ENGG 958: Life Cycle and Risk Management

Faculty of Engineering and Information Sciences

ASSIGNMENT: 04
Individual Submission
Group No: 03

NAME STUDENT ID
MUHAMMAD SHAHBAZ KHAN 5717395

Date: 06/06/2019
List of Figures:
Figure1 Relationships between the risk management principles, framework and process (AS/NZS
ISO 31000: 2009).......................................................................................................................... 5
Figure 2 Evolution of test requirement (ISO 15288: 2015) ............................................................ 6
Figure 3 Parts of establishing context (SA/SNZ HB 436:2013) ..................................................... 7
Figure 4 Hazard based risk assessment (Robinson and Francis, 2014) ........................................... 8
Figure 5 Levels of risk and ALARP, based on UK experience (Health and Commission, 1988) .... 8
Figure 6 Risk Matrix with treatment key (Dwight, R. 2018) .......................................................... 9
Figure 7 Safety management and Risk control (Vinnem, 2014) ................................................... 10
Figure 8 Risk management principles (ISO, 2009) ...................................................................... 11
Figure 9 Risk management framework (ISO, 2009) ..................................................................... 12
List of Table:
Table 1Technical Performance Measurement (Mercury Associates, 2019) .................................. 12
Table of Contents
The Fleet Asset of TransFast Key issues related to Risk Management Process: ............................. 5
Establishing the context:............................................................................................................ 6
Risk Assessment: ...................................................................................................................... 9
Risk Identification: ................................................................................................................ 9
Risk Analysis: ..................................................................................................................... 10
Risk Evaluation: .................................................................................................................. 11
Asset management system and Risk management system relationship: ........................................ 11
References: ................................................................................................................................... 1
Appendix A .................................................................................................................................. 2
 The Fleet Asset of TransFast Key issues related to the Risk
Management Process:
SysEng group has presented the asset management framework for TransFast, which is available
in Appendix A. The purpose of this framework is, not only to develop the operating procedure
of TransFast but also to monitor performance throughout the Life Cycle of the asset as per
defined boundaries in system process development. AS/NZS ISO 31000 (2009) described the
risk management principle, process and framework (Figure 1) which integrates into operation
and maintenance of truck fleets, to minimise or mitigate risks.

Figure1 Relationships between the risk management principles, framework and process (AS/NZS
ISO 31000: 2009)
Those risks may be available due to internal factors like operation department, maintenance
department, employees, senior management, or external factors like legislation, weather
condition, lobbyist or competitors. SysEng group recognises the importance of risk
management as an integral part of Asset management practices. As the risk-free working
environment is practically impossible, the available options are to control the risk effectively
by coordinating activities, reducing, anticipating, transferring or accepting (ISO, 2009). This
process may direct and control uncertainty and the unwanted situation at TransFast operations
to have an effective life cycle of the asset (Dwight.R, 2018). Establishing the testing during
operations to manage the risk is similar to system engineering process where new equipment is
tested according to requirement and existing system evaluation boundary is established to test
and provide feedback for further improvement (Figure 2).
 Figure 2 Evolution of test requirement (ISO 15288: 2015)

Establishing the context:

To develop the risk management framework for TransFast, Risk assessment, which defined in clause
5.4, requires the established context as per Clause 5.3 in Risk Management Framework shown in
figure 1. SA/SNZ HB 436: 2013 standard, a companion to AS/NZS ISO 31000:2009, provides the
risk management guideline and delivers a strategic parenthesis to develop the context (Figure 3).
SysEng group considered the objectives and operating environment of TransFast (both internal and
external) to establish the context. Along with those, stakeholders, circumstances and risk criteria are
considered for any change to address the possible risk raised because of the change. TransFast main
objectives were:
 Satisfaction the stakeholders
 Declined operation and maintenance cost of fleet
 Reduction of carbon emission
 Improved business volume
TransFast and SysEng group mutually agreed on the stakeholder's list, their demand and
responsibilities. Once the stakeholders are identified, their associated objectives and potential risks
to their objectives would be documented for further assessment and controls. Senior management,
engineers, operation team, marketing team, finance department are examples of internal
stakeholders whereas, Legal bodies, suppliers, customers are external stakeholders (Dwight.R,
2018). Internal stakeholders may have a different type of risks as compared to external stakeholders.
For example, the legislative authority has one of the main objectives is low carbon emission, which
is nothing to do with internal stakeholder (Operation Department) objective of operator skill set
improvement. The importance of this segregation would be reflected in the risk control process, as
in some case, internal and external stakeholders would have similar objectives to achieve and similar
risk would be considered to manage and vice versa. Similar to stakeholders, external and internal
factors would vary for the TransFast Company (Dwight.R, 2018). Culture, politics, social and
technological environment are external factor examples. Organisation culture, their capabilities,
commitment and owners decision-making ability, are an example of internal factors. Next step is to
articulate the context of the risk management process where scope, structure and resources
availability would be described (HB 436, 2013). This process may vary according to organisation
requirement. It may consider the clear goal, objectives of risk management activities,
responsibilities of the concerned body related to the risk management process, the relationship
between project, process and activity to other activities of the organisation (HB 436, 2013). The
example of scope defining in TransFast case is buying the new fleet decision. It requires the input
from the marketing department, finance department, engineering department and higher
management. A possible risk is to go beyond the budget. That would require defining the final
authority nomination. For risk management process, detailed documentation is required, which
would include the purpose, decision type, authority to make the decision, risk criteria to be applied,
level of adequacy of existing controls, included and excluded factors, and circumstances (HB 436,
2013).

