Risk management process according to ISO 31000

Introduction

The need for a systematic approach to risk assessment has long been recognized by owners and operators of transport infrastructure. However, until the 1980s, risk analyses concentrated mainly on traffic safety and the optimization of the safety of critical infrastructure objects, especially bridges and tunnels. Over time, the risk analysis was extended to individual investment projects in order to meet planned timelines, including implementation costs. Since the 1990s, risks have been systematically investigated and treated accordingly, not only in relation to individual projects or objects, but also in the context of the entire organization. Consequently, it is legitimate to speak of risk management.

Risk management according to ISO 31000

In view of the growing importance of risk management, the International Organization for Standardization (ISO) published ISO 31000 Risk Management [1] in 2009. It is the most widespread document of its kind in the world and was adopted by a total of 57 national standards committees by 2015.

Risk is defined in the ISO 31000 standard as “the effect of uncertainty on objectives” and risk management is defined as “the coordinated activity of directing and managing an organization in relation to risks”. The risk management process is shown schematically in the picture below.

Risk management process according to ISO 31000
Risk management process according to ISO 31000

The identification of external and internal stakeholders and their goals is part of the analysis of the “context” of the respective organization, so that management can concentrate on the uncertainties relevant from the perspective of the stakeholders.

The risks identified are documented and then analyzed to determine their probability and impact. In the evaluation sub-process, the priorities for risk management are then defined. All identified risks should then be assigned to appropriate measures. They range from risk avoidance (abandonment of certain activities), risk minimization, risk outsourcing (e.g. insurance) to risk tolerance.

The ISO 31000 standard can be adapted to each organization in its specific environment. It provides a very general approach that is not industry or sector specific, while being applicable to any type of risk.

Risk Management and Asset Management

Asset management and risk management are very closely linked. Both emerged at the end of the 20th / beginning of the 21st century as new knowledge disciplines.

Optimizing risks is one of the fundamental tasks that asset management demands of owners and operators of technical infrastructures. Both the international standard ISO 55000 Asset Management and all manuals and other documents based on it underline the importance and necessity of risk management in infrastructure management. The ISO 55000-compliant implementation of an asset management system is therefore impossible without the integration of risk management procedures.

  1. ISO 31000, Risk management – Principles and guidelines
Positioning of the BIM standard in the asset management environment (ISO 196502018-1)

Building Information Modelling (BIM)

Recently, discussions about the implementation of asset management in the organization have often been held in connection with building information modeling (BIM). In most cases, BIM is defined as a method of networked planning, execution and operation of buildings and other structures. These activities are usually supported by special software, which is usually based on 3D modelling. It is hoped that the use of BIM will improve the coordination of construction activities throughout the entire life cycle (life cycle approach) and improve the exchange of information between the parties involved:

  • considerable time savings,
  • a significant cost reduction or reliable cost planning,
  • better reporting as well as efficient analysis of critical processes and resulting
  • a reduction of risks over the entire life cycle.

The term building information modeling is used in the original meaning coined by the CAD software manufacturer Autodesk: a “three-dimensional, object-oriented, computer-aided design process”. There are now corresponding BIM solutions not only for buildings or bridges, but also for technical infrastructure, including roads.

However, infrastructure asset management looks at BIM from a different or a broader perspective. This perspective, which focuses primarily on infrastructure owners and managers, is most clearly presented by the UK BIM Alliance in various documents, most notably the BIM Guidance for Infrastructure Bodies. The introduction to the guide states:

This guide has been produced to help organizations, in the transport and infrastructure sectors, to get to grips with BIM and we start by defining what the BIM acronym means. The industry has been in discussion for a while about what the acronym BIM stands for, whether it is Building Information Modelling or Building Information Management, or some other variant. However, we believe that it is easiest to understand what it actually means for those who have been charged with ‘doing BIM’ for infrastructure, by adopting the following definition: BIM = Better Information Management“. [1]

This is followed by explanations that clearly position BIM in the asset management environment. In particular, the BIM standards ISO 19650:2018-1 (Concepts and principles) and ISO 19650:2018-2 (Delivery phase of plants) are located in the hierarchy below ISO 9001 (Organizational Management) and ISO 55000 (Asset Management) (Figure below). The UK BIM Alliance clearly considers information as an asset (information asset).

Positioning of the BIM standard in the asset management environment (ISO 196502018-1)
Positioning of the BIM standard in the asset management environment (ISO 196502018-1)
  1. UK Department for Transport, UK Roads Liaison Group BIM, Guidance for infrastructure bodies, 2017

Introduction

Asset management is one of the disciplines that has developed and spread very rapidly in recent years. One of the most important reasons for this is the dramatically increasing complexity of the decision-making environment the infrastructure manager is confronted with. For many managers of road infrastructure worldwide, the practical implementation of asset management attests competence and credibility, so important in the struggle for investment and maintenance funds, as it provides them with a recognized and transparent basis for argumentation.

