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Risk Management

Risk is defined as the effect of uncertainty on objectives.

Loss prevention.


Process of Risk Management
Listed below are the six (6) key steps in the risk management process:
  1. Risk context, Framework and principles
  2. Risk Identification
  3. Risk Analysis
  4. Risk Evaluation
  5. Risk Treatment and Controls
  6. Risk Monitoring and Review


1. Risk Context




2. Risk Identification
The process of finding and describing the risks, within the context of the organization.

A.  Methods
Listed below are some of the methods for risk identification:
  • Expert report
  • Workshop
B. Types
Listed below are the four types of risks:
  • Enterprise Risks - seismic, pandemics, strikes, acts of war, reputational damage, dissatisfied stakeholders, etc.
  • Asset Risks - equipment failures, warranty failures, deferred maintenance backlogs, vandalism, injuries, inclement weather damage, service disruptions, etc.
  • Project Risks - scope creep, budget overruns, etc.
  • Operational Risks - management of change
The following table provides a sample list of different types of hazard events.
CategoryIDHazard events
Enterprise risks1Eartquake/seismic event
2Pandemics/Epidemics
3Union strikes
4Terrorist attack; Act of War
5Reputational damage
6Wildfires
7Other
Asset Risks1Asset failures
2Warranty failures
3Vandalism
4Climate change
5Inclement weather damage
6Knowledge workforce retirements
7Other
Operational risks1Management of change
2Shutdown/recharge issues
3Other


C  Risk Register
Listed below are the key elements of a risk register:
  • Risk ID
  • Risk description
  • other



3. Risk Analysis
The process of understanding the nature, sources and causes of risks that have been identified.

A.  Risk Equations
B.  Consequence & Likelihood Matrices
C. Critical Asset




4. Risk Evaluation
The process of comparing risk analysis results with risk criteria in order to determine whether or not a specified level of risk is acceptable or tolerable.

A.  Risk Appetite and Tolerance


B.  Risk Scoring & Ranking Scheme



C. Risk Matrix Correlations
Included below is a summary of some of the risk correlations.

+

P
r
o
b
a
b
i
l
i
t
y


-
LI-HP



Quadrant 3
HI-HP



Quadrant 1
LI-LP


Quadrant 4
HI-LP


Quadrant 2
-                 I m p a c t                 +


+

P
r
o
b
a
b
i
l
i
t
y


-
-                 I m p a c t                 +


+

P
r
o
b
a
b
i
l
i
t
y


-
MonitorFix soonFix now
Fix soon
Fix soonFix soonFix soon
Fix on failureMonitor
-                 I m p a c t                 +






5. Risk Treatments & Controls 
The process of modifying the risks.

ISO 31000:2009 gives a list in order of preference on how to deal with risks - treatment and controls:

A. General
  • Avoiding the risk by deciding not to start or continue with the activity that gives rise to the risk
  • Taking or increasing the risk in order to pursue an opportunity
  • Removing the risk source
  • Sharing the risk with another party or parties (including contracts and risk financing)
  • Retaining the risk by informed decision
B.  Changing the Likelihood
C.  Changing the consequences
D. Residual Risk



6. Risk Monitoring & Review
The process of checking and critically observing the risk register and risk plan.

Risk-based decision making is at the heart of asset management and this requires mindful consideration of the relationship between the probability of failure (PoF) and the consequences of failure (CoF). The complexities of these correlations can sometimes be captured on a risk matrix.
Fig. Risk-based decision making is at the heart of asset management and this requires mindful consideration of the relationship between the probability of failure (PoF) and the consequences of failure (CoF). The complexities of these correlations can sometimes be captured on a risk matrix.



Four type of risk management: Enterprise, Asset, Project and Operations
Fig. Four type of risk management: Enterprise, Asset, Project and Operations.


Different types of risk registers to capture enterprise risk, asset risk, project risk and operational risk
Fig. Different types of risk registers to capture enterprise risk, asset risk, project risk and operational risk.


The principles of ISO 55001 help to ensure that optimization is achieved through mindful balance and measured trade-offs between decision-making criteria
Fig. The principles of ISO 55001 help to ensure that optimization is achieved through mindful balance and measured trade-offs between decision-making criteria.


The many benefits of implementing an asset management system in accordance with the requirements of ISO 55001
Fig. Risk management is one of the many benefits of implementing an asset management system in accordance with the requirements of ISO 55001.



The risk spectrum extending along the P-F interval to illustrate the varying strategies in the Pre-P and Pre-F periods. For example, a shift from Time-Based Maintenance (TbM) to Condition-Based Maintenance (CbM)
Fig. The risk spectrum extending along the P-F interval to illustrate the varying strategies in the Pre-P and Pre-F periods. For example, a shift from Time-Based Maintenance (TbM) to Condition-Based Maintenance (CbM).


I. Care is oblivious to the extraordinary events that can totally wipe out his assets and upset the delicate order of things, such as force majeure, acts of God
Fig. I. Care is oblivious to the extraordinary events that can totally wipe out his assets and upset the delicate order of things, such as force majeure, acts of God (earthquakes, lightning storms, floods, fires, etc), lawsuits arising from slip-trip-and-fall injuries, environmental contamination, etc. He needs a risk register for his buildings so that he can get a line-of-sight on his risk management plan, prioritize work and keep a proper perspective on it all.

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