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CMMS: A Powerful Tool for Operational Risk Management

Risk pic

At first glance, Operational Risk Management (ORM) seems to be an overwhelming process. The risks that companies must contend with are varied and complex, and putting systems into place to prioritize and manage them effectively can place strains on even the most organized and efficient companies.

A look at the research on risk, however, reveals that just a few factors tend to be at the source of most issues: people, processes, and assets. According to research by the Aberdeen Group, the companies considered best-in-class when it comes to managing risk are “more likely to understand that unplanned downtime, inability to maintain planned production rates, safety, and environmental incidences are all problems that can be traced directly to recurring equipment failure, mismatches in production capacities, and human interactions when facing these situations. For them, information such as asset reliability, spare parts availability, cost of maintenance, safety index, energy consumption, corrective actions status, and lost time accident rate are all critical information for making decisions.”

In other words, proper equipment/maintenance management is deeply interconnected with risk. It’s easy to see why: ORM and equipment maintenance both require a high level of organization, transparency, and communication.

This is why CMMS solutions provide the perfect backbone for ORM initiatives.

Data for Proper Risk Analysis

According to the Aberdeen Group, failure of critical assets is the risk companies most often cite as the biggest threat to their company. How companies respond to this risk is therefore a strong predictor of their overall success in ORM.

Companies considered best-in-class in ORM report rates of unscheduled equipment downtime, overall equipment effectiveness, and operating costs that are up to 20 percent better than their peers in some cases.

So what makes these best-in-class companies different?

For starters, they’re doing a better job of tracking equipment data. Detailed historical records on past work orders, inspections, and notes provide critical insight into common causes of equipment failures that can be used to build risk management policies and procedures.

But more than the data itself, it’s how these companies capture and analyze it that sets them apart. By utilizing tools like CMMS solutions, these companies have a much easier time capturing the data they need and turning it into easy-to-read reports for accurate analysis.

Most importantly, CMMS solutions also provide insight into the other two key sources of risk: people and processes.  When performing risk analysis, it is vital to have solid data on who has been using equipment, where it has been used, and who has performed maintenance and inspections on it.

And because CMMS systems are used to design and manage maintenance workflows, it is easier to identify process-level sources of risk and neutralize them. If work orders are continually getting stuck on a given status in the workflow, for instance, the problem will be evident in the data and managers will have a place to start when investigating process-related risks.

Companies that rely on outdated paper or spreadsheet systems to track equipment data are often completely neglecting this crucial data, or else they are wasting time and effort by manually tracking and reconciling it.

Standardizing and Automating Workflows

In order to achieve the distinction of best-in-class in ORM, a company must not only be proficient at gathering data, they must also excel at putting it to proper use. CMMS solutions are perfectly suited to this aspect of risk management as well.

Once data has been gathered and analyzed, maintenance schedules, inspections, and workflows need to be built or tweaked to mitigate the risks that have been uncovered. This is much easier to accomplish with a CMMS solution than a jumble of log books and spreadsheets.

Changes made in a CMMS are instantaneous and uniform throughout maintenance operations, making it easy to implement solutions. For instance, inspections can be designed to automatically trigger work orders upon failure, and the sources of equipment data entering the system can be expanded to include sensor data, which can trigger alerts in the system when key metrics fall outside the acceptable range.

As time goes on, a CMMS makes it easy to track the efficacy of these changes and determine whether they are effectively mitigating risk. Companies that manage their operations with spreadsheets and log books will have a much harder time running flexible operations that can be easily adjusted to account for changing circumstances.

As the Aberdeen Group puts it, “Operational Risk Management is about creating a framework that will help executives, employees on the plant floor, and maintenance personnel understand and manage the risks impacting their organization, establish processes to effectively address these risks, and implement procedures for corrective and preventive actions.”

CMMS can be a powerful tool in the implementation of ORM initiatives for tracking and organizing the data needed to build sound risk management policies, and implementing those policies once they have been created.

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