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Asset Management - Establishing a line of sight for Risk Management
- 1. UMS Group | Europe region London, March 2014 Jan Schipper Establishing a “line-of-sight” for Risk Management
- 2. Founded in 1989, UMS Group is an international management consulting firm specializing in solutions for the global energy and utility industries Demonstrated leader in innovative business and regulatory strategy. Recognized expert in Process Diagnostics and Benchmarking, Best Practices, Performance Improvement and ongoing Performance Management. Exceptional base of experience in Asset Management transformation. First hand experience of working with the majority of leading energy and water/wastewater infrastructure owners worldwide on performance improvement initiatives. UMS Group | Line of sight in Risk Management
- 3. © UMS Group Inc., All Rights Reserved 3 Asset Risks don’t seem to fit into the concept of Enterprise Risk Management (ERM) from an corporate perspective! Can you send me an overview of your risks? Is this what you are looking for?? No not your technical problems.. Don’t you understand?
- 4. © UMS Group Inc., All Rights Reserved 4 Enterprise Risk Management (ERM) seems to be from another planet from the perspective of Operations! Let me send you what I am looking for… But, … I don’t see any relationship To my assets !!?
- 5. © UMS Group Inc., All Rights Reserved 5 Both ERM and Asset Risk are generic in nature and not related to each other. How to close this gap and establish a connection? Asset Risk ERM ERM: - High level - Generic major threats Asset Risk: - Population of Assets - Generic failure modes
- 6. © UMS Group Inc., All Rights Reserved Develop Asset Strategy RISK MATRIX Change Catastrophe Sever Small Minimal EH EH EH H Unacceptable EH EH ZH H EH EH H M EH ZH H M Acceptabel ZH ZH M L ZH H M L H H M L H M L V M M L V L L V V Impact Yearly Regularly Permanent Daily Frequent Monthly Unlikely Highly unlikely Probably Possible 6 Specific asset related events are the connection (“line of sight”) between ERM and Asset Risk Management! ERM Asset Risk Specific Event Within Asset Management you are looking for these specific events that are a threat for meeting your business objectives! Business risks
- 7. © UMS Group Inc., All Rights Reserved 7 Managing specific events with unacceptable risk are reputation sensitive! Black out of a major city (>200.000 citizens) for two weeks or more due to extreme flooding Is this risk covered by your insurance? Do we have proper emergency plans just in case that…? Capture these risks in your risk register and report them to ERM! Good governance = Licence to Operate! specific event
- 8. © UMS Group Inc., All Rights Reserved 8 Specific events with significant impact are for an asset manager a business risk. But at corporate centre these are seen as “technical problems”! Map of overhead lines Map of tree density Overhanging trees causing fault in a HV- circuit resulting in a black out of city >100.000 citizens Need to differentiate vegetation management plan! Remark: The need for intelligent data analytics will rise, as a side effect ! Capture these risk in your risk register. These are your business risks and don’t report to ERM! specific event
- 9. © UMS Group Inc., All Rights Reserved 9 Register and monitor specific events that have acceptable risk, you never know how these will develop… Street light failure leading to several customer complaints about safety on the highway Capture these risk in your risk register. These are acceptable, no actions necessary Apply current policy. No need for further action!However do track all these customer complaints and other small technical issues. They could be an early warning for a major threat!! specific event
- 10. © UMS Group Inc., All Rights Reserved 10 Business risks are mitigated with effective Asset Strategies (1). These will result in projects or programs in your portfolio (2). Each investment in your portfolio should be linked to one or more business risks (3)! Asset Strategy Portfolio Business Risks (or Opportunities) Line of sight (1) (2) (3)
- 11. © UMS Group Inc., All Rights Reserved 11 The challenge is to combine life cycle management approach(1), asset performance (2) and business risk (3) into an effective asset strategy! AM Policy AM Strategy AM MT-Planning (1) (2)(3) Risk register Project Library asset performance Asset Strategy
- 12. © UMS Group Inc., All Rights Reserved 12 At certain stages your investment portfolio must be evaluated and decisions made to fund or to defer each investment. Portfolio To fund or not to fund… R Risk is (party) mitigated! Risk of deferral is added! Residual Risk
- 13. © UMS Group Inc., All Rights Reserved Investment Portfolio 13 To complete the line-of-sight, the residual risk needs to be determined and then fed back into the business risk register… Business Values MeasuresInherent Risk Magnefix explodes Gas leak Crossbeam breaks off PCBs in transformer Transformer overload Station collapses Accident to employee Image Legal Quality of Supply / Service Safety Financial Environment Disconnect power Course on working safely Preventive replacement Paint masts Construction of RMU Inspection of masts Inspection of distribution boxes Residual Risk Magnefix explodes Gas leak Crossbeam breaks off PCBs in transformer Transformer overload Station collapses Accident to employee Raw Risk that has no mitigation factors or treatment applied to it Projects to mitigate Risks (or benefit from opportunities) Risk remaining after risk treatment (after project execution) H L H H L H H M L M L L M M Business Risk Register feedback
- 14. © UMS Group Inc., All Rights Reserved 14 One thing….it is important to have a low hurdle process in place to collect “issues” of all kinds! These could be early warnings of an impending major threat! Business Risk? issue issue issue
- 15. © UMS Group Inc., All Rights Reserved Project ID Project Asset Strategy. nr Risk IDRisk ID Risk Asset Strategy. nr Project ID 15 How to implement? Start by connecting each Business Risk to your Asset Strategies, and each investment project or program to your asset strategies and the associated business risks. Asset Strategy Portfolio Business Risk
- 16. © UMS Group Inc., All Rights Reserved 16 Want to know more? Jan Schipper MD-Region Europe UMS Group Europe BV Amstel Business Park Joop Geesinkweg 901-999 P.O. Box 94013 1090 GA Amsterdam The Netherlands Mobile: +31 6 30166654 Office: +31 20 5617033 Fax: +31 20 5616666 jschipper@umsgroup.com www.umsgroup.com Dan Leva Director Client Relations UMS Group Inc. Morris Corporate Center 300 Interpace Parkway Suite C380 Parsippany, NJ 07054 Office: (973) 335-3555 Mobile: (908) 229-2665 Fax: (973) 335-7738 dleva@umsgroup.com www.umsgroup.com