Exploring Risks Associated With Tianjin Port Explosion

Objectives of Risk Management

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Risk is defined as occurrence of incidents without certainty and prior anticipation which causes harm directly to the stakeholders who are interlinked with the project. These incidents have the causes harm for the beings as a whole. Risk can be further classified as the factor that arises during the completion of task and risk might appear at any stage of the task before it is finished. Hence identification of risk is one of the foremost priority as it can affect the quality as well as the overall outcome of the project (Stulz, 2015). Hence the ability to mitigate risk during project is one of the major concerns for team managing the task. Several theories about risk management has been proposed which seek to identify and minimize risk factors which are often unseen and unrecognized by project team.

The principles of risk management is adopted by the organizations that seek to deal with the project related risk effectively so that it does not have significant impact on the team work and the overall success of the project (McNeil, Frey & Embrechts, 2014 ). There are some risk management principles that are quite helpful for managing project related risk factors: –

Legal: Storage as identified in the case of the Tianjin port, has been one of the factor that lead to poor disaster management. The main reason for the explosion was the explosion of the Ammonium nitrate for excessive amount of heat due to the ignition of fire. These incident might be avoided if the team that was on charge of storing the ammonium nitrate has previous knowledge about the nature of the substance (Sun, 2015). The fact that ammonium nitrate is explosive was not known to the team responsible for managing the storage. If the fact was already known to team, then they could have been more careful while handling the substance that lead to the explosion. Several materials sensitive to the explosion was added with ammonium nitrate which made the explosion much more intense and the fire spread out quickly. Another reason for the huge explosion was the presence of huge amount of ammonium nitrate, 800 tons in quantity. Illegal activities were also a reason for uncontrollable fire that broke out in Tianjin. It is illegal to store huge quantity of dry nitrogen in a single place. Over 300 tons of dry nitrogen was stored in Tianjin port. As the risk related to the project varies, so should be the strategy mitigating the risk. Hence, the approach to the risk management must be dynamic. However, in the case of Taijin explosion, it is evident that the risk management approach lacked in dynamism and this might be accounted for the incident (Fu, Wang & Yan, 2016).

Risk Management Principle

Human Resources: Sometimes complication arises during the project due to the mistakes done by the human. An effective risk management strategy should take human factor into consideration and must considered the factor that an employee can commit mistake and it must be taken into account (Zaho, 2016). This is evident as the explosion was due to the lack of knowledge of employees in storing ammonium nitrate. Transparency is an important factor. Risk management technique should be transparent so that it is easier to manage risk. In this particular incident employees working in Tianjin port were not aware of the facts and procedure that must be followed to store the ammonium nitrate properly and hence the incident took place (Huang & Zhang, 2015). Human Resource management must be employed in order to perform man management and provide knowledge to employees regarding the subject they are working on

Financial risk management: A total of $9 billion was wasted in this explosion. More than 2000 Toyota cars got burnt during explosion that occurred in Tianjin port. Basic price of Toyota cars being $15,350, average being $25,500 and highest range being $45,888, a gross loss that that is estimated is over $500 million. Entire showroom of Toyota worth $700 million was decimated due to this explosion. Entire China was devastated due to the fact that there has been a huge loss both financially as well as psychologically.

Environment: After explosion in Tianjin China port, excluding the fact that huge loss in financial background was suffered, the major problem was pollution that was caused after explosion. Pollution in environment led to the fact that entre air cycle surrounding china got polluted and rain turned into acid rain. Due to acid rain, water bodies present in China was adversely affected. Marine animals were the ones who were affected the most. Marine animals died in huge numbers. Water pollution was everywhere. Residents of Tianjin vacated Tianjin for few months in order to avoid water pollution.  

Risk management involves identification, classification and prioritizing of the risk that might occur during the completion of the task (Yongli & Guo-xi, 2015):

Identification:

Risk that is associated with the Tianjin port must be identified before the project is processed

Planning:

Once the risk is identified it should be mitigate with proper planning.

Derivation of safeguards:

Once the identification and planning is completed, proper strategies should be derived to create safeguards against the risk.

Consequences

Monitoring:

It is not enough to derive the safeguards, it should be properly monitored to assess the quality and credibility of the strategy.

Almost 173 people died after the incident. The figure was discovered after the investigation and the figure came out after one month of the incident took place. The combination of water with the chemical proved to be fatal and it acted as the catalyst for the explosion. The energy of the explosion was equivalent to 2.9 tons of TNT and the seismic plate was shocked by this event leading to earthquake of magnitude of 2.9 (Middleton, 2016). The damages caused by this explosion was havoc in nature. It destroyed around 8000 cars.  National Supercomputer Centre was also affected by this explosion.  Dhongai road station located near Tianjin port was adversely affected due to this massive explosion. $9 billion was wasted due to this massacre caused by the explosion (Li, Zhu & Shi, 2016). More than 300 buildings were devastated due to this incident. 1200 cars were damaged during the course of this explosion. 200 Toyota cars were blown away at a stretch during this explosion. 

8 explosions took place in a row. First 2 explosions occurred in an interval of 30 seconds.  Both the explosions affected employees adversely who were working in the port. 2^nd explosion was comparatively larger than the 1^st explosion. Ammonium Nitrate was detonated and over 800 tons of dry nitrogen was depleted that increased intensity of the explosion. Binhai was affected by this initially as fire broke away in their warehouse. Fire fighters were trying to prevent fire from spreading and used water to stop the growth of fire. Fact that the explosion was die to chemical hazards were unknown to the fire fighters. Chemical reactions occurred due to the fact that water and chemical effluents reacted in a flammable way, which caused destruction in the port (Jiu-zhou & Plant, 2015).

