QUANTIFICATION OF RISK PROCESS™
HS’ Quantification of Risk Process (QRisk) provides the decision maker with a comprehensive assessment of the risk exposures due to technology, operations, and maintenance. This process identifies and prioritizes issues that potentially represent the greatest threats to profitability. Recommendations to implement prudent risk mitigation alternatives provide viable solutions to reduce risk and maximize operating results.
The Challenge
All industries are being exposed to an increasingly broad spectrum of risks from competitive global markets. These numerous risk factors are collectively called the Total Cost of Risks.
The concept of the Total Cost of Risks is a business reality that exposes companies to potentially devastating financial consequences. Therefore, the cost effective management of Total Cost of Risk becomes a strategic as well as a tactical means to sustain performance to operate successfully. Unfortunately most management efforts are solely financially oriented and fail to thoroughly recognize the performance unknowns associated with processes and technology to produce the company’s final products.
More refined risk management processes need to respond to increased demands for forecasting accuracy and the elimination of large unplanned negative operating results. The magnitude of any risk is defined by the seemingly simple equation:
Risk = Failure Probability X Consequence
The challenge is to identify major risks and to assign appropriate values for estimating the probabilities for failure and the extent of financial consequences before implementing appropriate actions. Quantitative data from actual experiences needs to be combined with qualitative expert opinions. Unfortunately until now, there has not been one mechanism to achieve the desired results.
The HS Approach
We use the Analytic Hierarchy Process (AHP) in combination with the risk-based inspection methodology from the ASME Risk-Based Inspection Research Project. The Process constructs a customized hierarchical model for each application. Typically the
evaluation criteria include such factors as availability, plant efficiency, operations and maintenance expenses, and fuel costs. The modeling efforts identify the major systems, sub-systems, and components. The Process defines the significant modes of failure. Based upon the risk assigned values, the Process calculates the probabilities or frequency of failure and the associated consequences.
Data Used for Assessment
With the AHP, a unique pair-wise comparison is performed for each level in the structure tree. The comparisons are assigned a value of their relative importance as to their potential contribution to the risk of the element in the level above. The evaluation technique utilizes a correlation between a numerical scale and a verbal scale to quantify data in the public domain, private data, expert opinions or judgments. Depending upon the client’s desires, the evaluation is undertaken with their input or independent of their involvement. It is noteworthy that HS always seeks to understand the way a company performs its business through interviews with key personnel, equipment and process flow analyzes, and observations before making its assessment. Combining the risk evaluations of all technology sub-systems within a facility, results in an overall risk evaluation.
Final Products
The results are a comprehensive Risk Assessment that combines quantitative and qualitative information in a format that is both factual and graphical; making it easy to understand. We also develop a specific Risk Quantification Table that identifies the potential problems, quantifies the level of risk exposure, and proposes specific risk mitigation alternatives for consideration regarding technology, operations and maintenance.
QRisk™ Benefits
- Minimizes the Frequency and Severity of Unplanned Events that Negatively Impact Profits.
- Serves as the Basis for Implementing an Effective Risk Mitigation Process.
- Improves Employment of Critical Resources.
- Enhances Asset Utilization Through Focused Predictive Maintenance.
- Improves Financial Forecasting Accuracy.
- Refines Insurance Coverage Through a Better Understanding and Mitigation of Risks.
- Increases Profitability
Why HS?
We pioneered the development and implementation of these processes to critically assess factors affecting the overall performance of your facility. Our Quantification of Risk Process identifies, prioritizes, and proposes specific mitigation alternatives for consideration of issues that represent the greatest threats to a plant’s sustained performance and opportunities for increased profitability.
