DRAFT April 08, 2010 CEO-Process Safety Presentation

1. DRAFT April 08, 2010CEO-Process Safety Presentation This is just a template for a presentation at e.g.Board meetings after showing the film “Process Safety Pays” and has to be customised to the needs of the specific company (see accompanying booklet)

2. Intro: Flying Process Safety • Reference to/lead over from the film • Flying and Process Safety both are complex man – machine – interfaces • Major incidents both in (commercial) flying and Process Safety have high consequences. However, the probability is very low if operations are designed and maintained according to the most up to date standards • Airlines are high reliability organisations – so must ours be in the process industry, can we say the same of our organisation?? • Focus on safe operations integrity is essential for an airline’s success... Must be the same for process industry! • Process Safety must be among the top priority for sustainable growth of our company as it is for airlines

3. Threats: Consequences of major Process Safety incidents (choose examples as close as possible to own business) • If Process Safety fails (such as: Seveso, Bhopal, Piper Alpha, Toulouse, Buncefield, Texas City, …)  Consequences of one incident alone bear the potential to cause significant problems/losses: • Multiple casualties • Environmental Damage • Legal (e.g. liability [e.g. murder prosecution of Thyssen management in Italy, Culpable Homicide in U.K.] – may be of special interest for the target audience and therefore worked out further) • Business and reputation (leadership, brand, revenue of company or entire industry sector) • Share price (e.g. BP/Texas City, Union Carbide/Bhopal, Exxon/Exxon Valdez) • Management becomes distracted from other aspects of the business • The same is true for the aviation industry • Swiss Air, PanAm, Air France, .....

5. Threats: Consequences of medium/minor Process Safety incidents (choose examples as close as possible to own business) • Process incidents with no (near miss) or minor consequences happen more frequently than major accidents, but in general do not reach Board attention • Examples from your own company • May have the potential of major impact (examples!) • In general no KPI’s are used for Process Safety • “OSHA” type incidents resulting mainly from general activities in the process plant happen more frequently. Performance in general is monitored at Board level • Such as tripping, falling, cuts, bruises from industrial activities such as scaffolding... (examples from own company) • Well established KPI’s available and often perceived as the measurement of state of safety of organization

6. Case Study • Insert here a “negative” case study from your own company, use the following case study from a company which does not exist any longer (Hoechst AG) or any other case study which may fit (e.g. Texas City)

7. Case Study: Hoechst AG (Germany) 1993 -1- The incident • Expected procedure: addition of sodium hydroxide to o-nitro-chlorobenzene in methanol under stirring during 8 hours  o-nitro-anisol • Procedure leading to the incident: stirrer was not switched on during addition of sodium hydroxide  accumulation of reactants. When noticed, stirrer was switched on against orders from supervisor  runaway reaction  overpressure  release of appr. 10 to of reaction mixture Consequences • No casualties/injuries due to functioning of pressure safety valve • Widespread contamination of residential area  extensive clean-up • Extensive nation-wide media coverage (up to 250 reports/day) for >10 weeks as every other (even minor) incident at Hoechst sites received much attention • Long term damage to image of the whole sector

8. Case Study: Hoechst AG (Germany) 1993 -2- Causes of the incident • Direct cause: • combination of operator errors • Root causes: • Insufficient risk assessment of the chemical reaction • Insufficient implementation of safety management system • Sub-standard technical equipment (stirrer control/interlock) • Process safety was not in focus of senior management as “visible performance” seemed to be good (very few major incidents before, low figures for occupational accidents) Accountability of/consequences for senior management • CEO resigned completely after 1 year • According to many analysts the public discussion after this incident contributed significantly to the end of Hoechst AG (at this time as big as Bayer and BASF)

9. Case Study: Hoechst AG (Germany) 1993 -3- Process Safety Cost-Benefit Estimate for the German State of Hesse • Appr. 600 units covered by Seveso II • Competent authority requested in-depth third party process safety assessments for all of them after the Hoechst incidents 1993 • Total costs for these assessments appr. 7 Mio EURO (to be covered by the operators) • 1991 - 1993 3 major incidents occurred in the State of Hesse with direct damages (not including business interruption) of appr. 120 Mio EURO • If only one of them could have been avoided by these process safety assessments this would be a dramatic return on investments!

