Risk Management Definitions

The Congress finds that the movement of hazardous materials in commerce is necessary and desirable to maintain economic vitality and meet consumer demands, and shall be conducted in a safe and efficient manner. (HMTUSA; 49 App. U.S.C. 1801).

Satisfying the needs of our highly competitive industrialized society, while maintaining an acceptable level of safety at a reasonable cost, is a regulatory challenge that PHMSA consistently, and successfully, meets through its hazard/risk-based approach to the management of the hazardous materials transportation safety program.

The terms hazard, risk, risk analysis, hazard analysis and hazard or risk management have many forms and meanings. For hazardous materials safety the following terms are understood to mean:

HAZARD is the inherent characteristic of a material, condition, or activity that has the potential to cause harm to people, property, or the environment.

RISK is the combination of the likelihood and the consequence of a specified hazard being realized. It is a measure of harm or loss associated with an activity.

LIKELIHOOD is expressed as either a frequency or a probability. Frequency is a measure of the rate at which events occur over time (e.g., events/year, incidents/year, deaths/year, etc.). Probability is a measure of the rate of a possible event expressed as a fraction of the total number of events (e.g., one-in-a-million, 1/1,000,000, or 1X10-3).

CONSEQUENCE is the direct effect of an event, incident or accident. It is expressed as a health effect (e.g., death, injury, exposure), property loss, environmental effect, evacuation, or quantity spilled.

HAZARD ANALYSIS is the identification of material properties, system elements or events that lead to harm or loss. The term hazard analysis may also include evaluation of consequences from an event or incident.

RISK ANALYSIS is the study of risk in order to understand and quantify risk so it can be managed.

RISK ASSESSMENT OR RISK CHARACTERIZATION is determination of risk context and acceptability, often by comparison to similar risks.

QUANTITATIVE RISK ANALYSIS incorporates numerical estimates of frequency or probability and consequence. In practice a sophisticated analysis of risk requires extensive data which are expensive to acquire or often unavailable. Fortunately few decisions require sophisticated quantification of both frequency and consequences.

RELATIVE RISK ANALYSIS means that a risk is evaluated in comparison to another risk. The type of risk analysis used should be appropriate for the available data and to the exposure, frequency and severity of potential loss.

RISK MANAGEMENT is the systematic application of policies, practices, and resources to the assessment and control of risk affecting human health and safety and the environment. Hazard, risk, and cost/benefit analysis are used to support development of risk reduction options, program objectives, and prioritization of issues and resources. A critical role of the safety regulator is to identify activities involving significant risk and to establish an acceptable level of risk. Near zero risk can be very costly and in most cases is not achievable.

AN ACCEPTABLE LEVEL OF RISK for regulations and special permits is established by consideration of risk, cost/benefit and public comments. Relative or comparative risk analysis is most often used where quantitative risk analysis is not practical or justified. Public participation is important in a risk analysis process, not only for enhancing the public's understanding of the risks associated with hazardous materials transportation, but also for insuring that the point of view of all major segments of the population-at-risk is included in the analyses process. Risk and cost/benefit analysis are important tools in informing the public about the actual risk and cost as opposed to the perceived risk and cost involved in an activity. Through such a public process PHMSA establishes hazard classification, hazard communication, packaging, and operational control standards.

HAZARD/RISK-BASED MANAGEMENT IN THE HAZARDOUS MATERIALS PROGRAM:

• REGULATORY STANDARDS: The hazardous material regulatory system is a risk management system that is prevention oriented and focused on identifying a hazard and reducing the probability and quantity of a hazardous material release. Hazardous materials are categorized by hazard analysis and experience into hazard classes and packing groups. The regulations require each shipper to classify a material in accordance with these hazard classes and packing groups; the process of classifying a hazardous material is itself a form of hazard analysis. Further, the regulations require the shipper to communicate the material's hazards through use of the hazard class, packing group and proper shipping name on the shipping paper and the use of labels on packages and placards on transport vehicle. Thus the shipping paper, labels, and placards communicate the most significant findings of the shipper's hazard analysis. A hazardous material is assigned to one of three packing groups based upon its degree of hazard, from a high hazard packing group I to a low hazard packing group III material. The quality, damage resistance, and performance standards of the packaging in each packing group are appropriate for the hazards of the material transported.
  
  
• SPECIAL PERMIT S TO THE HAZARDOUS MATERIALS REGULATIONS: With great wisdom, Congress in the Hazardous Materials Transportation Act of 1974, created a risk management program that can authorize alternative regulations. The purpose of these alternative regulations -- special permits -- is to facilitate the implementation of more efficient methods and new technologies that provide a level of safety at least equal to that provided by the regulations. The procedural regulations governing PHMSA's special permits program, published under section 107.103 of Title 49 of the Code of Federal Regulations (49 CFR 107.103), require all applications for special permits to be accompanied by a safety analysis, i.e., documentation and data substantiating a finding that the special permit sought will provide at least the same level of safety as that provided under the regulations. The safety analyses required to support special permits vary greatly, from complex risk analyses for complex packaging systems involving new technologies to simple comparative analyses for minor variations in packaging or operational controls for relatively low hazard materials. The risk present in new technologies and materials is often particularly difficult to evaluate and often requires extensive risk analysis.
  
  
• EMERGENCY PREPAREDNESS AND RESPONSE: Should an incident occur, PHMSA's hazardous materials program includes elements to mitigate the consequences of a release. PHMSA publishes and distributes to first responders an Emergency Response Guidebook to provide guidance on hazards, emergency actions and protective action decision factors and distances. This information is also tailored to reflect the risk of each material. To support emergency preparedness and response planners at the State and local levels, PHMSA, the Federal Emergency Management Agency, and the Environmental Protection Agency jointly developed a Handbook Of Chemical Hazards Analysis Procedures and a personal computer based program Automated Resource for Chemical Hazard Incident Evaluation (ARCHIE). PHMSA, through its Planning and Training Grants, provides funds to State and local emergency preparedness and emergency response organizations for planning and training directed towards mitigation of the consequences associated with hazardous materials incidents.
  
  
• INFORMATION/DATA BASES: Information is critical to the effective use and application of hazard/risk analyses. PHMSA has improved the information/data bases used to determine which risks in the transportation of hazardous materials appear to be the greatest, and to identify corrective actions needed to address the major contributors to those risks.
  
  
• COMPLIANCE: PHMSA uses risk management to prioritize compliance activity and address the risk associated with non-compliance. PHMSA places greater compliance emphasis on materials and packagings associated with materials presenting high hazard to the public such as poisons and flammable gases, explosives, and poison inhalation hazard liquids. When packagings are found in non-compliance, risk and benefit/cost assessments are used to determine if an appropriate course of action, such as recall, down-rating or use restriction, is necessary to protect public safety. PHMSA has developed a "Procedure for Removal of Nonconforming Hazardous Materials Packagings from Service” that delineates a process and assessment guidelines for nonconforming packagings.
  
  
• OUTREACH: Communication of regulatory requirements and changes to the general public and industry is a critical area of risk management. Clear, consistent information dissemination is a top priority with PHMSA.