AHI: Understanding Risk and Opportunity

Will your assets generate value for your organisation? Without a clear understanding of asset health there is no way of truly knowing. Experience and intuition are useful tools, but they can only be relied on to a point. Asset Health Indices offers a methodology to systematically determine the confidence with which assets will perform the work required of them.

What affects confidence in asset performance? Asset health is an obvious factor, it is logical to assume that an asset in good health will perform as required. But asset health cannot be considered in isolation. The inclusion of asset risk gives context to AHI, it means that organisational values, objectives and operating contexts are taken into consideration.

The process of developing a health index means taking a detailed look into asset performance. The parameters making up the index need to be indicative of the asset’s ability for continued performance. This can mean detailed functional assessments, evaluating production information, on-site observations and much more. All this results in a multi-faceted understanding of assets in terms of their ability to generate organisational value. With the addition of risk, this means that decision making is about maximising potential outputs within the confines of resource limitations, rather than gut-feel and intuition.

At its core, an Asset Health Index is about understanding whether or not assets will perform the work required of them. Without resource limitations, the obvious strategy would be to drive health indices as high as possible to ensure asset performance. However, increasing asset health comes at a price and almost all business activities need to compete for resources. This means that organisations need to decide where certainty is required, and where uncertainty can be tolerated.

Generally speaking, high risk situations require certainty and low risk situations can accommodate some uncertainty. This means that high risk assets should ideally be in good health, and low risk assets can generally afford to be in worse health. In the real world, it comes down to a balance between the confidence you require in your assets and available resources. A key consideration is whether an improvement in asset health will bide down the associated risk. The consequences of failure are always independent of asset health, but in certain situations increased asset health can reduce the probability of failure. If so, the benefits of improving asset health are magnified. In situations where asset health and probability of failure are independent, it can still be beneficial to improve asset health. For high risk assets, it is beneficial to have a high degree of certainty that they will perform as expected. Improving asset health means that the confidence intervals for the risk of failure are higher. This reduces uncertainty and ultimately allows organisations to manage the risk effectively.

**Asset Performance in line with organisational strategy and goals

In an ideal world, all asset management decision making would be driven by risk. But in reality, actions and decision making are generally driven by the one who shouts the loudest, or out of necessity. In contrast, AHI provides justification for asset management decisions and a basis for the prioritisations of actions. With the context provided by the inclusion of asset risk, this means that resources are targeted at the creation of organisational value and the achievement of objectives.

In many situations, deciding what not to do is just as important as deciding what to do. This is especially important in order to maximise value generation from limited resources. Asset health and risk are key factors when informing these decisions. If an organisation intends to retire a particular asset, the best strategy could be to drastically reduce maintenance and avoid any life extension activities. This lack of activity could potentially free up resources which would be better spent on other assets. But this is only feasible when an organisation has an intricate understanding of their assets health and associated risks. Asset risk gives organisations an understanding of what will happen if an asset fails, and asset health the confidence of the asset performing as required. Understanding this helps organisations to manage risk and leverage opportunity.

#AssetHealthIndices #AssetHealthIndex #AssetManagement #AHI #KeyPerformanceIndicators #KPI

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