Facility Risk Management: Identifying and Quantifying Risk

May 9, 2013

Within most facility portfolios, a wide variety of risks exist; it’s important to identify and quantify those facility risks in order to make better decisions now and in the future. Types of risk include life and safety issues, compliance with codes, mandates and regulations, environment hazards, natural disasters, and the possible compromise to an organization’s mission and reputation. The potential consequences of these risks include loss of business continuity, damage to the organization’s image and the high cost of unexpected damages and repairs. Quantifying these risks helps organizations make smart business decisions that can protect facility capital plans from unforeseen events and diminish risk overall.

There are three major risk-related questions facility managers need to ask: Where is my greatest risk within the portfolio, both today and in the future? What are the highest priority projects to address, given limited capital dollars? How can necessary expenditures be justified to management?

It’s important to develop an approach to facility risk so that it’s addressed in capital planning and budgeting. Key aspects of the approach are:

Definition: Is there a clear understanding of organization objectives and what constitutes facility risk?

Process: Is there an efficient, standardized process for assessing risk to facilities?

Technology: Is there a standardized methodology that leverages automation?

 Metrics: Is there a way to measure and report on risk objectively?

Knowledge and Education: Do the right people have access to the information they need?

It’s crucial to identify the specific risks the organization faces in terms of its facilities and the importance of each. Life and safety issues are always important to any organization, but they may be even more so in a facility that caters to the public. The type of facility affects the level of risk – for example, the failure of an emergency clinic is more crucial than the failure of an office building; for a university, the failure of classroom buildings most likely has a greater impact than the failure of athletic buildings, although perhaps not if it is a Big Ten school.

Every organization has a unique definition of facility risk. Facility teams need to work with departments across the organization to understand what facilities and systems are most critical in support of the organizational mission and specific objectives. Knowledge is power, and identifying and quantifying risk benefits any building portfolio by becoming the first defense against the worst or the unplanned.

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