantity of
-Exterior Adequate no. of fire flammable liquids used Medium Medium
-finished good hosereels as per Flammable liquids not
warehouse bldg code safely handled or stored
Limit storage of No sprinkler protection Medium High
combustible No fire detection system
materials No fire fighting team at
Good housekeping night shift Medium High
24 hours manned No pre-fire plan
All employees Annual shut down for 2
underwent fire weeks during New Year Medium High
fighting and safety Wall not extended above
training roof
There is a trained Opening / penetration not High High
fire fighting team sealed
Fire station within Fire door self closing
5Km and response jammed and door always High High
time is 7 minutes wedged open
Fire wall of 225mm No fire wall or fire
thick division High High
Entrance to main No sprinkler in main
processing are clear processing
of storage No fire wall or fire High High
Entrance to final division
processing are clear No sprinkler in final
of storage processing High High
Clear distant greater Empty wooden pallets
than 25m stored in between High High
Sprinkler provided in Not 24 hours manned
this building High Inventory storage High High
Factory - TABLE (2) FIRE RISK ASSESSMENT WITH
FREQUENCY & SEVERITY LEVEL IDENTIFIED

OUTSIDE Clear distant greater Storage of large quantity Medium Low

-Adjacent Warehouse than 100m of flammable
-Adjacent Paint Clear distant greater materials
Factory than 35m Storage of large quantity Medium High
of flammable
materials
 RISK MATRIX

(High Risk is unacceptable-must be reduced to Medium or Low Risk)

(Ref no.2 MOM’s Risk Assessment Guidelines –

http://www.mom.gov.sg/publish/momportal/en/communities/
workplace_safety_and_health/maintaining_a_safe_workplace/
occupation_safety/risk_management.html)
 FM Global Experience:

USE SPRINKLER SYSTEMS ALWAYS
FOR YOUR PREMISES NO MATTER
WHAT KIND OF COMMERCIAL OR
INDUSTRIAL PREMISES YOU HAVE,
IT’S A GUARANTEE YOU WILL
MINIMIZE YOUR LOSS DURING ANY
FIRE INCIDENT OR EVENT!

Read FMGLOBAL P0037

(Ref no.3 FM Global Newletter P0037 -
http://www.fmglobal.com/page.aspx?id=03030000)
 REFERENCES

Ref no.1

Ref no.2

Ref no.3 Adobe Acrobat

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