The great cost risk debacle!

If you have been working in the field of reliability or asset management for any level of time you have probably come across the figure below. Right?

The implication is that as costs reduce, risk increases, and there is a point where the trade off between cost and risk is at its lowest point, or optimal. There are a few of these around. Spares management uses it, and a few other areas... but for now we are most interested in the use in managing assets.

This has infiltrated all levels of asset management and it appears in academic texts, training courses, framework publications and a whole host of other documents that have given it credibility over the years.

The problem is that in most cases this line of thought is not only wrong, but it can actually be counter-productive to balancing costs and risk.

Before we get into some of the specifics, lets look at the underlying message here. Managing risk costs money. And the more you spend the lower the risk is that you are managing.

To say this is the rule is garbage.

I have worked on many, many sites where the results of our work was not only a reduction in direct costs, but also a reduction in the level of risk exposure.

How? Easy, over maintenance kills assets.

I have posted before on this, but it is very easy to tell when a company does not have a good handle on its maintenance strategies for example. And one of the key contributors to this is the preponderance of daily inspections.

And what happens when you have regular, unneeded daily inspections? Well.. a few things can happen...

On one hand, the people performing them come to realize pretty often that most of them are garbage. So they turn them from serious routines into "tick and flick"activities, often carried out in a lunch room somewhere...

One of the real impacts here, and something that is pretty unmeasurable often, is the fact that there may well be very important inspections buried within the daily checks that also get ignored. Raising the risk considerably higher.

On the other hand they are done. And when you do unneeded maintenance you start to run some significant risks, such as

1. putting people in harms way when they do not need to be, 
2. requiring frequent decisions on production and stopping the assets, or carrying out the inspections while running, 
3. increasing the risk of introducing human error in many cases, and 
4. raising the likelihood of failure through the very act of intrusive maintenance. (As per 3 and other information uncovered in the original RCM report.)

In fact, in many cases the level of strategies is reduced considerably. This allows a company a potential cost saving in many areas.

• Reduced routine maintenance costs, possibly leading to a reduction in manning levels, or at the very least the ability to focus on more deserving work.
• Reduced corrective costs.
• Reduced likelihood of skipped inspections. 

In brief, the tasks we do are exactly the tasks we need to do, when we need to do them, and they are tied to the level of risk we wish to have.

Reducing risk, reducing costs, and showing clearly the error in the judgements made from the graphic above.

And another thing...

I am going to avoid the temptation to ramble on here for pages and pages about this.. it is obviously something I hold as extremely important...

But there is another point that is very important to make. And that is that in practice, this sort of thinking is often used to justify increases or reductions in the frequency of routine maintenance tasks.

There is only one occasion where this is really useful as a means of changing maintenance frequencies, and that is in hidden economic tasks only. In this case the consequences are economic, the cost of doing the task is economic, and there is a very clear trade off point. Particularly as hidden tasks are all about managing the likelihood of two events coinciding. Not just one event alone...

For everything else, frequency is not a variable that can be reduced and increased at a whim. The frequency of tasks is determined by the physics that determine how an asset fails. Nothing more and nothing less. Not even criticality.

Predictive Maintenance (PTIVE)

If you take Predictive Maintenance, or condition based maintenance, as an example. RCM teaches us that the only two things that drive CBM is a) The P-F interval and b) the probability of detection of the chosen technology. That is it, nothing more. '

Changing the task frequency based on cost may mean working against these two factors, leaving you with either a task that costs way too much without any additional benefit, or a task that is going to detect the onset of failure through absolute chance - nothing else.

Preventive Maintenance (PRES & PREP)

Within RCM the frequency of the two preventive tasks is determined based on the point where the asset has reached the end of its useful life. or, to be more accurate, the point at where the conditional probability of risk starts to sharply tick upwards. 

If cost was an issue due to, say, timing with a shut down or turnaround, or for some other logical reason, then okay. Taking it out of service earlier may well be worth the economic benefit. 

But to spread it further than the end point, the point where the conditional probability of risk begins to rise rapidly, means you are at considerably higher and sudden risk of unplanned failure. This decision does get made from time to time in economic cases where production runs are close, or annual / period targets need pushing. 

But they are not made at the outset using the graphic of cost and risk. 

Instead of working out a way around this cerebral experiment, there is an easier way. When you chose to actually do the tasks, within RCM, you are asked to justify not only if the task is possible. But also whether it will be a more cost effective or risk effective solution if you were to do so.

And when there are safety or environmental consequences... well there is just no option.

Detective Maintenance (DTIVE)

The last of the routine tasks, and number 4 of the 8 maintenance types. Detective maintenance IS about risk. All about risk. But it is not about comparing risk and cost... for the most part it is about comparing risk and the level of risk you are willing to tolerate.

The great Cost / Risk Debacle

At the very least I hope this post has made you ask yourself a few hard questions about some of the concepts and approaches that are thrown at us as fact everyday, when they are often nothing to do with the facts as physics understands them.

In this new managerial discipline we all need to be exercising critical thought, and making sure not only that we understand the implication of what is being put forward as fact, but also that those making the claims are held to account logically.