10 Sep Uncertainty has always had a role to play in the business world
Posted at 11:22 in Resilience by Francesca Parcell
Take a look at any financial market and you’ll see that peaks and troughs are just as natural, necessary and inevitable as the fall of any seemingly untouchable empire throughout history.
However, even with this in mind, it is clear that we’re living in unprecedented times where risks are evolving at a particularly alarming rate.
We’re seeing climate change present significant flood risks to UK infrastructure. We’re seeing growing examples of both scaremongering and bullish sentiments as economic uncertainty grows post-Brexit. We’re seeing alarming disparities in how industries inform their decision making moving forward.
What makes these economic, regulatory and environmental risks so scary for many is that for the most part, no-one really seems to have the answers. Sure people will speculate, and of course the recent climate change impact report has uncovered some drastic infrastructural vulnerabilities in the UK, but the fact remains: many organisations are flying blind.
As a result, I believe we need to leave the scaremongering and overly positive predictions for the reporters and remain focussed on the practicalities of how we’re going to protect assets, profits and market share against these risks, whatever form they take.
Highlighting these practical steps, I’ve spoken recently on the need to use data and auditing to inform decisioning making and most recently, the new approach we all need to take to better care for and maintain assets.
However, to ensure assets remain resilient and cost-effective in the long term, I also believe we also need to change the way we value them.
In my experience, organisations tend to view assets in primarily tangible and monetary terms, often using maintenance and purchase costs as the basis for their valuations. While these calculations are vital and it’s understandable that these are relied upon to ensure asset efficiency and cost-effectiveness, I feel this only tells part of the story.
Given the risks in today’s climate, I believe that to effectively determine an asset’s total cost of ownership (TCO), we need to adopt a more holistic view of things.
Asset resilience is a crucial example of something that is frequently disregarded by organisations looking to quantify the value of assets. For instance, organisations need to consider an asset’s ability to recover from downtime incurred by business disruption. Then, much like the UK’s network, there’s the matter of interdependencies. Do the asset’s protective and resilience measures ensure that other areas of the system, site or business can operate optimally? These are questions that need to be answered, and the answers need to be factored into how organisation view assets.
All things being equal, it’s only natural that an asset with resilience measures designed to actively limit the extent of any collateral damage should be valued differently to one that places other assets at risk when it faces disruption. In fact, you could argue the latter is more of a liability than an asset – but these assets are rarely regarded as such.
Instead of focussing primarily on maintenance and installation costs, I believe we need to focus on our assets’ ability to cope with destructive forces and, more importantly, limit the extent of any disruption they cause to business continuity and profits.
Outlined in the resilience map below are the 12 key destructive forces that organisations need to identify as part of this process.
Identifying the forces acting on your assets alone is not to effectively value assets. You need to be able to benchmark each asset’s preparedness against theses forces. A great way to start this process is to identify all the potential resilience measures that could be used to protect assets. You can then use these as a reference point for assessing how prepared your assets are for certain scenarios. Below is an example of the resilience measures that could be applied to offset risk during a substation flood.
By mapping resilience measures against dangers and disruptive forces, organisations can begin to identify just how vulnerable certain assets and systems really are, taking a more holistic, comprehensive and well-rounded approach to determining their true TCO in the long term. In a time where many organisations’ margins are already stretched and no-one is certain what the future holds, effectively valuing assets and minimising TCO is more important than ever.
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