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Six Sources of Failure in Managing Risk

02/07/2012

Operational risk management is receiving increased attention and focus in recent times as organizations seek to improve their overall performance and mitigate potential loss. To manage risk effectively, you have to choose the right data and metrics and have a clear sense of how all the moving parts work together.

Risk managers routinely make several mistakes:

  1. Focusing on narrow measurements, when more in-context data should be included.
  2. Relying on historical data, or when aging equipment and demand has changed.
  3. Overlooking known risks. Maintenance teams simply overlook many types of risk and sometimes even create them.
  4. Overlooking concealed risk. The people responsible for incurring risk often don’t report it.
  5. Failing to communicate. Risk management will fail if the systems fail to communicate clearly.
  6. Not managing in real time. Risk can change quickly, thus systems need to be responsive.

Example: The Hammersmith Flyover in London has been closed since December 23 after serious defects were found in its structure. Built in 1960, about 90,000 vehicles per day travel along the 900m (0.56-mile) main access route, into the capital. Seeping water has caused the cables, which help to support the road bridge, to rust and weaken. The impact to business, including preparation for the Olympics, is immeasurable. The point is, total closure at this critical time could have been avoided if the correct systems were in place.

So my question is this, if you were to rate your enterprise from 0 to 5 with respect to addressing the six conditions above, what would the average score on your risk report be?

I’d be interested in your feedback. Please leave a comment to this post with your thoughts.

 

Posted by Cyrus Hatfield, Vice President, North America, EAM and Sustainability, Infor

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