Operational Management of Risk - Essay Example

FSR503 Operational Management Of Risk “This paper presented on the basis of case study on East Coast Aviation Service Company situated in wales, The main focus of the study is to work out the specific queries on risk identification techniques, risk analysis & risk treatment approaches. Risk management is very important for a every organization aiming for serious long term business & implementation of all the necessary processes, development & maintenance of KPIs & PIs are important to align all hierarchical organization that helps in reducing complexities in the work flow, conflicts in the roles & responsibilities, provides ease in performance analysis & gives accurate results on implementation of all the treatments figured out during the process, these are not the only benefits, but it has innumerous benefits that can help organizations to move wisely & to avoid mistakes that may cost with severe effects on economy, profits & productivity of any particular company. Hope this paper will be useful for every body in getting their initial step to proceed for opting risk management process implementation.” FSR503 Operational Management Of Risk Question 1: Sec. 1.a : List of ten (10) key operational activities of East Coast Oil Aviation Services as step-by-step, input-to-output actions/processes. 1. Aircraft fuelling for small jets, small piston aircrafts, older piston planes. 2. Stored Plane Fuelling Service, i.e, removal of aircraft from individual hangar & fueling. 3. Fueling of aircrafts on the flight line (where aircraft lines up for take off & after landing). 4. Preparing for self service fuelling for private aircraft owners & pilots. 5. Repair & Maintenance of 15 private & the transient hangars. 6. Inspection of safety & fire violations. 7. Transportation & Carriage of planes from hangar to flight line & vice-versa. 8. Management of landed flight directions, parking & refueling. 9. Management & Accounting of fuel charges of fuelling & parking. 10. Provision of on duty staff for maintenance of all fuel storage tanks, piping and pumps at the airport’s small fuel farm (three storage tanks). Sec. 1.b: Identification of one critical stakeholder/crew for each operational activity in Sec. 1.a. (Corresponding list of stakeholders/crew.) 1. Chemical/Fluid Mechanic Engineer expert in identification of fuel & air craft engines for guidance to labors in fueling different categories of planes. 2. Aircraft Maintenance Engineer & Stores Manager for managing safe removal of plane & chemical engineer for relevant fuelling according to the type of plane. 3. Site Aircraft Maintenance Engineer & Aircraft Parking Manager. 4. IT Infrastructure Development Engineering Manager. 5. Aircraft Maintenance Engineer / Stores Manager. 6. Safety / Fire Engineer or Manager. 7. Transportation Manager. 8. Chemical/Fluid Mechanic Engineer & Transportation Manager. 9. Accounts/Billing Manager. 10. Site Maintenance Engineer. Sec. 1.c: Identification of a consultation/communication technique/strategy to engage the stakeholder in risk identification process & explanation of reason to choose it as appropriate for purposes. Any project is required to be managed through a well structured hierarchy & reporting results to work out problems in processes & project performance tracking to categorizing them in problems & solution sets for in all cases that would be easy for review & changes too in later time for implementation of new plans & strategies. Following is a stake holder hierarchy that I think will work in automating the processes. A project manager lead (at least 15+ years of experience in project management) responsible for management of all the undergoing project’s solutions, & performance tracking to help technical member/engineers to concentrate more on technical side development, instead of increasing their over heads of managing all of the things that will not work for sure. Every person should have only that much burden & responsibilities that he/she could manage, else, may result in increased attrition & depreciation of employer’s image in employee cadre & further consideration for career development. Project Manager Lead (PML) Duties. (Rank 1) Identify and analyze potential threats. Identify generic and project-specific risks. Document identified risks. Prepare the Risk Management Plan. Periodically identify new risks that occur during the project life cycle. Training of Rank 2 cadre on process implementation techniques