2. John Woodhouse.establishing a Risk Management Plan

The Woodhouse Partnership Ltd 2010

Establishing a risk management

plan that identifies the optimal

accepted risk

John WoodhouseCEO, TWPL

Chair of Faculty, IAM


Asset risk management


Assets have different risks, criticalities & needs

0

1 0 0 0

2 0 0 0

3 0 0 0

4 0 0 0

5 0 0 0

6 0 0 0

Min

wor t

h (

a, st)

Coventr

y (

Fin

ham

) (f

&a, st)

Sto

ke B

ar d

olp

h (

a, st)

CR

AN

KLEY

PO

INT (

a, st)

GO

TH

AM

( f)

WIG

STO

N (

f ,s)

Cr a

dle

y (

f )

Roundhill (

new

wks

,a, st)

Scunth

or p

e (

Yaddle

thor p

e)

( f&

a)

Boughto

n( f

)

Belp

er

( a &

n/f

)

Gain

sbor o

ugh (

a, st)

Glo

uceste

r -Longf o

r d( a

, st)

Ske

gby( a

)

Alfr e

ton (

f )

Worm

ingto

n (

d,r

)

Chesw

ar d

ine (

f )

Mile

Oak-

Osw

estr

y (

a, st)

Sto

ke H

eath

(f )

Cutn

all

Gr e

en (

f )

Hanbur y

Woodend (

d) (

f )

Br o

ckh

am

pto

n (

a)

Lic

hf ield

(f )

Bur n

twood (

f )

Br o

msgr o

ve (

f )

Bid

f or d

(f )

Sla

ds- B

r idgenor t

h (

f )

Holt

Heath

( r)

Codsall

( f)

Ship

sto

n (

f )

The vital few

The small and many

The core of the business


How big are the headaches?How much improvement can we achieve?

FUNCTION, SYSTEM or EQUIPMENT

CR

ITIC

AL

ITY

SC

OR

E

0

200

400

600

800

1000

1200

1400

1600

1800

A B C D E F G H I J

Current

If improved


Portfolio of assets & systems

(types, criticalities, condition, performance)

Acquire/create

Operate

Maintain

Dispose/replace

3. Activity programme

optimisation(cost/benefit/risk/timings)

2. Asset life cycle optimisation(cost/performance/risk/lifespan)

a) Component/equipment level

b) System level

1. Individual intervention

optimisations(cost/benefit/risk/timing)

PAS 55 requirements for cost/risk optimisation

The Woodhouse Partnership Ltd 2010 6

What is the right compromise?

Maintenance/Life Cycle (months/years)

500

1000

1500

2000

2500

3000

3500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Bu

sin

es

s i

mp

ac

t (

k/y

r)

RISK

EXPOSURE

PREVENTIVE

ACTIONS

TOTAL

IMPACTTRUE

OPTIMUM

Balance pointbut not optimal


MACRO project: Asset Mgmt decision-making

European

EUREKA project EU1488 Investments & Capex Projects Design & purchasing: Life Cycle Costing

Project prioritisation & cost/risk evaluation

Repair vs. replace options

Optimal replacement timing

Life extension/refurbishment projects

Operating & Maintenance Decisions

Maintenance intervals

Inspection/monitoring intvls & alarm points

Safety testing & failure finding tasks

Shutdown & Outage programmes

Work opportunities & clustering

Resources & Purchasing Decisions

Spares & Materials stock

Supplier & Purchasing strategies

www.MACROproject.org


Conflicting Objectives


The 4-step Analysis Process

Problem Definition

Direct costs (labour & materials)

Penalty costs (lost oppty, risk etc.)

BENEFITS

Reliability

Efficiency

Life Extension

Compliance

Shine

COSTS

Data Gathering & FilteringFailure modes & consequences

Probability & performance patterns

Costs & penalties

Range estimating

Analysing the uncertaintyWorst-case & Best-case

Sensitivity testing

Evaluate alternative options

Conclusions & Cost/Risk Justifications(how to interpret & explain a business case!)


