Putting a value on risk management
If facilities managers want to increase their influence with the C-suite, they need to embrace risk, writes Roger Roelvink.
Built environments enable us to live, explore, discover, learn and evolve. Asset management (AM) and facilities management (FM) are instrumental in helping people maintain and operate within this environment. They also play a pivotal role in establishing a sustainable, ongoing legacy for future generations.
The Australian FM industry is worth $32.157 billion representing 2.6 percent of GDP, while globally FM is estimated at $1.02 trillion. Industry-wide reduction of waste (time, cost, materials and utilities) has a significant cumulative monetary impact and environmental influence. These two factors warrant major changes to asset and facilities management (A&FM) including the introduction of strategic thinking into how these services operate.
With the introduction of the FM ISOs (ISO 41011:2017 – Vocabulary, and ISO 41012:2017 – Guidance on strategic sourcing) and ISO 55001 (asset management) a strategic approach to A&FM, supported by international standards, is considered good industry practice.
A&FM industries are on the cusp of major change with the introduction of increasingly advanced technologies. It has become paramount to demonstrate the significant contribution they make to businesses. The introduction of ISO standards means there are now globally unified standards to follow.
The convergence of the advances in technology, ISO and strategic actions, presents an opportunity for these services to increase their profile and sphere of influence within both national and global organisations and industries.
STRATEGIC RISK MANAGEMENT FRAMEWORK
Developing a strategic framework that draws activities and expenditure into a risk context that key stakeholders and decision-makers will understand, provides asset and facilities managers with a structure to justify A&FM expenditure and activities.
Enterprise risk management (ERM), the collective risk management approach to managing and mitigating adverse impacts (risks) within an organisation, provides an organisational framework that identifies risks that could prevent an organisation from achieving its business objectives. It provides a corporate framework that allows organisations to align strategic A&FM frameworks.
Risk management aids decision-making and provides a framework to:
- identify the impact, often best expressed in health and safety impacts and/or monetary quantities, which could arise and potentially have an adverse impact on the core business
- identify how risks are to be prevented through mitigating actions, and
- develop asset and facilities management service delivery models to ensure control of risks.
INHERENT EFFICIENCY AND EFFECTIVENESS
Developing an A&FM risk register allows a business to assign a monetary value to these risks. Risk impact and probability also allows for prioritisation of A&FM expenditure and activities. Further, it provides a framework for budget justification through clear articulation of where and when expenditure should occur.
The ongoing quest to achieve efficiency and effectiveness means that, after prioritising A&FM activities based on the risk register, the determination of the most efficient and effective means of delivering the services and achieving risk control and mitigation is prioritised. It provides a framework within which an organisation can pursue its desired objectives.
In summary, a strategic A&FM approach requires identification and documentation of an organisation’s:
- Critical Success Factors (CSFs) directly impacting business success
- Key Performance Indicators (KPIs) indicating appropriate service levels that support achievement of the CSFs, and
- Service Standards (SSs) determining the scope of services defined as deliverable outcomes.
CSFs, KPIs and SSs are pivotal in demonstrating and articulating how activities in A&FM directly contribute to the success of the core business. Asset and facilities professionals should integrate ‘fit for purpose’ thinking into their daily responsibilities. They need to justify why certain tasks are being undertaken and how they contribute to the success of the core business by ultimately mitigating risk.
FIT FOR PURPOSE
Introducing a strategic A&FM approach and ‘fit for purpose’ thinking into an organisation provides a platform to eliminate time and money wastage on activities that prevent risks of low probability and/or little impact on the business. More time can then be allocated to high-priority activities.
Starting on a strategic A&FM journey can be a daunting task. The best approach is to take small steps. Ensure specialists and advisers are available to offer advice, but, most importantly, make informed decisions based on collected data.
Examine the ISO standards and use them as a guide. Adopt ‘fit for purpose’ thinking, risk mitigation and clearly defined CSFs, KPIs and SSs to create a justifiable position for activities and expenditure. Documented approaches, outcomes, decisions and supporting data will be of significant value at budget time when there is a need to justify expenditure.
The three basic steps to follow are:
- conduct an assessment against existing good practice systems such as ISO standards
- prioritise the implementation of improvements based on business benefit, and
- continually improve processes over time.
Experience suggests that using strong data when presenting a funding business case, which relates directly to the organisation’s business objectives, has the greatest chance of success.
A strategic approach for A&FM benefits a portfolio by defining, implementing and operating the organisation’s facilities in a
‘fit for purpose’ risk mitigation framework. It justifies every action and expense, while also demonstrating to the organisation’s executives how A&FM proactively contributes to enhancing business outcomes by mitigating operational risks related to the built environment.
Rogier Roelvink is an associate director at Turner and Townsend.
This article also appears in the December/January issue of Facility Management magazine.
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