Asset Risk Assessments
Assessing an Asset's associated level of Risk is a critical part of a good Asset Management Plan, and is one of the three cornerstones of an Asset Management Plan, along with Relative Condition Assessments, and Level of Service Assessments.
Goal of an Asset Risk Assessment
A good Risk Assessment for a particular Asset lets Municipal Administrators know if an Asset possesses the potential to impact the Municipality in a negative manner. Once the risks are know, a Municipality can decide whether or not invest in mitigating them.
Components of a Risk Assessment
Risk assessments are an assessment of potential events, that could result in consequences, associated with an Asset. The risk score is essentially a function of a consequence's impact and likelihood:
- Impact - what is the magnitude of a consequence's influence?
- Likelihood - what is the probability that this consequence will occur?
Creating a good assessment of asset risk depends on:
- Properly evaluating the potential events, associated with an Asset - what events could create unintended consequences? (ex. an improperly maintained gravel road)
- Properly evaluating the potential consequences, associated an Event - what consequences could arise as a result of events? (ex. vehicle damage, due to improperly maintained gravel roads)
- Properly assessing the impact and likelihood of a potential consequence.
Risk Consequences - PEARS Model
A commonly used model to evaluate the different considerations of risk consequences, is in the form of the PEARS model:
- People - what is the potential for a consequence to harm people?
- Assets - what is the potential for municipal assets to be damaged?
- Environment - could this negatively impact the environment?
- Reputation - what affect could this consequence have on our Municipality's reputation at the local, provincial/state, and national level?
- Service - could this consequence negatively affect an asset ability to deliver on its design service?
When evaluating a potential consequence, it is wise to consider whether or not the consequence could effect People, Assets, the Environment, the Municipality's Reputation, or the Asset's ability to deliver service.
Risk Assessment Matrix
A commonly used tool in the Risk Assessment Assessment process, is a Risk Assessment Matrix (RAM). RAMs are used to standardize the evaluation of a consequence's impact and likelihood. The risk level is determined by combining the consequence impact and likelihood, to get a resultant risk level:
- Consistent risk assessments - keep risk assessments similar within different asset categories, to be consistent. Be sure to use the same Risk Assessment Matrix across all asset classes
- Divergent thinking - be creative when thinking of the various risk events, consequences, likelihood, and impacts
- Multi-disciplinary approach - bring together team members from different departments, when brainstorming during the Risk Assessment process, to get a wide range of perspectives
- Understanding risk tolerance - It is impossible to mitigate all risks. It is therefore important for a Municipality to understand what level of risk they are willing to live with
- Deciding which risks not to mitigate