Chapter 4. The model for maturity assessment
B. II) Risk asset management
As we said in the literature review, the purpose of Risk Asset Management is to understand the cause, the effect and the likelihood of adverse events which may occur while an organization is managed. Indeed, PAM is often viewed as an integrated approach to balance costs, performance and risks during all asset life cycle, hence risk asset management became fundamental.
There are different types of risks to consider in the organization.
Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures
B.II.1) What types of risks does your organization consider?
□ Operational risks caused by:
□ Functional failure
□ Incidental damage
□ Human Factors
□ Others:_______________
□ Natural environmental risks (storms, floods,...)
□ Financial risks
□ Stakeholders risks (such as failure to meet regulatory performance requirements or reputation damage)
□ Suppliers risks
□ Others:____________________________
Risk management analysis can be adopted in order to support different decisions, or to simply provide communication through the interested parties.
B.II.2) The results of risk management analysis are used to:
□ Provide a common communication tool.
□ Support process system design.
□ Identify redundancy – equipment and systems.
□ Plan Maintenance programs.
□ Identify spare parts requirements.
□ Target maintenance budgets.
□ Identify training requirements.
□ Identify skill based risk.
□ Quantify the maintenance commitment KSF’s, KPI’s.
□ Provide a basis for system modeling.
□ Indentify the better options (investment, repair,…)
□ Other:_____________________
Also in this case, these first questions are not used in the assessment directly but they are used for qualitative considerations. Instead, next questions have maturity
Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures
scores: they refer to the way the risk management process is carried on, to its understanding in the organization, as well as to its responsibility.
B.II.3) Is there a risk asset management process in your organization?
Answers Maturity Score
No 1
Yes, but it is not standardized 2
Yes, and it is standardized (as an enterprise standard) 4 Yes, and it is standardized (as an enterprise standard,
considering also certifications / norms from third parties / institutions)*
5
* specify if there are certifications about risk management process (such as ISO/IEC guide 73/2002)_______________________________________________
B.II.4) The importance of risk analysis is understood by
Answer Maturity score
Only the asset / risk manager 1
Only the asset management team 2
Part of the people who act on the operational level 3 Part of the people who act on the tactical / planning level 3 All the people who act on the operational level 4 All the people who act on the tactical / planning level 4
Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures
B.II.5) Who is responsible for Risk analysis?
Answer Maturity score
There is none responsible for it 1
Asset manager 2
Risk manager 3
There is a function responsible for it 4
Regarding the assessment of this question, we have to develop some considerations.
In particular, we assume that it is preferable to have a risk manager than a general asset manager because it means that there is a dedicated figure for risk asset management. Moreover if there is a function we can assume that there are dedicated persons that try to achieve the continuous improvement. In fact as a Risk Management Standards (AIRMC, 2002) says some of the roles of the Risk management function are:
designing and reviewing processes for risk management;
coordinating the various functional activities which advise on risk management issues within the organization;
developing risk response processes, including contingency and business continuity programs;
preparing reports on risk for the board and the stakeholders;
and all these duties are part continuous improvement concept.
There are a lot of methods that can be used to assess risks, from qualitative to quantitative approaches. In general quantitative analyses are preferred because they are considered more objective. However in some cases it is impossible to quantify in a correct way a risk, so in these situations qualitative analysis can be more useful.
Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures
B.II.6) Risk assessment is developed through
Answers Maturity Score
Only qualitative analysis 1
Only quantitative analysis 3
There is a balance between qualitative and quantitative analysis
5
One of the most used output from risk management analysis is the risk matrix. A risk matrix is a simple graphical tool that combines:
the chance for an occurrence of an event (Probability) (usually an estimate)
the Consequence if the event occurred (usually an estimate)
put the twos together as: Risk = Probability * Consequence
Risk matrix is an important tool to categorized risks, prioritize actions, define the acceptable level of risk.
B.II.7) Do you have a risk matrix or other similar tool to express, in a visual way, the risk of different entities under concern?
□ No
□ Yes*
*which tool? ________________________________________________________
Observation: For the evaluation of yes/no questions, such as question B.II.7, we decide to consider the maturity score only in case of “no” as answer (ML = 1). In other cases, considering another value can falsify the mean. For example, for a firm with high maturity, adding 2 as score in the formula of ARMi (Asset Risk Management index)can considerably decrease the result.
In the LCC section we made some consideration about the need of sharing information and knowledge and the need of updated data. Same considerations can be done regarding risk management.
Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures
B.II.8) Who has the organizational duty to update the risk matrix/risk database?
Answers Maturity Score
Only the manager responsible for it (indicate the functional area responsible for it:________________)
1
There is a dedicated team (indicate the name of the unit / function in the organization:________________)
3
All the operators can access to data (indicate the functional area of the operators, more than one functional area is applicable:____________________________)
4
All the operators can access to data (indicate the functional area of the operators, more than one functional area is applicable:____________________________) and there is a check for the consistency
5
B.II.9) Are risk data periodically updated?
Answers Maturity Score
No 1
They are updated after important events (overhaul, incidents, new machine installation)
2
They are periodically updated (indicate how often:______________________)
3
Also in this case it is important that third parties can access to risks data.
B.II.10) Share information with third parties. Contractors:
Answers Maturity Score
Have to deliver information and there is a person/a team with the organizational duty of update risks database
2
Can access to risks database 3
Can update risks database 4
Can insert data in risks database 5
Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures
As in previous section, a summarizing table reporting all the possible answers given in this part of the questionnaire is presented in Table 4. 4
Table 4. 4 Summarizing table - ARMi
The formula of ARMi (Asset Risk Management index), for a generic i-th firm, is then expressed as an arithmetical average of all the questions to which a maturity score is assigned, i.e.:
𝐴𝑅𝑀𝑖 =∑�� 𝐵. 𝐼𝐼.��
���
8 where:
- q is the index of the question
- B.II.iq is the score obtained by the firm i in the question indexed as q.