Risk Management describes policies and processes for the identification, assessment, quantification, analysis and treatment of risks and opportunities. Risk and criticality are not the same. Criticality is a function of the relative importance of an asset OR system to the organisation’s overall mission. Critical assets are an organisation’s essential assets that can impact on the organizational objects. Risk, on the other hand, is a function of criticality (impact of failure) and the likelihood of failure. Accurately identifying and understanding criticality and risk is foundational to the success of an organisation’s approach to Asset Management and to securing its level of service.

The Asset Risk Management Framework should be aligned to the organizational (or Corporate) risk management framework, risk appetite and Risk Management standards (e.g., ISO 31000). ISO 31000 quantifies risk as the product of the Likelihood (or Probability) of an event occurring and the Consequence (or impact) on organizational and Asset Management objectives.

Risk level is assessed against the organisation’s risk tolerance both at the individual level and at an aggregate level. Risk mitigation strategies can be developed to ensure that the resulting Residual Risk is at tolerable levels based on the organisation’s appetite for risk. Assessing residual risk involves considering trade-offs with cost and performance, and impact on the achievement of organizational and Asset Management objectives. Comprehensive Risk Management is the foundation for developing capital plans related to growth, rationalization, upgrades, enhancements, renewals, and updates to operations as well as maintenance strategies.

Risk Management is common to all subjects within the Asset Management Landscape. Risk management activities must be clearly aligned with activities at an operational and project level such as risk treatment and Asset Management Assurance and Audit. An organization should establish processes to identify, gather, collect, or capture opportunities and decide on the opportunities to be addressed to improve performance of the organization.