Posted on 06/15/2015
This is the second post in a two-part series. Click here to read the first post, “Managing Risk through the Facility Portfolio: Identifying Risk”
A Fortune 500 pharmaceutical manufacturer with more than 100 million square feet of infrastructure supporting its worldwide operations learned how important it is to factor risk into a facility capital planning and management program. The company’s business continuity plans were essentially emergency response plans. A lack of investment in infrastructure and failure to identify and address systemic problems at its plants left the company vulnerable. When a facility failed, it had a significant negative impact on the brand’s reputation and the bottom line. The disruption limited its ability to maintain an adequate stock of quality products in stores and pharmacies.
To avoid similar business disruptions, the company developed a “risk-based” approach to infrastructure management which helped to prioritize mission-critical systems. To read more about developing a risk index, click here to read our previous blog post in the series. In this case, the highest priority was given to systems and equipment that affected production, whether directly or indirectly. Through this approach, the company has minimized unnecessary expenditures in end-of-life systems and tied capital allocations to functional value.
In another example, a research laboratory with government funding needed to meet “mission readiness” mandates. The challenge was how to allocate limited capital funds to remediate aging infrastructure for mission-critical systems.
In order to meet the mandate, the facility team needed to determine risk by analyzing three factors: time, the risk of failure and mission criticality. First, team members worked closely with the organization’s leaders to define the mission importance of each facility and rank them accordingly. They then determined the criticality and risk of the major systems within each facility and calculated a system mission criticality index (SMCI) for each system based on timeframe (near term (one year), medium term (five years) and long term (10 years)). This information was then rolled up into an overall mission criticality index (MCI) for each facility. Based on the MCI, the team identified areas of high mission criticality that could pose an immediate impact on life safety, regulatory compliance or environmental risk.
Risk management enables facility managers to take into account those factors that can have a major impact on the operations of not only individual buildings but also the organization itself. A risk index provides an objective view into facility risk and builds a solid case for funding. The flexible model enables facility managers to adjust variables based on systems and their importance for the company’s operations.
With effective risk management, facility managers can pinpoint areas of risk within the organization’s portfolio, today and in the future, and systematically prioritize projects to address that risk, A repeatable, consistent process for evaluating and addressing facility risk enables strategic decision-making and provides a level of confidence to an organization’s facility staff and management.
This article originally ran in the January/February 2015 issue of FMJ, the official magazine of the International Facility Management Association. For more information on FMJ, visit www.ifma.org/fmj.