Figure 3 Parts of establishing context (SA/SNZ HB 436:2013)

The final step in establishing the context is to evaluate the significance of the risk. Nature of risks,
their causes and measurement of the effects should be included. Duration of likelihood,
consequences and level of risk should be included with the views of stakeholders (HB 436, 2013).
This criterion would be the product of likelihood and consequences. ISO/IEC 73 defined the risk
criteria as the reference by which the significance of risk is assessed (Dwight.R, 2018). Individual,
legal, societal and environmental risks are majorly considered while developing the risk matrix. A
detailed risk matrix is presented in Appendix A related to Charles Sturt city council, which may be
used as a reference (Charlessturt.sa.gov.au, 2019). Level of risks is developed with hazard
identification, the risk associated with them and then compared to acceptable risk criteria (Robinson
and Francis, 2014). The hazard-base risk assessment approach is described in following figure 4.

Figure 4 Hazard based risk assessment (Robinson and Francis, 2014)

As low as reasonably practicable (ALARP) is used in the context of safety work to judge further
actions. Melchers (2001) described ALARP as a guide to regulatory decision-making and path to
suggest the reason and practicality (Figure 5). The author argued that ALARP helps to bridge the
gap between technological and social views of risks.

Figure 5 Levels of risk and ALARP, based on UK experience (Health and Commission, 1988)
The risk matrix is used combined with the ALARP diagram to identify through the likelihood and
consequences. This matrix can be used as a reference document across the company. The AS4360
risk matrix is presented by R.Dwight (2018).

Figure 6 Risk Matrix with treatment key (Dwight, R. 2018)

Risk Assessment:

AS/NZS ISO 31000 (2009) comprises the sub-category of risk assessment, which contains:
 Risk Identification
 Risk Analysis
 Risk Evaluation
A brief on each step explained below.

Risk Identification:

This process should include all the risks, whether they may be controlled or not. Accurate risk
identification is necessary to avoid further investigation.
TransFast Company associated risk related to operation and performance would be:

 Safety Risk: (Design of truck, traffic on the road, drivers of the trucks)
 Environmental Risk: (Carbon emission, noise level while vehicle operating)
 Socio-political Risk: (Consumer behaviour, Extended duration of delivery to customer,
frequent variation in legislation at the national level)
 Business Risk: (Difference in organisational culture, defining a need, the input of
stakeholders, customers satisfaction)
 Delivery Risk: (Inventory availability, supplier support)
  Financial Risk: (Capital Budget limits, operational budgets limits, tax changes, the rising
cost of fuel, poor condition of stakeholders)
 Regulatory Risk: ( Legislative requirement related to insurance, registration, the driving
licence)
 Operation Risk: ( Trucks rotation, availability of drivers, shift management, training of the
driver for safe driving)
 Maintenance Risk: (maintenance cost, maintenance re-work, lubrication system, daily
inspection task, preventive maintenance work order compliance, maintenance backlog)

Risk Analysis:

Once the identification of risks is finalised, SysEng group assessed based on their occurrence
probability and consequences at TransFast Company’s objective. This source must address the
negative and positive consequences and their likelihood. Existing controls by TransFast Company
was reviewed as well to find the gaps (HB 436, 2013). A general iterative loop for risk assessment
and control is presented below in figure 7 with risk analysis part.

Figure 7 Safety management and Risk control (Vinnem, 2014)

Risk analysis process would provide the risk picture for further evaluation. An accurate risk analysis
would provide a beneficial outcome while doing the risk evaluation for acceptance or rejection.
Cause and effect diagram, fault tree analysis or event tree analysis are the most common methods
to perform risk analysis assumptions (AS 3931, 1998).
 Risk Evaluation:

AS/NZS ISO 31000 standard (2009) defines the risk evaluation purpose as “to assist in making the
decisions, based on the outcomes of risk analysis, about which risks need treatment and the priority
of treatment implementation”.

Asset management system and Risk management system relationship:

SysEng group develop the system engineering process with appropriate boundaries, which were
used as a control in Asset management (AM) system of the Truck fleet at TransFast Company.
Possible risks to asset related to its performance and involvement of multiple entities were
considered while developing strategic asset management (Dwight.R, 2018). Life cycle cost (LCC)
was one of the critical factors to be considered under the system engineering process (ISO, 2015).
Risk management system found all the possible risk, which may affect LCC at any stage of an asset
from procurement to disposal. AM started with defining objectives, plans and buying-in leadership
commitment. The objective of the organisation has also integrated the safety, risk tolerance
environmental risk, service level, operational performance and reliability. Asset performance
measurement system with integrated activities highlights the relationship with Risk Management
principle of facilitating the continuous improvement of the organisation. Figure 8 shows the Risk
Management principles.

