Quantifying Seismic Risk Exposure for Global Beverage Company
Read how ABS Group helped a leading global beverage company quantify and manage seismic exposure and natural hazards risk at a large brewery in one of the world's most active earthquake zones.
Conduct an on-site audit and discuss operations with personnel to determine the seismic hazard level at the facility and develop a tailored risk reduction program
Quantify the seismic risk exposure in terms of both financial risk/impact and physical vulnerability
Provide probable maximum loss and maximum foreseeable loss estimates to support insurance program and confirm that provisions are appropriate
Make cost-effective recommendations in order to reduce the overall seismic risk exposure should a natural hazard event occur
ABS Group undertook a detailed seismic risk assessment (SRA) on behalf of one of our long-term clients for one of the Company's large breweries in South America. The aim of the SRA was to quantify and allow for the management of seismic risk exposure, increase overall business resilience and support ongoing insurance programs. Given the facility's location in South America, which has some of the highest seismic hazard levels in the world, there was a need to understand the structural vulnerabilities in order to withstand extreme conditions during a natural hazard event, to manage and reduce these and confirm that the current insurance program was appropriate.
Our Risk Management engineering team supported the client by performing an onsite SRA, thereby quantifying vulnerabilities in order to develop practical recommendations to address the significant business and safety risks. In addition, our SRA solution included probable maximum loss (PML) and maximum foreseeable loss (MFL) estimates to assist the client in understanding potential facility repair costs associated with the structural damage of a seismic event.
- Understand and quantify seismic hazards based on facility location
- Increase awareness of business and safety critical vulnerabilities
- Develop a strategy for minimizing seismic vulnerabilities at the facility with risk based recommendations
- Track recommendation progress and document risk improvements for global headquarters
Seismic Hazard Quantification
To assist a client with operations in South America (which is a region with extreme seismic activity) in understanding the natural hazard risk exposure, ABS Group carried out an SRA, which would determine the local seismic hazard vulnerabilities of the Company's facility. The assessment was conducted for an event with a 475-year return period, which can also be expressed as an event that has a 10 percent chance of exceedance in 50 years. The engineering team performing the SRA used the local building code and site geotechnical data to determine soil parameters in their associated calculations.
We provided the client with an appraisal of the regional and local seismicity in the vicinity of the site including an event catalogue, local fault appraisals, tectonic processes and a historical review of the applicable national seismic building code. The latter was done to determine the seismic design basis of existing assets, as compared with the prevailing code requirements.
Perform On-Site Audit and Identify Structural Vulnerability
A key element of the SRA was the on-site audit which identified the vulnerability of the structures, installed equipment, as well as the storage of raw materials and finished products. Audit meetings were held with site personnel to discuss operations for a complete understanding of the facility and its dependencies, both internal and external. Reviews of existing mitigation measures, emergency response and business continuity plans were also performed to obtain a broad risk picture for the facility.
ABS Group has developed a macro based excel file application for compiling our survey notes using a touch screen computer when conducting site surveys. This has increased the level of data that we can collect in the same duration on site and has therefore allowed us to analyze these data to better effect for the client.
To support a sustained program of risk management and vulnerability reduction, our assessment team applied bespoke survey-recording tablet applications, which provided enhanced vulnerability cataloguing and data recording. Following the audit, these data were entered into the natural hazard scenarios and in-house loss models within the programs to establish a baseline for the facility with which to measure and track future risk reductions via a tailored risk reduction program.
Estimate Probable Maximum Loss and Maximum Foreseeable Loss
Using the facility specific data, a comprehensive loss model for the facility was constructed. The output of these models were the PML and MFL loss estimates, built-up with the Property Damage (PD) and Business Interruption (BI) components. This output was used to enhance decision-making associated with and improve on the client’s ongoing insurance programs.
Develop a Risk Reduction Program
The data collected during the site survey, analyzed and processed offsite at ABS Group's offices formed an element of the SRA output. This output was supported by the development and implementation of a series of practical recommendations (including the use of our THESIS BowTie Risk Management software to communicate the risk) intended to provide the greatest vulnerability and financial impact reductions, thereby improving the overall risk profile of the facility.
In developing our recommendations, we considered the risk appetite and operational needs of the client. We then developed targeted completion dates, responsibility assignments and cost estimates to provide the Company with a targeted, cost-effective mitigation plan allowing for control and reduction of risk exposure at the large brewery.
Our solution to build a seismic risk framework with recommendations to mitigate natural hazards has provided a global beverage company with a greater understanding and appreciation of the seismic vulnerabilities present at one of its key process facilities. This increased awareness and preparation will enable the client to:
- Understand specific vulnerabilities at the facility with respect to earthquake exposure in one of the most active seismic regions in the world
- Optimize its insurance program to accommodate expected costs
- Implement a cost-effective mitigation program at the facility
- Improve the Company's overall risk profile and increase its operational resilience while lowering the potential negative impact on operations from future major seismic events