on six sigma & lean approaches of operational management. All Team Leads – Senior Engineers & Senior Managers Level Duties (Rank 2) Support the PML in monitoring and controlling risks Project implementation tasks on technical grounds by managing their technical teams of junior engineers & technicians in case of engineers & junior program managers & labors in case of managers. Implementation of operational approaches in their team management tasks. Reporting to PML with all the status of project execution time to time. Project Team Members – Junior Engineers & Junior Managers (Rank 3) Support their respective managers & tech leads in identifying risks. Reporting their individual tasks execution status to them on timely basis. This hierarchy will enable the communication in cross functional hierarchies across the organization & provide an ease to handle the process implementation. The communication approach may differ on the basis of the situations, type of problem, who is auditing & who are performing. The level of inteview/commuication may vary from member to member, i.e, oral individual communication to note the project status, group meeting, conference, communication meeting with CEO, internal quality process audits & mock interviews with workers & employees, conduction tests on technical works & safety measures, email or live chat while working on some thing to synchronize the works & meeting deadlines or end to end solutions/remote customer issue resolution/interfacing with field engineers…etc. Question 2: Sec 2.a: Five Risk Identification Techniques: 1. Examination of future prospects of Aviation service business by research on future of fuel dependent services that is expected to loose value in near future & has to take preventive measures to establish an alternative of non-renewable fuel resource with an renewable/abundant energy resource, survey of advance architectures & designs of aircrafts of next generation making use of electronics solutions based on renewable energy resources like solar energy to provide power in highly sophisticated ultra low power ASICs may give a solution to cut non-renewable fuel. 2. Analysis of risk taking capability through examination of KPI compliance checks, Data Entry of Key Performance Indicator values & iterating all historical performance values against present values. 3. Analysis of capability of stakeholders & crew in project delivery & meeting deadlines is essential to ensure & commit the contractor to set the financial value. It may be done using excel sheet data entries of values of all parameters of Stakeholder/crew capabilities in project delivery that is to be compared with ideal performance stats required to meet the goals of project successfully. In turn requires a software tool that could keep the track of all the values & also could simulate all the values to give final picture. 4. Analysis of resource availability for project/service execution & comparison by development of PI metrics it’s analysis against risk taking capability of east coast aviation group. 5. Examination of safety measures taken in consideration & failing to meet safety constraints set. Some useful software tools for Risk Management, KPI / Scorecard Designing & Maintenance, Project Planning & Follow-ups. 1. Katmar, ‘PRA-Project Risk Analysis’, Ver. 2.1. 2. AKS-Labs, 2008, ‘BSC Designer’, Ver. 2.0.0.0 3. ProjectBuzz, V1.02. 4. Accord, PPR (Project Planner Reader), Virginia, USA. 5. Manas S.L., ‘Risk Management Additional Tools’, EAR/RMAT. 6. Palisade Corporation, ‘Risk & Decision Analysis Softwares’, 2009. 7. EAR / PILAR, ‘Environment for the Analysis of Risk’, 2009 * Jones, G.F, ‘Risk Management at Work’, n.d. Sec 2.b: Five Broadly Classified Risk Categories: 1. Technology & IT Related Risks. (StomeBurner G, “Risk Management…”, July 2002), (Chew.T, ‘MAS’, 2002). 2. Financial Risks. (Tham.J, “Conceptual Issues…”, 2001). 3. Safety Related Risks. (HSE, 2008), (System Safety Handbook, 'U.S. Department of Transportation', 2008), (Zwicker T J, ‘System Safety Process Steps’, 2005) 4. Operational Risks. (MetricStream Inc, Col. 