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ERM vs. ORM – What is the difference? (Part 3)

July 17, 2019

In Part 1 of the series on ERM vs. ORM, we discussed the difference between Enterprise Risk Management (ERM) and Operational Risk Management (ORM). In Part 2 we discussed Risk Management in more depth. Now in Part 3, we focus on Ensuring Assets Perform.

Most people agree that asset integrity and reliability are integral parts of Operational Risk Management (ORM). But, in practice, Mechanical Integrity (MI) continues to be challenging to manage as our plants and infrastructure are well beyond their design life in many cases.

Organizations today often struggle with making the investment to strategically manage their assets. Instead, they let compliance be the basis for inspecting and maintaining their assets. In the past, practitioners promised that investing in Risk-Based Inspection (RBI) and Reliability Centered Maintenance (RCM) had a quick payback, only to find out that the actual payback period depended on a lot of factors such as the remaining life of the asset, economic conditions, and the availability of resources to implement a program across their organization. More recently, companies have been investigating Integrity Operating Windows (IOWs), only to find that IOWs are challenging to define and there isn’t a lot of data to support what may happen to equipment when operated beyond design limits for varying periods of time.

With the advent of the 4th industrial revolution and artificial intelligence, organizations are looking for new potential technologies they can leverage to reduce risk and enhance operating efficiency. The promises seem compelling, but new challenges are appearing because companies lack a solid foundation for data – including issues with quality and consistency, lack of data scientists, and limited models to make predictions on the process engineering and equipment. In addition, aging facilities lack the sensors and wireless infrastructure to enable additional insights.

We now realize we as an industry need to rethink our strategies for managing equipment. Past focus tended to be tactical such as inspection data management and condition-based monitoring. Top quartile companies appear to be focusing less on older tactical-first approaches and more on Asset Strategy Optimization. In addition, companies are employing Enterprise Loss Prevention strategies to capture lost production opportunities and enhance Overall Equipment Effectiveness (OEE).

By creating an Asset Strategy, companies are then able to leverage their efforts to increase efficiency while reducing their operational risks (bringing us back to ORM). The tactical asset outcome is reduced maintenance and inspection costs. Companies can focus on improving how they manage their critical assets, while learning from equipment failures and automatically updating their asset strategy library. Templates can be created for similar manufacturing facilities to greatly reduce the time to value realization.

Figure 1 – Next Generation APM

Once companies create an Asset Strategy, they can focus on Asset Performance Management (APM). Traditional APM is extremely labor intensive, requiring significant manual data entry, and taking an “equipment only view;” plus it fails to address key issues such as process safety, human performance, and conduct of operations. Next Generation APM addresses these key gaps by further integrating people, process, procedures, human engineering, and technology – keeping equipment strategies up to date and moving beyond a primary focus on maintenance. At its core, Next Gen APM is an operational decision support platform instead of simply a maintenance/cost decision platform. New production efficiencies can be achieved by ensuring the right people, with the right skills, are utilized to minimize defects and to reduce cost, equipment downtime, and incidents.

In short, Next Gen APM makes ORM more practical from an asset perspective because it integrates Process Safety, Conduct of Operations, and Human Performance. Because an EH&S first view of ORM doesn’t typically address a holistic set of the real risks of an organization, it’s time to expand our thinking.