Chemical Industry Risk Management
3 min

RIMS 2023 Recap: Risk Management in the Chemical Industry

Kozeta Rexha explained five unique risks facing chemical industry risk managers.

Date: 15 May 2023

Chemical Industry Risk Management

For chemical industry risk managers, the stakes are high. Business interruption can be catastrophic. Equipment is expensive. Risk profiles are constantly evolving.  

To shed light on the industry’s risk management landscape, Kozeta Rexha, Client Executive - Chemical Industry Practice Leader for TÜV SÜD Global Risk Consultants, held a speaking session at RIMS RISKWORLD 2023 in Atlanta. During her talk, she explained the importance of identifying potential uninsured losses along with covered perils. She also discussed risks emerging from an evolving workforce and the power of risk engineering. 

Here are five takeaways from the event. 

1. Uninsured losses underscore the importance of independent risk engineering. Uninsured losses are growing faster than insured losses, according to SwissRe Institute. In the chemical industry, that’s a big issue as accidents, natural catastrophes and other problems can lead to heavy losses not fully covered by insurance. Risk engineering can help alleviate those pressures — particularly when they are unbundled from insurance underwriting. When independent risk engineers examine a portfolio, they make recommendations for all perils, whether they fall under your insurance deductible or not.  

“Boots on the ground is the best approach,” said Rexha. “Analyze exposures at the location level, understand loss scenarios, and get unique risk improvement recommendations that will not only bring a significant reduction in loss but also will help in negotiations with carriers for deductibles, pricing, and capacity.” 

2. A changing workforce is leading to human element exposures. The chemical industry is also facing a need for talent acquisition, retention, and knowledge transfer as experienced workers retire or move on to new jobs. 

“When you have a 25-year or 50-year veteran leave a company, it takes a lot to replace that knowledge and experience,” said Rexha. 

With companies relying on less-experienced workers, human element risk factors increase, leading to accidents and potential losses. 

“I can name a number of instances in my career where that was the root cause,” she said. “It’s incredible how human element exposure can increase loss expectancies in such a profound way.” 

3. Supply chain challenges. Recovery times to get back up-and-running after a catastrophe are longer due to supply chain issues. That’s especially true in the complex chemical industry.  

“In the chemical industry, one product can affect 20 others in the supply line,” she said. “That leads to a huge consequence for protection and loss of business.” 

4. Boiler and machinery. Despite the presence of many other risk factors, one out of two losses in the chemical industry is due to boiler and machinery issues, Rexha explained.  

“The root cause analysis is that a piece of equipment not being maintained properly, not replaced in a timely fashion, or not operated properly will cause a failure that could result in a huge loss,” said Rexha. “Engineering efforts more and more are focusing on developing specific loss expectancies related to bottlenecks and unique equipment failures.” 

5. Mergers and acquisitions. In the chemical industry, mergers and acquisitions are quite common — and leave newly combined organizations with serious risks. Getting it right requires new training, updated operations standards, and a combined vision on mitigating risks. 

“Many are global acquisitions,” she said, “meaning that merging cultures, operating standards, and risk mitigation tactics requires a lot of planning, budgeting and time.”  

If you want to learn more about independent risk assessments in the chemical, petrochemical, or oil industry, click here

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