Periodic taskse.g. maintenance, inspection, renewal


History data events, costs, performance

Current data condition, performance

Future information -

extrapolation/prediction

Main sections of a decision-support toolbox

Base level of decision support: organising data/information to describe the problem

Systems-level strategies,

resourcing & What if? modelingAsset Whole Life Cost/

Performance Optimisation

Level 3: integrating multiple tasks into compromise programmes

1-off taskse.g. modifications & design changes


Level 2: evaluating discrete tasks or solutions


Increasing complexity of the decision

Criticality/

size of the

decision(appropriate

sophistication

& cost of

method)

Yes/No

decisions

Options or

scenario

choices

Specific task

evaluation &

timing

optimisation

Multiple tasks

or systems

configuration/

optimisation

Customised

system/RAM

Simulation

n/a 5 n/a 5

Quantified

cost/benefit/risk

Calculation3 4

Rules, templates

& decision trees 2 n/a

Simple,

structured

common sense 1n/a

Combination of decision criticality & complexity

to select appropriate technology

Levels of cost/risk Patterns of cost/risk


More complex case, but same output

Optimal

interval

Net impact of delayPremium for

compliance


Using uncertain information

Inspection Interval (days)

Tota

l costs

& r

isks (

k/d

ay)


Pro

ble

ms

Op

po

rtu

nit

ies

Prioritise Filter

1. asdfasf

2. fwqerv

3. tasdf fwq

4. eadfre rwe

5. rwerwr

Quantified risk

identification

Root CauseAnalysis

What typeof solution?

Known causes,

unknown solutions

Degree of risk taken

500

1000

1500

2000

2500

3000

3500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Imp

act

($$/y

r)

TOTAL

IMPACT

RISK

PREVENTIVE

ACTIONS

OPTIMUM

Cost/benefit/risk

evaluation

Decision-support toolkit

Optimal work

programming

Criticality

ranking

APT-PROJECTCost/risk evaluation

e.g. CMMS,

SPC, RAM

e.g. PROACT

APOLLO

e.g. RCM, RBI

APT-PROJECT(design modifications)

APT-MAINTENANCE(periodic preventive tasks)

APT-INSPECTION

(testing/monitoring tasks)APT-LIFESPAN

(replacement timing)

APT-SCHEDULE

(work/resource

bundling)


The human factors

Education

Conflicting stakeholder expectations

Cross-functional teamwork mechanisms

Black box mentality

Short-termism & fire-fighting habits

Risk-based decision credibility


Establishing a risk management system

1. Design, test and obtain top management endorsement of a criticality backbone

2. Build the risk register and create ownership claritya) Sites and/or functional systems level

b) Equipment level (critical systems)

c) Align to FMEA scales & assumptions

3. Develop decision-support toolkit & training in cost/risk optimisation

4. Build risk & uncertainty criteria into all business case proposals and investment decisions

5. Use quick-win cases to pay for more systematic culture change and business process embedding


Examples of cost/risk optimisation impact:

Maintenance Strategy: Typically 25-40% saving

Inspection/Condition Monitoring: Corrosion monitoring, vibration analysis, protections system testing (up to 50% reduction in testing frequency, some cases 4x more inspection worthwhile)

Shutdown/Outage Strategy: 50% reduction in annual downtime (manuf.), 28% critical circuit outages avoided (NGT), 2xextension in turnaround interval (SASOL)

Projects & Asset Renewals: 400 proposals screened/ranked in just 3 weeks (2 persons); 2.5M capex saved

Strategic spares: $8-12M saved in new plant construction, 60%inventory reduction in materials service company, 3M downtime event avoided in N.Sea


Conclusions & implications

Failure modes interact so simplistic models (FMEA, Weibull etc) on their own are rarely valid

Life Cycle Cost modelling a) must include CAPEX, OPEX and Risks

b) should not use NPV if different lives are being explored

Tacit knowledge is the key (structured range-estimating is often more valuable that lots of unsorted data)

Data sensitivity is not what everyone thinks

Financial impact of cost/risk optimisation (what is worth doing, when) is c.10x bigger than just improving efficiency(doing the same thing quicker or cheaper)

2. John Woodhouse.establishing a Risk Management Plan

Documents

Transcript of 2. John Woodhouse.establishing a Risk Management Plan