'Operational Risk Management', 2009), (FAA System Safety Handbook, Chapter 15: ‘Operational Risk Management’, 2000) 5. Resource Related Risks. (RRM (Resource Risk Management), n.d), (Leverett, ‘17.906…’, 2007) Sec. 2.c : Ten Risks to which the operation may be exposed – Risk Register: Risk Category Risk Statement (Description) R1. Loss Of Business Technology No alternative non-renewable resource for future security after around 35 – 40 years or inflation in the fuel costs that will push the revenue to the negative side. (D1) R2. Individual Service Based Business Financial East Coast Aviation Service business is based on one domain operation instead of distributed risk portfolio that may affect the future of aviation group in one unfortunate rise of fuel prices, no other business ownership that may sustain in next generation for long term perspective. (D2) R3. Fire or Explosion Safety Highly inflammable substances all over the field keeps the danger of small mistakes that may result in big destructions, requires safety measures, techniques & security to be taken in serious consideration. (D3) R4. Storage liability Operational Expensive stored aircrafts prone to damages & may cost severely that could cross the profit margins & hence negative revenue due to carelessness or insufficient automation or human dependent system that is prone to commit mistakes. (D4) R5. Requires good concentration & judgments Resource Navigation inside the airport premises in aircraft handling, Fuelling of aircrafts with right fuel as per the type of aircraft engine that requires good experience & knowledge of aircraft, inexperienced or non-judgmental crew/ stakeholder may cause problems. (D5) R6. Transportation Losses Operational Fuel loss in accidents & refilling of tankers, old/leaking containers, evacuation of fuel from tankers in storages on aviation base. (D6) R7. Flaws in IT Infrastructure Technology & IT Inefficient/No automation may result in delays in response to customer requests, inefficient data management may result in accounting errors that may in turn result in loss of actual profit statistics, dis-satisfaction of customers, disputes on fuel charges & quantities. (D7) R8. Field Service Tracking. Operational Difficulties in tracking the field services like fuel tankers, labors & technicians in field taking advantage of no-tracking system on their individual works in day to day routines may show the fake work engagement, handling of goods/cargos loading or unloading by labors may suffer carelessness may result in accidents due to wrong approaches of goods handling & charges of goods damage. (D8) R9. Health Loss Resource Labor grade employees in the works involving inhaling fuel fumes. (D9) R10. Lack Of Training Staff Resource & Operational Lack of smart techniques to perform particular work, reduction in fatigue in stressful works for qualitative & quantitave outputs may result in reduced outputs, loss of profits/contacts/ customers. (D10) Question 3 : Sec. 3.a : ‘level of risk’ matrix to help in analyzing and assessing the risks identified in the risk register in Sec. 2.c above. Level Of Risk  0 1 2 3 4 5 6 7 8 9 10 R1 D1 R2 D2 R3 D3 R4 D4 R5 D5 R6 D6 R7 D7 R8 D8 R9 D9 R10 D10 Risks (See Table 2.C) Level Of Risk. D1 to D10 – Description of Risks (See Table 2.C) Sec. 3.b : Application of a consequence, likelihood and level of risk rating to each of the ten risks in your risk register in Sec. 2.c using level of risk matrix in Sec. 3.a. Risk Level Of Risk Consequences Likelihood (Out Of 10) R1 1 Insecurity Of Company’s Future. 9 R2 3 Uncertainty & Unsecured Future Of Company. 8 R3 9 Destruction or Tragedy, Wastage, Revenue Loss. 8 R4 6 Inefficiencies, Wastage, Negative Revenue. 7 R5 5 Accidents, Customer Loss. 6 R6 9 Increase in consumption & loss of profit. 9 R7 3 Loss of customers, Trust, Affect revenue. 9 R8 1 Accidents, Damage Charges, Loss of Customers & Trust. 8 R9 2 Declined Productivity. 9 10 6 Delays, Inefficient works & less utilization of resources, Customer’s Dis-Satisfaction & Affects Productivity. 8 Question 4: Sec. 4.a : Risk treatment matrix outlining three (3) specific risk treatments for each of these two risks (R3 & R6) in Sec. 3.b. Risks Treatment R3. Fire or Explosion 1. Tracking & Inspection of refilling & evacuation of tankers. 2. Fire & Safety Precaution Training & Awareness. 3. Provision of remedy measures & convenient emergency exits in infrastructure. R6. Transportation Losses 1. Strict guidelines for labors of their liability in fuel loss. 2. Equipments to measure loaded, expected & actual quantity of fuel transferred in the aviation base storage. 