Risk Management

The main consideration with all operation and maintenance activities and capital expenditures is how much risk the system is willing to tolerate. The system will spend less if it is willing to accept more risk and spend more if it is willing to accept less risk. The system should invest money to reduce the failures it feels cannot be tolerated. This investment should be made in both operational and maintenance capital expenditures. Money should not be spent to prevent failures of low-risk assets, except for routine maintenance that keeps the asset operational. These assets should be replaced after they fail.

As a starting point, a system can ask itself the following questions:

• Did we experience negative consequences from failures last year?
• How bad were they for customers or the community? Was anyone injured? Was anyone’s health affected?
• Did customers or the community complain about the consequences of the failures?
• Did we incur additional costs from fines or legal expenses because of severe consequences?

If the system can say that there were few severe consequences from failures, then perhaps the system is appropriately managing its risk from asset failures. If the system had many negative consequences from failures and the customers are expressing concerns about failures, then perhaps the risk level is not well-managed. In that case, the next questions the system should ask include:

• Are we doing enough to prevent high-risk assets from failing?
• Are maintenance activities focused on high-risk assets?
• Have we properly identified high-risk assets?
• Will our customers be willing to pay more to reduce risk in the facility?
• Do we understand the risk profile? Is it one we find acceptable?