10. Benefits: Good Process Safety is more than avoiding major incidents(choose examples as close as possible to own business) • Less business interruption • Average productivity “x% of total capacity” • “y% better productivity means AA EURO higher turnover/profit” • … • Insurance costs • … • Corporate image • Less problems with authorities • Easier permitting • … • Easier investment • Capital market more accessible to good performers (Rating!) • …

11. Our company`s Process Safety status • Risk Management/Operations Integrity System incl. Risk Map, KPI’s • E.g. defining expectations, specifying certain practices, procedures, tools to be used in entire corporation • If not available  action item! get help from industry associations incl. EPSC • KPIs (including benchmark with peer companies, if possible) • If not available  action item!  get help from industry associations incl. EPSC • (examples of) major hazards of company • Clearly explain the potential Process Safety risks to the Board (if they don’t know how severe these are, they will never vote resources to reduce and manage risk)

12. How to improve/maintain a high level of Process Safety -1-(focus on specific needs of the individual company) • Personal leadership of Board members and senior executives • Review state of Process Safety regularly in Board meetings • Review system and process ensuring consistent Process Safety management • Set targets on KPI implementation and Process Safety incident reduction • Request immediate personal reporting of Process Safety incidents (above a defined level, to defined organizational levels, similar to reporting of serious workplace accidents) • Demonstrate your commitment for Process Safety in day-to-day decisions • Ask for Process Safety at business meetings and site visits (get prepared by senior Process Safety leader) • Talk/write about Process Safety in “town hall meetings”, intranet, image brochures, … • …

13. How to improve/maintain a high level of process safety -2-(focus on Board level and on specific needs of the individual company) • Initiating program(s) for: • Comprehensive review of key Process Safety performance requirements and gap analysis of current Process Safety Management System: what are our weaknesses and strengths? • Process Safety KPIs • Resourcing/expertise • Process Safety audits • Mergers and Acquisitions (Integration of heritage sites) • Changes in production portfolio • Comprehensiveness of Management of Change (organisational, technical) • Contract operation and outsourcing • Knowledge management and transfer • Linking bonuses with Process Safety performance • …

14. How to improve/maintain a high level of process safety -3- You may close the presentation by another case study which gives a good example for process safety or demonstrates the way to improve process safety performance, e.g. • space shuttle story (courtesy Exxon) : in short as a wrap-up, demonstrating that in process safety the overall (major) risk (for a company) can only be reduced by reducing many small risks which are as such far below the level of board attendance (see following slides, which have to be worked out further!!)

15. What can we learn about managing risks from the Columbia disaster? Despite Improvements, risks remain part of space equation The Numbers say this: Two catastrophes in 113 shuttle missions dating back to 1981 is a 98 percent success rate. But the space agency’s own assessments place the odds of a tragedy at one in every 250 missions, when the launch, orbital and landing phases are assessed. The odds of a loss during a shuttle launch are judged to be lower, one in 556 flights. These odds are for flights in 2003. They were much worse when the shuttle program began. By MARK CARREAU Houston Chronicle As Columbia lifted off on the first shuttle flight in 1981, NASA assessed the prospects of a catastrophic loss at one in 25. After the post-Challenger improvements, the odds bettered to one in 78. They have since continued to improve...

16. 1989 POST- CHALLENGER IMPROVEMENTS (32 MOS./$15B) 1981 1ST SHUTTLE FLIGHT 2003 COLUMBIA DISASTER (13YRS/$?B) ...1,000’S OF SCENARIOS 1:556* I 1:25* 1:78* 1:250* = 1:xxx* = 1:yyy* LAUNCH ORBITAL LANDING phases II III IV # # # # # # # ... # # # # # # # # # ... # # # # # *ODDS OF CATASTROPHIC LOSS PER MISSION # # NASASPACE SHUTTLE RISK ASSESSMENTS ~ 1986 CHALLENGER DISASTER A B C D E This needs a more detailed explanation for the presenter CONSEQUENCE PROBABILITY

17. Additional Reading • Company-specific choice from sources listed e.g. on the EPSC website (see booklet) which address senior management