Risk Description	Impact	Reason	Crucial factors	Triggers	Risk Response Strategy	Contingency Plan
12th August is considered as one of the black days in China. Over 3000 peoples were injured in this explosion and 173 fatal injuries were caused	Over $9 billion was spent in mitigating the damages that took place due to explosion caused. 200 Toyota cars were destroyed in the Toyota company as it was located very close to the port. More than 300 people died in this attack. This caused Tianjin explosion to be one of the fiercest explosions in history of China. Pollution was caused in massive way, leading to the fact rain was converted t acid rain and marine animals were adversely affected due to this (Irshad, 2015).	2nd explosion marked detonation of 800 tons of Ammonium Nitrate. In beginning there was a fire at the warehouse of Binhai. The fire was uncontrollable in nature. Fire fighters were on spot, fighting the fire and trying to prevent it from overflowing. Fire fighters were not aware of the fact that the fire that has struck is due to explosion of hazardous chemical substances. Applying water to fire increased intensity of the fire. This in return increased the intensity of explosion.	Incomplete knowledge regarding chemical structure and chemical property of the elements that are stored in the port is proclaimed to be one of the major reason for explosion (Zhao, 2016).	Water is often considered to be inflammable in nature. Chemical property and chemical structure of water also supports this fact, but combining water with ammonium nitrate and dry nitrogen alters the chemical structure of both water and reacting element, leading to explosion (Yao & Qin , 2014).	Risk mitigation strategy that must be undertaken to resolve this problem is that avoidance of hazardous flammable elements must be done and idea of retention of risk must be omitted (Sen, 2016).	Contingency planning will ensure that such activities does not occur further and employees have proper knowledge regarding elements they are in charge of.

Strategies to deplete risks: –

Risk avoidance: avoiding risks is one of the most important techniques that will help in mitigating risks. By understanding the causes of danger regarding accidents, prevention of accidents can be made by taking preventive measures (Lo, 2016). Total cost that will be needed for risk avoidance is very high, as high as $35 million every year.

Risk minimization: Minimizing risk is one of the basic techniques that must be implemented in order to prevent risks that are heading towards the organization. This has been the major reason that minimizing risk has been evolving as one of the major techniques to mitigate risks (Wang, 2018). Risk minimization will cost highest as it will require nearly $97 million in order to minimize the risk.

Likelihood

Retaining risk: Retaining risk is the only managerial decision that higher authorities of organizations can take regarding risk mitigation for the organization. Higher authorities can take decisions regarding strategies that must be used to retain the risk, as according to scholars retention of risks also acts as revenue earner for the organization. Retaining risk is beneficial as organisations earn revenues by retaining risks. By retaining risk organization can analyse risks that are approaching the organization. In case the risk that is approaching the organization is retained insurance cab be earned successfully through it.   

			Year of Project
	year 0	year1	year 2	year 3	year 4	year 5	TOTALS
Net economic benefit		$36,000.00	$36,000.00	$36,000.00	$36,000.00	$36,000.00
		0.7700	0.4500	0.8700	0.6780	0.7473
PV Of Benefits	$0.00	$27,720.00	$16,200.00	$31,320.00	$24,408.00	$26,901.29
BENEFITS of NPV	$0.00	$27,720.00	$43,920.00	$75,240.00	$99,648.00	$126,549.29	$126,549.29
Single terminal Costs	$9,000,000,000.00
Recurring Costs	$0.00	($14,400.00)	($14,400.00)	($14,400.00)	($14,400.00)	($14,400.00)
Discount Rate 3%	1.0000	0.9434	0.8900	0.8396	0.7921	0.7473
PV Of Recurring Costs	$0.00	($13,584.91)	($12,815.95)	($12,090.52)	($11,406.15)	($10,760.52)
NPV Of All Costs	($60,000.00)	($73,584.91)	($86,400.85)	($98,491.37)	($109,897.52)	($120,658.04)	($120,658.04)
ROI							$0.70

 

Conclusion

From the above discussion it can be concluded that Tianjin China explosion is one of the most dangerous explosions to happen in history of China. China was not only affected due to loss during the explosion, but it’s after effect was massive. Pollution caused due to this explosion polluted water and citizens of China were drinking impure water causing to breaking of epidemic. Acid rains were one of the major reasons that polluted the environment of China. Recommendations are stated in this report which will help in preventing such disasters in future. On following the strategies that are stated will ensure that there will be proper maintenance of elements that are stored.    

Reference:

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Irshad, M. S. (2015). One belt and one road: dose China-Pakistan economic corridor benefit for Pakistan’s economy?

Jiu-zhou, G. U. A. N., & Plant, S. O. P. (2015). Analysis and Control of Oil and Gas Explosion During Air Injection for Heavy Crude Oil Development. Contemporary Chemical Industry, 6, 098.

Li, X., Zhu, Y., & Shi, Y. (2016, December). Conflict analysis in redevelopment of brownfield caused by contingency: Tianjin port “8· 12” explosion Hazard, in China. In Industrial Engineering and Engineering Management (IEEM), 2016 IEEE International Conference on (pp. 1106-1110). IEEE.

Lo, S. S. H. (2016). Policing Crises in Mainland China: The Shenzhen Landslide, Tianjin Explosion and Shanghai Stampede. In The Politics of Policing in Greater China (pp. 223-242). Palgrave Macmillan, New York.

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Middleton, R. (2016). China explosion: major disruption expected at Tianjin port.

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Wang, L. (2018). Features of the microblog and its role in the formation of a green public sphere in China: The case of 2015 Tianjin Explosions. Catalan Journal of Communication & Cultural Studies, 10(1), 133-142.

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