3. Assignment of a storage manager to monitor & enter all the records of fuel loading, dispatched & actual quantity transferred in the aviation base storage & also the maintenance requirements of the tanker & storage resources. Sec. 4.b : Treatment Options for R3 & R6 (Two Suggested Risks) & explanation of reasons to be considered as most appropriate for respective risk treatment. i> Treatment for ‘R3. Fire & Explosion’ falls in ‘safety precautions’ operational category & the most appropriate solution for implementing this treatment is to include them in compulsory process to be followed by all the employees to undergo training on safety provided that the staff is available to deliver bi-quarterly or while induction programs for new hires. I believe that it is the most appropriate solution because, training & awareness to any thing is the most convenient method as ‘Prevention is Better Than Cure’, every body should be aware of the techniques in advance to prevent the mishaps & if safety precautions are tried at the time of mishap or occurrence of such event may produce severe results because in sudden panic no-body knows what to do, where to go & how to solve the problem of fire or explosions as the accident happens in fraction of seconds that doesn’t gives any chance to get alert or never gives warning. ii> Treatment for ‘R6. Transportation Losses’ falls in ‘Operational Improvement’ Category & the most appropriate solution is development of KPI for stakeholders that indicates the goals & target, individual/crew performance could be measured through the values of KPI matrices of individual/crew or compared with the set goals & fulfillment of targets. In his case the Transportation Manager should have the liability to fulfill all the targets set in evaluation KPI values & also monitor labor activities while refilling to maintain the records of loaded/unloaded fuel quantity, actual fuel quantity loaded will tell about the loss of fuel when compared with loaded fuel in the refinery/gas station. This approach is most appropriate for the category of risk because, for any measurement data is required to be collected that could help in analyzing the losses & monitor & prevent any further mistakes that has already been committed by labors, and dedicated transportation manager is the person who is paid for this work, so it will maintain the automation of the process implementation & maintenance of KPIs, that can not be done by every individual member as they have to work on technical/operations to meet the time lines & project/service delivery can not concentrate of other’s activity & maintenance of record or doing research on it along with their work, it is an impractical think to expect. Sec. 4.c : KPI inputs & outputs for two selected Risk Treatment implementation. Risk Treatment KPI Inputs Outputs 1. Safety Precautions against Fire & Explosion Risks. Preparation of training material relevant for making required awareness & practical delivery of training on safety measures & techniques. Measured on number of trainee enrolled in training, attended. Implementation of techniques & safety measures by regular emergency punch to check the alertness against disasters & applied trainings are successful. Output will be reduced number of accidents & infrastructure losses. Can be measured on value/score of employees in applying training in works while performance analysis. 2. Operational Improvement against Transportation Loss Risks. Application of analyzed data collected during refilling, transfer of fuel & quantity statistics to eradicate the losses & inefficient handling practices of fuel. Reduction in the loss of fuel resulting in increased efficiency of transportation crew in booking close value of target revenue of concerned crew. Sec. 4.d: Person liable for implementation of selected risk treatments. 1. Stakeholder liable for Safety Precautions against Fire & Explosion Risks – Safety Manager (See above in sec. 1.b, pt. 6). 2. Stakeholder liable for Operational Improvement against Transportation Loss Risks – Transportation Manager (See above in sec 1.b, pt. 7). Conclusion: A custom step by step approach for Process of Identification of Risk in East Coast Aviation Base Support & Maintenance Services. 1. Identification of key services provided by service provider (east coast aviation). 2. The overall dependencies of revenue & business sustainability of east coast aviation, i.e, the revenue is generated after how many stages in the integrated supply chain of different companies contributing in revenue generation. More the stages less will be the profit, each has separate NREs & profit margins will result in increment of consumptions & cost if operated separately. 