It’s a small, simple word: risk. Just four letters. It can be an ominous word, as well—the possibility of bad things to come. Without quantification, it can be a vague word. You might feel that there’s an impending risk, but what exactly is it?
The ISO 31000 standard for risk management defines risk as, “the effect of uncertainty upon objectives where an effect is a deviation from the expected – positive or negative.” This characterization is accurate, but broad enough to be overwhelming. People don’t have the energy and resources to examine every possible deviation. We tend to focus on identifying and mitigating the negative.
For asset-intensive industries, risk can be reduced to two negative components: the probability of asset failure, and the consequences should failure occur. Both probability and consequence are influenced by such forces as asset age, location, usage, operating condition, adjacent devices and facilities, even weather and the time of day or year. These multiple forces can be in constant fluctuation.
You can think about the duality of risk in terms of a car’s reliability. An old car may be more at risk to quit running without proper maintenance, especially under frequent usage, heavy driving habits and in extreme environmental conditions. However, an older car failing to run is not comparable to the risk of driving recklessly in a new sports car. Breaking down on the side of the road likely has fewer severe consequences than crashing.
Analyzing multiple, fluctuating forces to uncover and visualize insights is a core deliverable of situational intelligence. When applied to asset risk, situational intelligence provides an approach to quickly and accurately analyze and visualize possible asset failures and their resulting consequences.
Scoring the probability and consequence of failure, either separately or combined into a single risk index, gives asset-intensive industries an objective standard for making decisions and plans that will mitigate and lower risk.
If only you received similar feedback from your car.