What Is Risk?
The word risk can have different meanings in English, depending on the context. Quite often, it means chance or probability. In insurance and financial circles, the word describes an asset, a person, or a financial instrument. Therefore, the word’s meaning can change with the context and the background of the people using the word. The word risk has a negative connotation; you do not often hear of the risk of winning the jackpot, while you may run the risk of failing an examination.
Risk has two aspects. The quantitative aspect can be calculated if we know the probability and consequence. The qualitative aspect relates to people’s perceptions and depends on their emotional state and feelings. Both aspects of risk are important, but their relative importance can differ from case to case. Engineers, physical scientists, and mathematically oriented people tend to be biased toward the quantitative aspects. Psychologists and the lay public are more likely to emphasize the qualitative aspects. We need to understand the process by which people make decisions; therefore, their orientation or attitudes have a bearing on this matter. If you are to sell your point of view, you must prepare and present your case to suit the target audience’s perceptions and decision-making rules.
Perceptions of risk are therefore important. All of us are influenced by our perceptions, affecting our judgment and decision-making. Our perceptions depend on several factors: whether we are in control of the situation, whether they result in delayed effects on health, or whether the cause is natural or man-made. Morality, dread, and subjectivity also influence our attitudes. The important point to note is that perceptions affect decision-making. When we seek the support of an individual or a group, it is as important to appeal to their perceptions as to the hard facts
The Business Case to Manage Risk
We continuously evaluate risks, and our decisions are based on such evaluations. Whether we are crossing a street, deciding on a skiing holiday, buying a new car, hiring new staff, approving the budget, or proposing marriage, we decide based on our evaluation of the risks.
Every business decision is also based on the manager’s evaluation of the risk, whether it is made consciously or not. Most engineers like to think that they decide logically, evaluating the benefits and costs of the alternatives they face, but their feelings and emotions play a significant role. They may not realize it, but perceptions matter greatly, both in everyday life and business.
Thus, our decisions may appear illogical to others who have a different set of values. The underlying reasoning does not follow a simple structure, so conventional logical analysis is not always the answer. There is no simple right or wrong way, and we must understand that such a decision-making process is normal.
The most rational and logical amongst us still decides under some of these factors. We may, for example, still buy a car based on the smell of the seat leather. When people fall in love, do they use logic to decide?
When we encounter resistance to change from those who will benefit from reducing their own risk, we may conclude that they are illogical. The reality lies in our poor marketing technique – our reasoning may not have appealed to the people’s perceptions. Implementation of change needs careful consideration of perceptions, or it will not succeed.
Quantitative Risk
Let us examine the more familiar quantitative aspect of risk. This is defined as:
Risk = Probability x Consequence
We calculate the risk using the estimated or measured value of the two parameters in the equation, as there is no absolute measure. The units are money, loss of life, reputation, and ecological or environmental damage.
The probability is evaluated based on historical information, or in its absence, by expert judgment. Note that any near miss is considered a real event, and the potential consequence is used in evaluating the risks. If two or more consequences are possible, we use the more severe risk.
This leads us to the concept of exposure. If you have to cross a road frequently, your exposure to a road accident is higher than if you did not cross the road. The traffic density also affects the exposure, rising as the traffic increases. The demand rate, the number of times we call on something to work, is the industrial equivalent of exposure. Higher exposure results in an increase in the probability of failures. Similarly, the stress levels caused by loading, adverse environment, temperature swings, sudden load changes, etc., affect failure rates. The term loading roughness denotes a combination of sudden load changes, stresses above design levels, frequent stop-start operations, or running close to the ‘blood-line continuously.
The consequence of a failure depends on two factors. If we have two fire pumps and any one of them can take the full load, the failure of one pump usually does not matter. If, however, we had only one fire pump, its non-availability could be devastating. So, equipment configuration plays a significant role in determining the consequence of failure. The second factor is very local; a fire in an empty shed may burn it down, which has some consequences, but these are quite low.
The same fire in a schoolroom full of children can have serious consequences. Each failure situation must be analyzed in this manner to understand the risks involved.
Managing Reliability
Firstly, we need to do the right maintenance work. When our assets are expensive, technologically complex, or failures have high consequences, we can use sophisticated tools to identify the right work. For this, we use tools such as Reliability Centered Maintenance and Risk-Based Inspection. But in most other cases, an experienced maintainer and production expert can usually decide the work scope and timing quite well.
Secondly, the planner must identify all the key inputs; drawings, procedures, tools, lifting equipment, scaffolding, workshop facilities, spares, materials, and any other infrastructure required to do the work safely.
Thirdly, the scheduler must identify the best time to work, minimize production losses, and meet the plan’s timing. Next, ensure that all the support facilities identified in the plan are available in time and that the equipment is released as agreed.
Fourthly, the maintenance people must complete the work on time and to acceptable quality standards. Once completed, the equipment must be started up in their presence, so they know their work is satisfactory
Fifthly, any breakdowns, trips, or other failures that occur must be analyzed routinely so there is a clear understanding of why they occurred. A formal Root Cause Analysis should be initiated with trained staff to uncover underlying truths in specific situations. This will enable lasting improvements to be made in the Reliability of the equipment.
A Risk Assessment Matrix, of the kind illustrated below, can help assign the right priorities for routine work and decide which failures need an RCA. It can also decide which systems will benefit most from an RCM or RBI analysis.
Risk Assessment Matrix
The failure events in the colored cells are all of interest, with the stress on the High Risk and Unacceptable areas.
Starting a Risk-Based Maintenance Program
Starting a risk-based maintenance program requires a significant investment in time, effort, and money. It can produce returns of up to 20 to 50 times the cost, b1.1t it is not a decision that can be taken carefully. Once initiated, it needs continuous management support and encouragement to keep the momentum. The first package of work to bear fruit can take six to twelve months, so staying power is essential. Like a good tennis or golf swing, follow-through is critical to success. Jabbing at it does not work!
Before starting such a program, certain basic elements have to be in place. These are to ensure that
- Equipment is operated in a clean, dry, and non-aggressive environment
- Reliability performance measurement metrics are available and used
- The organization does not have excessive layers
- There is good cooperation between the stakeholders
- Targets are set
The first step is to set up improvement teams with members from the production, maintenance, and specialist support departments. Next, we need to train the chosen methodology and its implementation. Management involvement and support are vital to success. We need a proper management system, and the management team needs training. If performance metrics are not available, these need to be agreed upon and baseline readings established.
One or two simple pilot studies should then be completed and implemented. These studies will motivate all the people involved and help carry the program to fruition. It is necessary to measure the reliability performance before and after the study in each case. The results must be communicated to all the staff. It will be very motivating if management acknowledges the work done by the teams and rewards them suitably.
Conclusion
Risk is an integral part of life and influences all our decisions. Managing maintenance requires us to manage risks well to run our business efficiently. When making important decisions about maintenance, consider both aspects of risk, qualitative and quantitative. A Risk Matrix can help us prioritize our risks systematically and with a proper audit trail. Operational Reliability is a parameter on which we have control, and we can take various steps to enhance it. Embarking on a risk-based maintenance program can be daunting, so I have outlined a simple action plan to help those who wish to do so.