Figure 8 Risk management principles (ISO, 2009)

Development of asset register, with asset function definition, its possible functional failures, failure
modes effects, criticality and analysis (FMECA) are the similar tasks related to designing of the
framework for managing risk in operation and maintenance to improve reliability and performance
of the asset. Consequences table would be addressed to evaluate the inherent risk and its tolerable
level (Aladon, 2019). Based on the consequences score, critical assets would be highlighted. Then,
implementation of risk management framework (Figure 9) goes in parallel with AM system
implementation where technical performance measurement monitors the effective risk management
system and asset management system. A table of TPM is given below, which indicates critical
operation objective, performance attribute and performance measure.

Figure 9 Risk management framework (ISO, 2009)

Objective Performance Attributes Performance Measure

Availability Downtime % of Units out of service/day
Suitable Operating capacity Utilization miles/month
Reliability Meantime between Failure miles, Hours/Failure
Safety Accident Accidents/Million miles
Economical Cost Cost/VEU, miles, Hour
Sustainability Fuel Efficiency MPG
Environment Carbon Emission Grams/mile

Table 1Technical Performance Measurement (Mercury Associates, 2019)

This performance measurement replicates the monitoring and review process (Clause 5.6, Figure 1)
in which the feedback system analyses the effectiveness of applied control and indicates the
necessary changes if required.
An example of operating activity may describe the interrelationship of AM and risk management.
If the fleet engine seized, lack of lubricant as a failure mode, reasonable likelihood and significant
consequences would be ended up as immediate action as risk treatment key. The previous example
presented the safety risk (if happened at freeway), environmental risk (high noise and pollutions),
maintenance risk (high repair cost and labour-hours) and socio-economic risk (delay in services to
a customer). A daily inspection task of the engine oil level may be offered as risk control, which
would reduce the likelihood and in result, the risk may be controlled.

To summarise, AM system and risk management system integrates and provide an effective way to
identify, analyse, evaluate and treat the risk with the aim of lower life-cycle cost for TransFast
organisation. Organisational strategy and objective integration with both system would help to make
those objectives more achievable.
References:
Aladon. (2019). What is RCD? | Aladon. [online] Available at:
https://www.thealadonnetwork.com/about-rcm/what-is-rcd/ [Accessed 5 Jun. 2019].

AS/NZS 3931, “Risk analysis of technological systems—Application guide”, STANDARDS

AUSTRALIA & STANDARDS NEW ZEALAND, published on 1998, pp. 1-39.

AS/NZS ISO 31000, “Risk management- Principles and guidelines”, Standard Australia,
published on 2009, pp. 1-37.

AS/NZS ISO/IEC/IEEE 15288, “Systems and software engineering—System life cycle

processes”, Standard Australia, published on 2015, pp. 1-121.

Charlessturt.sa.gov.au. (2019). [online] Available at:

https://www.charlessturt.sa.gov.au/webdata/resources/minutesAgendas/Item%203.05%20-
%20Fleet%20Services%20Asset%20Management%20Plan%20-%20Appendix%20A.pdf
[Accessed 5 Jun. 2019].

Dwight, R.2018., Topic 11 Notes “Risk Management: Basic concepts” pp. 1-15.

Dwight, R.2018., Topic 11 Notes “Asset and Risk Management” pp. 1-11.

HEALTH & COMMISSION, S. 1988. Comments received on the tolerability of risk from nuclear
power stations.

MELCHERS, R. E., 2001. On the ALARP approach to risk management. Reliability Engineering
& System Safety, 71, 201-208.

Mercury Associates. (2019). Fleet Performance Measurement and Benchmarking. [online]

Available at: https://mercury-assoc.com/portfolio/performance-measurement-
benchmarking/?portfolioCats=33%2C28%2C27%2C29%2C34%2C31%2C35%2C36%2C
30%2C32 [Accessed 14 Apr. 2019].

ROBINSON, R. & FRANCIS, G. J. C. R. T. F. A. V. E. 2014. SFAIRP vs ALARP. 661.

SA/SNZ HB 436, “Risk management guidelines—Companion to AS/NZS ISO 31000:2009”,

Standard Australia, published on 2013, pp. 1-149.

VINNEM, J.-E. 2014. Offshore Risk Assessment, Vol 2.: Principles, Modelling and Applications
of QRA Studies, Springer., 513-520
Appendix A

Organisation Communication

Asset Management System (Developed by Muhammad Shahbaz Khan-Assignment 3)

Reliability Centred Design (RCD) comprises ISO 55000, ISO 31000 and Risk-based
inspection.
Risk Management Reference Sheet (Charles Sturt City)