Many experts around the world explain the reasons for such dynamic development of asset management with the now widely spread awareness that there are clear limits to the extensive expansion and maintenance of infrastructure. This requires completely new incentives and approaches in infrastructure management. Modern asset management offers the necessary tools for this. In order to be able to use it, the basics of asset management must be known to all persons involved in relevant management processes, whereby modern asset management is not only a matter for the higher administrative level, but also applies to most operational tasks.

The term asset management has been used as a synonym for maintenance planning since the 1970s. At the same time, a new discipline began to establish itself in the mid-1990s and the first applications of this new discipline were focused on the infrastructure of the oil industry. The convincing success that the oil industry has had with these new approaches has led more and more institutions and organizations in various industries to participate in the further development of these innovative concepts. The Institute of Asset Management “bundled” the procedures and methods developed in this way and, together with the British Standards Institution (BSI), published the first standard PAS 55 in 2004 under the title: “Optimized management of physical infrastructure assets”. The use of the term “infrastructure” in the title of the standard indicates that infrastructure assets were the focus of the new management discipline.

The publication of the first series of international standards ISO 55000 Asset Management by the International Organization for Standardization (ISO) in 2014 was the logical consequence of this development and at the same time the ultimate evidence of the maturity of the new discipline.

Already the definitions of the fundamental terms, namely asset and asset management, in the ISO 55000 standard indicate unmistakably the focus on the organization:

  • An asset is an “item, thing or entity that has potential or actual value to an organization
  • Asset management is “the coordinated activity of an organization to realize value from assets”

From today’s perspective, we already know that the establishment of the discipline of asset management was a revolutionary step on the way to rational management of infrastructure. It supports managers at all levels of decision-making, from political and strategic to operational, both in the creation and optimization of management structures and in the implementation of planning procedures that are consistent with the specific context of each organization.

In this portal, you will find some information about asset management and the disciplines closely related to asset management, such as:

Information as an asset in asset management

Introduction

Asset management refers primarily to the management of tangible (physical) assets. However, in order to follow the basic principles of this discipline, the other relevant assets of the organization must also be considered with the same attention as the material assets. These other types of assets include: human asset, information asset, intangible asset, financial asset.

Information as an asset in asset management
Information as an asset in asset management

Information is one of the most important “resources” in any infrastructure asset management. The inventory data, condition data etc. for all relevant asset types in the responsibility of the road authority must be recorded, managed and efficiently provided to the respective decision makers. The first two modules of the asset management plan are already dedicated to the collection, storage and provision of information.

However, it often happens that the way information is handled in many organisations does not comply with the principles of asset management. One of the fundamental mistakes is to strive to obtain the information with the greatest possible accuracy, timeliness and completeness that the market offers, without taking into account the requirements of the real decision-making processes in the administration. The information must, instead, be treated as an asset and all stages, such as procurement and management, should comply with the general rules of economy. Particular importance is attached to the provision of information to all actors active in the organization.

It is always helpful to look at the so-called knowledge pyramid. It contains three levels: data, information and knowledge.

Data represent the direct result of the survey. They are regarded as “raw material” and are therefore usually not useful for direct decision making. Data can be considered, for example, the speeds of individual vehicles or the coordinates of the road surface obtained during the condition assessment.

Only the targeted aggregation or transformation of the data into key figures leads to data becoming information. However, when defining the rules for the formation of the information, the objectives of the organization must always be in the foreground. Information is defined as, for example, the average speed on a given route determined from individual records or measurements or the average rut depth in an evaluation section.

The existence of information, even of the highest quality, is not yet sufficient in asset management. Information initially represents only a potential value, while the real value is initially zero. In order to increase their real value, the information must be incorporated into decision-making processes, i.e. it must be made available to decision-makers. The scope and form of this provision must be adapted to the respective objectives and tasks, to the respective decision-making level and even to the preferences of the respective decision-makers. Only then does information become knowledge.

The provision of information for decision-makers, which in asset management is referred to as a knowledge base, is thus considered a very important and unfortunately often insufficiently considered stage on the way to giving information real value.

History

As already mentioned, asset management has been used as a synonym for maintenance planning even among experts since the 1970s. Planning tools such as PMS or BMS are often mistakenly referred to as asset management systems.

