Consequence of Failure
After considering the likelihood of failure of an asset, system staff must consider the consequences of that failure. Consequences are a value judgement using the criteria of financial, environmental, and social impacts. These impacts can be valued differently by giving more weight to one type of consequence than another. Asset management professionals refer to these three categories as the Triple Bottom Line. Within each of these categories there are several tangible and intangible factors that influence the consequences of an asset failure. These consequences can range from impacts on public safety to environmental contamination to costs related to collateral damage caused by the failure. When data is available, system staff should attempt to turn these consequences into monetized values. When thinking about the consequences of a given asset failing, social, environmental, and financial consequences all need to be considered.
To calculate the overall criticality of an asset, the consequence of failure of that asset needs to be quantified. Similar to the probability of failure, each asset should be assigned a consequence of failure rating based on the severity of any financial, environmental, and social consequences caused by that asset failure. These ratings should be based on a consequence of failure rating structure created by system staff. Each consequence rating in the structure should have a general degree of impact description. It is important to create a consistent rating structure so that different staff members are likely to rate the consequence of failure of a given asset similarly.
It is important to give each asset a consequence of failure rating in order to calculate the overall criticality score of each asset. As a reminder, the criticality score (overall risk score) for an asset is the probability of failure rating multiplied by the consequence of failure rating. To learn more about probability of failure and probability of failure ratings click here. The reason for considering both probability and consequence of assets is that neither one taken by itself is likely to result in the best expenditure of funds. Consider two assets – Assets A and B – each with a moderate probability of failure. Asset A has a low consequence of failure and Asset B has a high consequence of failure. Clearly, expenditures to improve Asset B are more advantageous to the system than expenditures on Asset A because serious consequences can be avoided.