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By Grant Andrews, Uniqco Managing Director and IPWEA fleet expert

Risk is a scary issue, which can plague even the sharpest business mind if not managed properly. Although risk can become a reality in countless ways, let’s confine our focus to plant and vehicle operating risk.

A brief definition of operating risk is the potential for failure of the ongoing function and profitability of a business. Typically, it could involve a financial issue, but the scope is vast and it’s worth considering that the cause behind many a business failure is not always the most obvious.

In my experience it’s rare to find an organisation with a good strategy in place for managing plant and vehicle operating risk. This is surprising because the potential costs are ominous.

The Risk Management Standard AS/NZS 4360:2004 provides a generic guide for establishing and implementing a risk management process, and can be used as a framework for assessing plant and vehicle operating risk, under the following broad headings:

• Risk Context (establish risk evaluation criteria)
• Risk Identification (failure modes, effects & criticality analysis)
• Risk Analysis (determine consequence of failure; assess probability of failure)
• Risk Evaluation (determine risk cost of exposure; identify risk reduction opportunities)
• Risk Treatment (seek options – implement preferred option)

To appreciate how the standard can be used to assess operating risk, imagine a scenario in which we’ve been directed to cut our $3m vehicle replacement budget by $1m for next financial year. That means doing an operating risk assessment on fleet items due for replacement in order to identify the highest financial risk items that should not be deferred. Fortunately the Australian standard allows us to develop and apply precisely such an assessment.    

Step 1 Risk Context

The first step is to establish a context against which to assess the risks. This can be done by producing a separate matrix for factors like Consequence, Likelihood and Risk.

Typically, the “consequence” matrix might rank insignificant, minor and moderate consequences through to those of major or catastrophic dimension. Categories of consequence would include Injury (first aid, intensive care, etc); Service interruption (1 hour, 1 week, etc); Environment (oil spill, vehicle write off, etc); Financial ($ amount); Reputation (minor complaint through to official enquiry).

The “Risk” matrix would then indicate the likelihood of the various consequences occurring on a scale of “almost certain/likely” through to “unlikely/rare”.

Step 2 Risk Identification

When identifying risks it is important to single out critical assets, namely those that would impact service delivery if damaged or compromised.   

For instance, domestic garbage collection vehicles are high-risk items for a public works fleet manager. If one breaks down, the financial, social and health implications are potentially significant if there isn’t a spare unit available.

Extending the operating hours of other vehicles might avert a service interruption risk, but if that’s not possible, a loss of reputation risk could occur if bins aren’t collected on an allocated day. A third risk is financial because the cost of having one such truck off the road for a single day can be as much as $5,000 or more.

Other implications could include increased overtime, the risk of other units breaking down, the possible need to hire a replacement vehicle and general operator frustration.

Now let’s consider an item at the other end of the size spectrum – the humble chain saw! Say a crew heads out to attend a tree that has fallen over a road and they discover on arrival that their only chain saw is inoperable. Sadly, that’s when the fallout can become disproportionate!

The crew may have to establish traffic controls (which means leaving a staff member on site) while they return to the depot for a working chainsaw. Or they may have to call on a second operator to bring them a chain saw.   But either way, the financial impact might easily exceed the cost of a new chainsaw. In the meantime, community disruption continues and reputations are impacted.

Hence, to correctly assess operating risk you need to consider the consequences of the failure of a plant item – injury, service interruption, reputation, financial and environmental.

Step 3 Risk Analysis

Once risks have been identified, we can determine “exposure” by considering both “consequence” and “likelihood” of an event.  The objective is to separate minor acceptable risks from major risks that require active management.

The probability of failure is related to the condition of the plant and vehicle asset and can be assessed qualitatively (i.e. “almost certain” to “rare”) or quantitatively, using probability and statistics.

Armed with knowledge of the consequence of failure and the likelihood of an event, the risk can be evaluated using the risk matrix referred to earlier.      Although the consequences of failure may be “major”, if the event is unlikely to occur (i.e. “rare”) then the risk may be considered low and acceptable.   It is essential both consequence and likelihood are considered together.

Risk Treatment

Once we know the risk of critical assets, we can prioritise actions and treatments using a risk treatment hierarchy as shown below.

Risk Treatment Hierarchy

This topic is dealt with in more detail in the IPWEA Plant & Vehicle Management Manual.