3. Identification of the criticality, importance & uniqueness of the services that could be considered as dependency of happy landing on east coast aviation business. 4. NRE budget preparation (cost that will be deducted from net revenue after simulating/estimation of all the service costs like: - Cost of : Fuel Transportation from gas/fuel station to aviation base, - Cost of : Fuel Storage & Maintenance (employment & hiring cost of machinery & equipment and their maintenance cost (system & tool resource cost), - Cost of : Manual labor, Human Resource Management, Safety Resource Management, System (Site Electrical Automation, Data Base Maintenance Softwares & IT Infrastructure) & Tool (Mechanical/Electromechanical Machineries) Resource Management, Site/Building Resource Management, Fuel Storage/Material Handling /Fire Engineering Technical Experts, On call duty technicians. - Cost of : Fuel consumption in daily activities & their record/account maintenance. - Cost of : Fuel loss while - transportation, road accident, gas/fuel refilling on gas station & dumping it in fuel storage facility on aviation base. - Cost of : Damage charges to owners of aircraft while handling, cargo/goods/ service delivery delays (happy landing may charge it for the risk of customer dis-satisfaction & hence business loss), fire accidental loss, failures of craft due to impure fuel (by chance). 5. Evaluation of the risk of negative revenue after above estimation (is NRE is more than profit margin or have very less margin in actual & offered pricings?), through simulating all the data collected in NRE budget. 6. Preparation of PI (Probability & Impacts) Matrix through discussions/meeting with stake holders or including it as a procedure to report their respective up hierarchies with PI matrices on the basis of own individual work. And simulate all of the PI matrices to come up with an average values for final consideration. 7. Examination of stake holder’s capability against key factors like intelligence to handle contingent issues, experience in relevant work, average time frame of previous service/project deliveries, successful completion of previous projects & quality (could be scaled on number of positive & negative customer feedbacks associated with particular stake holder’s liability), reliability of the stakeholder in staying with the company in adverse situations in the scale of 0 to 10 (number of such events, degree of patience, self confidence level…etc) to measure/estimate the service quality & performance by means of general discussions, general interviews, meetings or tests. 8. Setting up the global KPIs (Key Performance Indicators) applicable to all top to bottom organizational hierarchies & giving it to respective crew manager to customize them up to some extent that may vary in roles, responsibilities & nature of work as applicable to their operations (further step would be converting them into separate BUs (Business Units)), preparation of KPI matrix of individual stakeholder/crew & than simulating all of the values to get a final average values. Could be included in work flow status reporting format by individual member of top to bottom organizational hierarchy starting from CEO to Labor/Technicians. 9. Simulation of all the data collected so far to prepare KPI metrics (value of performance against ideal KPIs), PI (Probability Impact) metrics to come up with a reasonable decision on further plans of investments, revision, re-establishment, starting up new venture/project…etc. 10. Survey of competitors/service provider with same/similar service portfolio in the market to stand as hurdle in generating consistent profits in/near business location (New South Wales/East Coast). 11. Evaluation of world wide commodity market for predictions of inflation & deflation in fuel market prices, their demands & supply information could be researched on internet to take decisions/predictions for fuel/other critical resource or commodities required for concerned services for advance stocking to keep the supplies up to the demand in East Coast Aviation Services. 12. Survey of airlines or flight owner business that are key contributors & future determinants of aviation industry growth & their dependencies to assist in inventory control as per the market’s emotional waves to prevent the wastage & cost of storage of over/under supplies. 