Risk Management
Recognizing the risk issues is very essential when providing the complete list of menaces which possibly takes place in all steps while a project is being executed. In this stage, the organization liable to identify the hazards by forming situations that may happen in various circumstances. They will then determine the reasons of hazards as well as the probable consequences that may affect the project whether the root causes are under organizational control (Chae, 2015). In order to recognized angers comprehensively, the company should allot the staff who have suitable knowledge about ISO31000, a standard to be maintained during the execution of the railway-bridge construction project. This would help them in identifying risk and utilize proper tools and methods. For example, while the execution of the project, maintaining ISO guidelines will result into
- Have a look into the doctrines of risk management, which are the basic standards for its success
- Concentrate on guidance by topmost management who must assure that risk management is assimilated into all organizational acts that start with the ascendancy of the company that is running the project.
- More impetus on the iterative nature of risk management, sketching on the new involvements, knowledge and assessment for the revision of process factors, actions and holds on at each step of the process
- Reshuffling of the content, with more emphasis on nourishing exposed systems exemplary that regularly interacts about feedback; with the outer environment to fit various wants and contexts
In the business world, risk management means the process of the identification, analysis and controlling threats to the organizations’ financial structures. For any organization this threats can come from varied sources such as fund shortage, legal liabilities, natural disasters, investment decisions etc. Every organization faces some or the other form of risks during the course of their business (Love et al., 2014). When any organization decides to invest in some forms, it faces a number of financial threats. These financial risks can come in form of recession, inflation, capital-market volatility etc. So in order to reduce and control such risks, investors practices risk management. If the fund manager does not give proper importance to risk management, it can create catastrophe at the time of financial volatility in economy (Hillson and Murray-Webster, 2017). There are a number of levels of risk in the financial market. For Example, investment in mutual fund is considered safer than investment in equity So while investing in the equity funds, the investors tries to maximum diversification of their portfolio to minimize the risk.
Purpose:The purpose of risk management is to detect the prospective problems that may occur during the course of any activity. So that a proper plan can be devised prior any such impending threats to the company or the project.
Risk is not necessarily a negative term in financial world. In financial world, risk is essential and indivisible from performance. Common definition of investment risk is a deviation from an expected outcome (Hillson and Murray-Webster, 2017).
Following are the various elements used in the risk management process:
Identify: The fund manager needs to consider every risks faced by the company. The risk can be both-positive or negative. Here opportunities are called positive risks and threats are referred as negative risks.
Avoid: After identification it can be seen that few risks can be avoided if the company chooses to ignore certain activity.
Develop: Some opportunities come in a disguise of risk. It is upto the fund manager to develop such risks.
Reduce: Sometimes threats occur suddenly on ongoing projects. In this case the fund manager needs to activate strategic initiatives to reduce the risk as much as possible (Olson and Wu, 2017).
Principles of risk management
Shift: Some threats, which cannot be avoided, should be shifted using contracts, insurance, joint ventures etc.
Accept: The rest of the threats should be accepted after scanning by the above steps.
Lastly, risk management is not a once done activity and it improves over time:
Improve: The investor needs to improve their risk management ability over time by making it a regular part of the operations (Bessis, 2015).
There are few core principles in regard to risk management (McNeil et al., 2015). While doing a proper risk management the following particular areas and should be a part of the overall risk management system:
- The system should create significance
- It should be a fundamental part of the organizational process
- It should be considered in the decision making process
- It should clearly address uncertainty
- It should have a proper system and structure
- It should supported on the latest information available
- It should be custom made to the project
- It should include the human factor
- It should be clear and all-inclusive
- It should be adjustable to change
- It must be continuously evaluated and improved according to the necessity
Risk Management is a vast field and needs specialized understanding and background to perform effectively. However, the project manager of any project becomes the defacto risk management officer, in case someone else has not been appointed for the particular job. Being the asset manager, project manager becomes responsible for the success or failure of any project (Hopkin, 2017). Being equipped with the knowledge of various concepts and methods responsible for risk assessment and risk management, he or she will have an advantage in being able to create a project plan, which also include any adverse potential for the project.
