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Asset and risk management integration: Reducing costs in six steps

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Asset and risk management integration: Reducing costs in six steps

The global recession, combined with increased international competition and market consolidation have forced the mining industry to consider a diverse array of mechanisms to achieve their financial goals. After merger and acquisitions, operators can spend a considerable amount of time and resources attempting to understand their new operations. In order to stay competitive, operators must be able to improve margins by reducing operation, maintenance, and capital replacement costs as well as consequential costs associated with unexpected failures. One way to do this is to combine asset and risk management programs.

Operations using integrated asset and risk management are in a stronger position to develop meaningful maintenance and capital expenditures programs, and are at an advantage when addressing other potential issues such as litigation, regulatory fines, and other unforeseen costs. By identifying and ranking all assets--from the highest likelihood of failure to lowest--across all operations at once, mines become more proactive and are able to avoid unplanned crises, such as catastrophic failures, and the high, sometimes human cost of responding to these unanticipated events.

Industry Challenges

Operators understand that robust asset management requires profound technical and engineering understanding of an operation’s physical assets (including trucks, haul roads and bridges,processing mills, chemical facilities, drag lines, and piping). This understanding is a prerequisite for developing sound maintenance strategies.

Simultaneously, clearly documented asset management systems with performance standards go hand-in-hand with organisational mapping and role descriptions. However, many programs don’t drill down further than role descriptions to look at the individual’s wellness.Wellness information - such as health and safety monitoring – is typically integrated into a mine’s safety program.  However, if organisational mapping is already a component of asset management, doesn't it make sense to combine the programs?

Integrating risk management into an existing asset management program allows operators to track and monitor the condition, characteristics, and operating environment. Data produced allows operators to identify trends -- such as the rate of natural corrosion -- and avoid costly failures before they occur.

Failures in the mining industry are often unfathomable, and in most cases can be tracked to a single point of failure.The horrific 2010 Pike River Mine disaster, which ended the lives of 29 miners,was determined by some to be caused by an alleged lack of working gas monitoring systems. Although it is hard to pinpoint the cause of most mine disasters, the case can be made that the industry’s traditionally-separated asset and risk management programs have led to some of these events.
Most importantly, the integrated approach is designed to prevent such disasters.

This approach allows operators to strategically allocate maintenance and capital resources to the right location at the right time, leading to fewer work stoppages, less reactive maintenance,plant upgrades made with greater efficiency, streamlined operations, a better promotion of  safety throughout the organisation, responding to regulatory and environmental challenges more succinctly,and reduced risk exposure. 

Six Steps to Integration

Perhaps even better news is that an integrated asset and risk management system is straightforward to implement.  Here are six simple steps to success:

1.            Understand (and agree on) organisational and regulatory requirements

Assessing risk begins with understanding the nature of your organisation’s objectives. Operators should quantify objectives in terms of health and safety, optimizing revenue, minimising downtime, reducing environmental impacts, maintaining good public relations,and complying with regulatory requirements. These factors form the basis for measuring consequences or impacts to the system if assets fail to perform at a level that supports your business objectives.

Also, industry requirements such as regulatory, legal, and national requirements should be understood and described. These may include record-keeping requirements which can be incorporated into your mine’s organisational strategic plan.

2.            Know your mine

A data management system requires careful planning to collect information at a level of accuracy required to meet the objectives of an integrated asset management program.  Detailed information should be maintained, including the age of the asset, material type, if there are any spare parts in the inventory, and construction and service records. Other information -- such as installation contractor, climate, and exposure -- may also be helpful.

Although this can be an expensive endeavour, technology -- including GIS based data management programs -- can be easily programmed to compile, organize, and analyse data. Already used by the industry, asset and data management programs give owners a high-level view of their system inventory while providing the capability to gather data for individual assets.

3.            Establish asset performance criteria

All assets are designed to meet the objectives of the organisation at the time of installation.  Over time, the objectives may change or the asset may deteriorate to the point where it can no longer perform to the standards it was designed.

Establish performance criteria, commonly referred to as levels of service that allow you to continuously monitor actual asset performance.  Assets that fail to perform at pre-determined levels pose a risk to an organisation’s ability to realise its business objectives, as well as becoming potentially dangerous in the mine.

As mines are often in challenging environments, deterioration of a component (from exposure to the elements) is the only factor that ultimately prescribes how the performance criteria should be measured.  Once the environment’s deterioration factors are understood, you can begin to set reasonable performance criteria.

4.            Determine asset specific failure modes and failure probabilities

In reality, asset management is managing for failure avoidance.  Understanding how assets may fail to operate at the levels of service required is therefore an essential component to any asset management program.  For instance, you may become aware that it is not the hopper that is failing, but it is a specific pin or bearing that is wearing and causing failure.

By first characterising how an asset may fail, operators are able to place failure probabilities according to age, condition, and performance criteria. Further, it allows operators to more efficiently allocate resources to monitor just those aspects of assets. In the case of the hopper, the operator can begin to inspect the worn bearing, instead of the entire piece. This saves time, money, and resources.

Although probabilistic programs exist, maintenance staff and mining crews typically understand failure modes better than anyone else does.  Rely on their judgement when determining failure probabilities. 

5.            Rate failure consequences

With business objectives in mind, operators must determine how much influence the failure of each asset has on that objective. 

The question to ask is: what would happen if this asset were to fail?  The answer could come in terms of any combination of impacts or consequences to business objectives.  If the mine is near an environmentally or culturally sensitive area, then there is likely a high consequence score for environmental health and safety as well as public relations.  If a road to a processing plant is damaged in a flash flood, it could stop production. Or, more grimly,if hoses and cables from the air circulators are neglected, there could be a significant human cost.

Consequence scores depend mostly on location and the function of the asset. Thereby it would score high in consequences associated with optimising revenue and minimizing downtime.

 6.           Rank assets according to risk

Risk is calculated as the product of the Consequences of Failure (CoF) and Probability of Failure (PoF). Determining Risk allows an operator to rank each asset according to the level of attention it requires.

It can be used as a basis for many decision-making processes from inspection programs to establishing maintenance programs to capital replacement and improvement programs.  All performed with an understanding that the information that goes into calculating Risk is directly associated with meeting organisational business objectives.

Conclusion

The mining industry has been challenged by economic factors this year, and mining companies must use aggressive asset management to improve volume and operating efficiency while controlling cost.Further, safety standards must be met as the industry continues to expand into previously unmined areas.

All companies will need to become more sustainable and financially stable, but the ability to streamline operations,reduce maintenance costs, and promote safety will be essential to thrive in the future.

William (Bill) Golightly and Adam Blundell are the VP for the industrial segment and a client account manger respectively for Kleinfelder.


 

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