QUICK GUIDE. Transforming Risks into Opportunities. A Risk Management Quick Guide. Transforming Risks into Opportunities

Transcription

1 QUICK GUIDE Transforming Risks into Opportunities A Risk Management Quick Guide 1

2 What does risk management mean to you? The definition of risk management involves the evaluation and prioritization of financial risks tied to different procedures and the necessary best practice strategies to reduce impact. However, what does that really mean to you and your job? When considering risk, it is important to understand that different types or risk apply to different areas of expertise. For instance, a fleet manager may observe risk associated with vehicle breakdowns and downtime, while a highway asset management professional would be more concerned with legislative reforms and the health of their highway network. Nonetheless, properly managing assets and considering risk when developing an asset management plan is a key component of risk management regardless of who you are and what you do. This quick guide will discuss risk management and how it affects asset management. It will also add a sharper focus on risks associated with driver behavior and suggest mitigation tools that can be used to transform these risks into opportunities. 2

3 Commonly Used Risk Management Terms First, here are some general risk management concepts worth grasping: TAMP TAMP Transportation Asset Management Plan Transportation Asset Management Plans act as a focal point for information about assets, their management strategies, long-term expenditure forecasting, and business management processes. MAP-21 MAP-21 Moving Ahead for Progress in the 21st Century Act MAP-21 is a long-term highway authorization that was signed into law in July of It is designed to provide funding to transform the framework for investments needed to guide the growth and development of the country s transportation infrastructure. PMS PMS Pavement Management System A pavement management system is designed to plan the maintenance and repair of a network of roadways or other paved facilities in order to optimize pavement conditions over an entire network. CMMS 3 CMMS Computerized Maintenance Management System A computerized maintenance management system maintains a computer database of information about an organization s maintenance operations and is intended to help maintenance workers do their job more effectively and help management make informed decisions

4 General Risk Management Steps The element of risk presents uncertainty of reaching set goals and objectives. In order to succeed in managing and analyzing risks, it s important to have a formalized, succinct plan that is adopted consistently throughout the whole organization. By implementing a formalized approach, an organization can position itself to pinpoint opportunities rather than prevent risks. Here are a series of steps that can be repeated on a year-to-year-basis for continuous improvement. 1. Identify your organization s goals and objectives 2. Identify risks associated with achieving these goals and objectives 3. Score or prioritize risks 4. Consider mitigation methods and strategies 5. Manage each type or risk 6. Communicate risks and management strategies 7. Monitor results and update accordingly 8. Improve processes 4

5 General Risk Management Steps There are various rules of thumb for discovering and evaluating risk opportunities, as well as selecting and packaging solutions to reduce risk. First, a list of event types must be identified as potential threats to your organization reaching its goals and objectives. These events can be categorized by severity rare vs. frequent, catastrophic vs. troublesome, etc. Once you have outlined potential threats, a set of candidate strategies can be assigned to each. Depending on the severity of the threat, you can decide if and how to be mitigate that risk. Mitigation strategies can also vary depending on the class of an asset. Examples of asset classes include pavements, bridges, culverts, and tunnels, just to name a few. A pavement risk management strategy may involve more response-related maintenance, whereas a more precise forecasting strategy may be more applicable to a bridge to minimize the impact of a risk event. The image to the right depicts some investment trade-offs and target-setting for traditional performance-based assets and performance-based programs. Performance Performance Performance Pavement Investment Bridge Investment Fleet Investment 5

6 Developing a Transportation Asset Management Plan (TAMP) One of the action items within MAP-21 legislation requires that each State organization develop its own Transportation Asset Management Plan (TAMP). This should act as a tactical-level document which focuses its analysis, options development, programs, delivery mechanisms, and reporting mechanisms on ensuring that strategic objectives are achieved. Since putting together a TAMP can be particularly challenging and complex, here are some key guidelines to get you started: Construct an Outline as is the case with any formal or even elementary report, it helps to be able to organize the content into a structured flow. This will also assist you in ensuring that adequate research efforts are allocated to each section of your TAMP. TAMP MAP-21 6

7 Conduct a Gap Assessment an analysis common within the diagnostics of the research, measuring actual performance vs. potential or desired performance effectively sets the bar for capitalizing on future risk-based opportunities. This can include improvements in people, processes, or technology. Develop a Risk Register also known as a Risk Log, this acts as a central repository for all risks identified by the organization and includes a source, nature, probability of occurrence, treatment option, existing countermeasure, and recommended counter-measure for each risk. Draft your TAMP document this final step consists of clearly identifying the as is situations vs. the to be vision. In other words, documenting current asset management processes and the implementation plan to address all gaps in the existing process. 7

8 Beyond the Transportation Asset Management Plan (TAMP) After the TAMP planning and research phase, it s crucial to engage in effective discussion to implement process improvements to address the gaps that have been highlighted during your analysis. These efforts may include a significant emphasis on risk management, scoping and optimizing projects to ensure sound investment decisions regarding your assets, seeing to it that chosen investment opportunities are actually physically delivered, and strategic management for continuous improvements. As part of this ongoing strategic implementation process, below is an example of an extended risk register that contains for each event type. The additional yellow columns consider mitigation strategies for event types as well as the benefits and costs associated with each. This allows asset managers to select or determine the highest opportunity risks from the register using cost-benefit analysis. 8

9 A Closer Look: Using Technology to Reduce Driver Behavior Risks One of the biggest challenges that fleet managers face is keeping vehicle operators safe while they are traveling to and from jobs away from the office. In 2012, there were over 30,000 fatal crashes recorded in the United States. Regardless of how much your organization promotes safe driving behavior in its policy, remotely enforcing these standards on an incidentfree basis is virtually impossible. However, working to implement the right technology can help to reduce driver behavior risks. GPS a GPS/AVL system can be used to mitigate risk by monitoring poor driver behavior such as speeding, harsh braking, swerving, and idling. Real-time alerts are generated to both the vehicle operator and the fleet management department when these violations occur, and driver scorecards can be utilized to determine which drivers need additional training. These scorecards can also be used to justify fuel and maintenance costs. In addition, a GPS system determines when an unauthorized user is operating the vehicle. 9

10 Sample Driver Scorecard To recap, here are the steps to follow to effectively address risk in your organization s TAMP: 1. Identify risk event types, levels, etc. 2. Build a Risk Register; quantify probabilities and consequences for each event type 3. Identify risk mitigation strategies and define costs and benefits of each 4. Determine how to package risk management efforts 5. Evaluate and prioritize candidate solutions 6. Include risk opportunities in overall asset management trade-off analysis 10

11 Enterprise Asset Management (EAM) Solution AssetWorks EAM is a comprehensive asset management system that handles all aspects of public infrastructure management including complex networks of linear and boundary-based assets such as roads, pipelines and parks. EAM addresses day-to-day tasks like work order management and real-time labor tracking. Inspection recording and future planning such as complete life-cycle analysis and capital budgeting is also managed. These features offer an improved level of transparency that allows organizations to better manage various risks and capitalize on opportunities. Furthermore, the system integrates seamlessly with AssetWorks comprehensive fleet management, fuel management and GPS systems to provide organizations with an end-to-end solution. For more information on how AssetWorks EAM Solution can help you improve Asset Management, click here