In the corporate world, asset management is the process of maintaining a company’s assets both tangible and intangible are used to their best ability, accounted for and maintained (Bromiley et al., 2015). In the given context, the railway bridges have been chosen as the asset.
There are seven elements in asset management. All of them and their relation with asset management activity and asset management system have been discussed in the following article:
Leadership- It is the responsibility of any leader or senior managers of the organization that they address and resolve the asset management objectives of the organization. It is not enough to provide necessary resources for the asset management function, but it is also important to play the role of dedicated champion within the organization (Bookstaber et al., 2015).
Planning- Every corporate can get advantage from a proper strategic asset management plan which is backed by organizational objective and applied through good asset management policy. Moreover, implementing asset management system can improve the efficiency of asset management information (Khan et al., 2015). This sometimes tends to involve taking tiered approach in planning.
Support- managing assets also involve support from various departments of the organizations, such as finance, communication, human resources etc. This is the most essential part in optimal alignment of asset management system with the existing other management systems and various decision making processes. The right support system can help with the following:
- The resources required for the company’s asset management objective
- Inputs required supporting assets, their management and asset management system.
- Requirement of internal and external communication for various asset management activities
Operations-The asset management system of any company should be able to direct, implement and control of all asset management activities including the activities which have been outsourced
- Planning, Implementation and control of the system
- Identification of the changes and risks and their impact on the achievement of asset management objectives
- Monitoring the performances of in-house and as well as outsourced asset management activities
Evaluation-Every senior management of the organization have an important role to play in scrutinize and evaluate of asset performance (Sadgrove, 2016). All the teams, which are involved in the business operations, should have a good knowledge of asset management performance and management systems
- Determination of the assets that needs to be monitored
- Plan, launch, implementation and maintenance audit programs
- Evaluate asset management functions for sustainable suitability, sufficiency and efficiency
Asset Management
Improvement-Asset management teams need to encourage continuous improvements to make sure that the results of performance evaluations reduces any negative effect on the company or its stakeholders
Railway bridges form one of the major asset groups on rail network. Railway bridges are long-life assets and it deteriorates with time, usage and poor maintenance. Every railway bridge is built differently in terms of construction, time, usage etc. Therefore, it makes their maintenance with regard to time of the maintenance or type of the maintenance, very complex. For every bridge, the degradation process is decided after examining the maintenance records and evaluating the times each component take to depreciate, when the maintenance is required. The rail companies are suffering due to increase in maintenance cost, ever-increasing rail traffic and limited opportunity for maintenance is responsible for the asset loss. Sometimes, condition assessment, cost effective maintenance, repairs, and replacements and up gradation, insufficient and incorrect data proved major challenges in the railway bridge management (Lam, 2014). The challenges makes the infrastructure planned require more time to plan, plan budget, evaluate and make decisions for asset life management. Majority of the bridge management systems used in Australia are basic and corrects fault at the network level. In most case, a detailed evaluation of each component will provide enhanced outlook of the basic causes of faults and will allow the planner to take decisions that are more informed on bridge life improvement.
The foundation of continuous improvement consists of four basic elements: Plan, Do, Check and Act. This also provides foundation for an optimized asset management system. Developing a proper plan that includes risk and eventually costs brings a significant advantage to asset management (Leveson, 2015). Asset management is one of the basic responsibilities of any corporate entity. It is obvious that the new standard will demonstrate the importance of transaction-level business operations, like production and maintenance or planning and scheduling. It will also important to have clear communication monitoring to maximize corporate profitability and resources. For varied reasons information system, corporate objectives and business processes are not well aligned with each other. This eventually leads to hide some of the company’s limiting factors and risks and ultimately prevents the company from optimizing the company’s asset performance.
Conclusion
In the above report, one can find the definition of risk management of any company. It also explains the process involved in the risk management of a particular asset. In this report, the given scenario was of Railway Bridges. The report also explains how the risk management system works in a particular company. The report also discusses the asset management, its various elements. It also focuses on the relationships between asset management and the elements of the asset management activity and the asset management system. Lastly, it explains how the risk management and asset management systems are interrelated.
References
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