Taming the Monsters of Operational Risk in Facilities Management
For facility managers, who can end up doing a certain amount of fire fighting, risk can be a many-headed monster.
Should we repair an asset or replace it? What if we get another hot summer and go over our electricity budget again? Will the cement in the parking garage last another two years? What if we aren’t as accessibility-compliant as we think?
Fortunately, risk is a monster that can be tamed (at least partially) with information. Combining current and historical data will help real property professionals make informed decisions, no matter what risk management framework they follow. To be useful, however, the information has to be readily accessible.
There are numerous types of risk associated with facilities management, and some of these will vary according to industry. For example, a healthcare facility has additional risks that an office building does not: loss of electrical power is an inconvenience in most workplaces but is potentially deadly in an operating room.
But most facilities have the following types of risk, and have started to use more advanced technology to mitigate them. Let’s take a tour of the current tactical thinking in managing different types of risk.
Risks in Asset Management
When it comes to mission critical assets, typical risks arise from downtime and expensive emergency repairs. Preventive maintenance, regular condition assessments, and periodically recalculating residual life expectancy are tried and true approaches to managing those risks.
Similarly, planned replacement (as a capital project) can reduce downtime risks, and potentially even save money. If you know the life expectancy of an asset, you can shop around for a replacement well in advance and potentially get a better price.
In terms of technology, RFID can be used to track asset locations. For example, if key assets aren’t supposed to leave an area, RFID tags and sensors can be used to mitigate the risks of misplacement or theft as well as timely locating for important (and sometimes legislated) maintenance.
Some organizations use tools like building information modelling (BIM) to bring large, useful sets of valuable data to be used in advance of commissioning a building of floor, avoiding expensive data collection. IoT devices like sensors can be used to monitor complex equipment or systems. For example, a simple thermal sensor can provide an early warning on equipment that is overheating or even about to fail. Looking further ahead, the use of AI/machine learning as a predictive tool is beginning to come online, allowing algorithms to be applied to the existing data to automate the data analysis— why not let the technology and the data forecast the best course of action.
For now, the most important part of the risk assessment process is data. This can include your own records and outside information. For example, your engineering firm might have lifespan information or typical failure timeframes for building materials or components. If assets are failing ahead of schedule, it’s helpful to know not to buy more of the same kind.
There’s a tipping point when it comes to replacing something now versus later (i.e., capturing the cost in your operations budget or in your capital budget). The numbers help you understand the trade offs between where and when to fit the replacement in, and understand risks from anything else you may be deferring until later in order to make that happen.
Occupancy and Lease Administration Risks
One of the greatest sources of operating budget savings can be found in reducing occupancy costs. Companies like Dell and American Express have been saving millions of dollars annually by leveraging remote working to scale down their property portfolios.
The right system can show you the numbers you need to make decisions on modifying or reducing workspaces, or when deciding between keeping existing buildings versus building new ones.
Lease administration is fraught with risk when it comes to renewals, options, and clauses. Should you miss a renewal date, it can be expensive to renew the lease, and just as difficult to relocate. A facilities management system should provide alerts so you don’t miss renewal key dates.
Risk in Technical Projects
We work with a wide variety of organizations, both public and private, and we’re seeing some fundamental shifts in the way that risk is being managed when it comes to delivering technical projects. A couple of ways to de-risk technical projects:
- The continued shift towards commercial software instead of building systems in-house. This manages risk from everything from schedule overruns to insufficiently captured requirements. Further, many organizations are using these systems without extensive customization, avoiding support and upgrade expenses.
- Starting small, building big. With a delivery model like this, progress happens in incremental quick wins, not with a big bang after a long delay. This mitigates risk associated with the most shapeshifting monster of them all: the unknown unknowns. (Unknown unknowns are risks from scenarios that are so undefined that they can’t be properly articulated or accounted for.)
Most large organizations have policies on risk, but may fall short on carrying them out. Having a system that can track and provide reporting on process adherence is essential.
For legislative compliance, like new accessibility regulations, there is a reporting mandate. Higher education facilities have reporting mandates for the province. If your facility’s mandate is research, for example, a system can track how you are optimizing your use of space to fit your mandate.
All Risk Translates to Financial Risk
In the end, almost all operational risk carries a risk associated to dollars and cents, especially considering that operating budgets are divided into capital vs expense.
If you have $10 M in capital, you need to know how you’re managing it on a 5, 10, and 15-year basis. You need to know what your assets are, what condition are they in, and the smartest ways to spend to improve them.
The right system makes data more visible and more actionable, and empowers informed decision making. Horizant specializes in pairing organizations with the right digital toolsets to help them manage risks more effectively.