13. Survey of upcoming new techniques that is more inclined towards research on environment friendly solutions that may reduce the popularity & usage of airlines/planes as mode of transportation in near future by passengers & goods transportation businesses as the consumption of fuel, air pollution & accidental risks are more in air travels & transports. For example china has bought a railway service from Germany to distribute the traffic within china through high speed rail services operating on controlled magnetic field, challenging the aircrafts in speed, fuel consumption, reduced air pollution, accidents, comparatively less complexities in rail traffic management than air traffic management, reducing the chances of appreciation of aviation businesses in near future. 14. Evaluation of services that can be provided for sustaining business in recession periods without complete shutdown of the units. 15. Evaluation of the services on long term perspective & thinking about after 40-50 years when fuel resources will become almost nil, evaluation of techniques to produce fuel in alternate ways or a complete alternative of non-renewable fuel resource with abundant renewable fuel resource. 16. Survey of on going research & developments in new architectures & techniques scientists & engineers are going to replace aircraft combustion engines, the most closest possibility is of replacement with electrically operated sophisticated systems having efficient batteries & microcontrollers/chips (ASICs (Application Specific Integrated Circuits)) for automation of electro-mechanical parts/remote sensing/communication is already done by these chips only, that would be a possible aid for securing future of aircraft, may kick the fuel dependent businesses & services down. References: Software Tools References: Katmar Software, South Africa, PRA-Project Risk Analysis, Ver. 2.1, February 2001, [Internet], Date Accessed: 17 February 2009, Available At: AKS-Labs, 2007-2008, BSC Designer, Ver. 2.0.0.0, [Internet], Date Accessed: 17, February 2009, Available At: ProjectBuzz, V1.02., 2008, [Internet], Date Accessed: 17 February 2009 Accord Software & Systems Inc., PPR (Project Planner Reader), (Virginia, USA), [Internet], Date Accessed: 17 February 2009, Available At: Palisade Corporation, Risk & Decision Analysis Softwares, 2009, [Internet], Date Accessed: 17 February 2009, Available At: EAR / PILAR, ‘Environment for the Analysis of Risk’, 2009, [Internet], Date Accessed: 17 February 2009, Available At: Jones, G.F, ‘Risk Management at Work’, n.d., [Internet], Date Accessed: 17 February 2009, Available At: Other reference material on Risk Management: ‘FSR503 Operational Management Of Risk’, (v06.01), “Australian & New Zealand Institute Of Insurance And Finance”, 2006, [Provided for Reference in secured PDF format], Date Accessed: 13 February 2009. More Information: StoneBurner.G, et al, “Risk Management Guide…”, NIST Special Publication 800-30, National Institute of Standards and Technology Special Publication 800-30 Natl. Inst. Stand. Technol. Spec. Publ. 800-30, 54 pages (July 2002), [Internet], CODEN: NSPUE2, Date Accessed : 18 February 2009, Available At: Chew.T, MAS (Monetary Authority of Singapore), “Reports & Consultation Papers”, ‘TECHNOLOGY RISK MANAGEMENT GUIDELINES FOR FINANCIAL INSTITUTIONS’, 11 November 2002, [Internet], Date Accessed : 18 February 2009, Available At: System Safety Handbook, Col. Aviation, 'U.S. Department of Transportation', Washington, Federal Aviation Administration, Updated: 2:03 pm ET May 21, 2008 Zwicker T.J, ‘System Safety Process Steps’, 2005, [Internet], Date Accessed : 18 February 2009, Available At: MetricStream Inc, Col. 'Operational Risk Management', 2009, [Internet], Date Accessed : 18 February 2009, Available At: FAA System Safety Handbook, ‘Chapter 15: Operational Risk Management’, 20 December 2000, [Internet], Date Accessed: 18 February 2009, Available At: RRM (Resource Risk Management), 'Resource Risk Management...', n.d, [Internet], Date Accessed: 18 February 2009, Available At: Leverett.F, “17.906 The Geopolitics and Geoeconomics of Global Energy”, 2007, ‘Resource Nationalism and Market Power’,[Internet], Date Accessed: 18 February 2009, Available At: Tham.J, Duke University, et al, “Conceptual Issues in Financial Risk Analysis: A Review for Practitioners”, February 2001, [Internet], Date Accessed: 18 February 2009, Available At: Academic Honor Code I, Ravi Prakash, take full responsibility for the contents of this assignment. To the best of my knowledge, any ideas, words, sentences, paragraphs or parts of another person's writings are fully documented. 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