At the same time, a new discipline began to establish itself in the 1990s in some Anglo-Saxon countries as a reaction to the infrastructure crisis of the 1980s. The chronic underfinancing of public infrastructure in countries such as the USA, Australia or New Zealand led to dramatic losses in performance and even jeopardized entire economies. At the same time, the pressure on performance and prices in many industries led to a neglect of safety, resulting in many severe damages to technical facilities and consequent disasters. One of the most spectacular catastrophes occurred in 1988 on the British oil platform Piper Alpha in the North Sea and cost 176 lives. The literature on asset management is generally agreed that the Piper Alpha disaster was the ultimate incentive to join forces with different experts to develop a universal, intersectoral methodology for the rational management of technical infrastructure.

The first applications of this new discipline focused on the infrastructure of the oil industry. The BP Mature Asset Team (MAST) [1], established in 1994, helped to reduce costs by 20% by implementing Asset management. BP’s competitor, Shell, also implemented the Shell Asset Management Business Model in 1995 [2]. The compelling success of the new approaches in the oil industry has led more and more institutions and organizations in various industries to participate in the further development of these approaches. The Institute of Asset management “bundled” the procedures and methods developed in this way and, together with the British Standards Institution (BSI), published the first standard PAS 55 Asset management in 2004.

PAS 55 asset management was published in 2004 under the title: “Optimized management of physical infrastructure assets”.[3] The use of the term “infrastructure” in the title of the standard indicates that infrastructure objects were the focus of the new management discipline. However, in order to increase the universality of the directive, the term “infrastructure” was deleted from the title of the next edition, which was published in 2008. PAS 55:2008 thus focuses on the “Optimized management of physical assets”.[4] This expansion of the application spectrum of the PAS 55 was a decisive factor in its successful development and has contributed to the stabilization and spread of this young discipline in many industries in recent years. The publication of the first series of international standards ISO 55000 asset management by the International Organization for Standardization (ISO) in 2014 was the logical consequence of this development and at the same time the ultimate proof of the maturity of the new discipline. The series consisted of three standards:

  • ISO 55000 Asset management – Overview, principles and terminology
  • ISO 55001 Asset management – Management systems – Requirements
  • ISO 55002 Asset management – Management systems – Guidelines for the application of ISO 55001
  1. Dominic, M.: et. al. Breaking the Mould: Unlocking the benefits of a tailored upstream operating model, McKinsey & Company, 10/2015
  2. Garton, I.: How Shell refined its Asset Management, Measuring Business Excellence, MCB UP Limited 1997
  3. The Institute of Asset Management: PAS 55-1:2004, Part 1: Specification for the optimized management of physical infrastructure assets, PAS 55-2:2004, Part 2: Guidelines for the application of PAS 55-1, 2004
  4. The Institute of Asset Management: PAS 55-1:2008, Part 1: Specification for the optimized management of physical assets, PAS 55-2:2008, Part 2: Guidelines for the application of PAS 55-1, 2008
Cumulative costs and the real value of information in asset management

Value of the Information

One must always distinguish between the real and potential value of the information. Of course, the information already has a certain potential value immediately after it has been collected. This value results from the properties of the information, such as accuracy, completeness, timeliness, correctness or exclusivity. The more accurate and complete the data or the information derived from the data, the higher the potential value.

This potential value is transformed into real value when the information is efficiently used in decision-making processes and contributes to increasing the level of knowledge of decision-makers in relation to their tasks. This depends primarily on the quality of the information systems, i.e. the systems that transform the information into knowledge. It should be emphasized that the context of the respective organization plays here a decisive role, including the objectives of the organization. Because even high-quality and valuable data can be useless for solving certain tasks. The criteria for assessing the usefulness of the information thus include the following: relevance, confidentiality, motivation, plausibility and transparency. Only when these subjective criteria are met does the information have not only a potential value but also a real value.

In summary, the real value of the information during the collection and management phase is initially zero.  However, it increases during the application phase. The cost of information, though, arises at all stages, i.e. during its acquisition, management and provision. The efficiency (performance) of the information is thus determined – in addition to the objective quality of the data, which is regarded as a necessary (but by far not sufficient) prerequisite for the real value of the information – above all by the quality of the systems for data provision. The more efficiently the information is provided and the more it corresponds to the respective tasks and expectations of the addressees, the greater its real value becomes. These relationships are shown schematically in Figure below.

Cumulative costs and the real value of information in asset management
Cumulative costs and the real value of information in asset management

With the progress of digitization in almost all sectors of the economy and the growing importance of information, the question of the potential and real value of information is becoming increasingly important. A relatively young discipline is dealing with this question: Infonomics. The name is a fusion of the words: information and economics. Infonomics was founded by Gartner Inc. In the fundamental work “Infonomics” [1] the author D.B. Laney consistently presents information as an asset. He advocates that the rules of asset management documented in ISO 55001 should also be applied to Information Asset.

  1. Laney, D.B.: Infonomics, how to monetize, manage, and measure information as an asset for competitive advantage, Gartner, Inc. 2018