Category Archives: Asset Investment Planning And Management

Author: Dane Boers, Senior Reliability Engineer

The risk matrix has served its purpose but falls well short of the data-driven business requirements of today. Enter the Value Framework.


For more than a decade, the risk matrix has been the go-to decision-making tool for assessing risk, and for good reason. The risk matrix is practical, easy to use and flexible enough to apply to various risk types and situations, including:

  • Assessing risks of a particular asset
  • Deciding which investments or projects have the highest importance
  • Choosing which risk controls to implement

Figure 1 Example of a Risk Matrix

The purpose of the risk matrix is to simplify the assessment process while still providing meaningful results. Technology and data processing tools now allow for complex assessments using simple interfaces – this plays a major role in supporting the increasing need for improved risk based decision making.

Shortfalls of the risk matrix

Granularity and/or resolution

Risk is not discrete but continuous, and many risks can be similar. Thus, the first shortfall of the risk matrix is that similar risks cannot be separated even though there are known differences. This reduced granularity can result in sub-optimal decisions and missed opportunities for improvement, because subtle differences in likelihood or consequence will likely result in the same ‘risk box’ selection.

If you were to prioritize two similar risks with all else being equal, it would make sense to address the slightly higher risk before the lower risk ­– even though the assigned risk level is the same according to the matrix.

Consider a reduction in the likelihood of an event by 50%, from once in 50 years to once in 100 years i.e. doubling the life of an asset. This is a huge improvement and may mitigate a significant amount of risk, especially if this is then applied at scale. According to some risk matrixes, the likelihood before and after would be ‘rare’, showing no improvement in risk exposure.

Businesses with large volumes of risk data need to be able to resolve very similar risks to make the best decisions possible, especially when constrained on expenditure or resources. This is even more evident when dealing with large fleets of similar assets and risks.

Multiple risks transparency

The next shortfall of the typical risk matrix is the ability to handle and interpret events that cause multiple similar consequences.

Consider an equipment failure that causes a large amount of smoke in a building. The result may be that 50 people require medical treatment for smoke inhalation. If a single medical treatment injury is assessed as a ‘moderate’ safety consequence, at what point does the sum of these injuries constitute the equivalent of a ‘critical’ or ‘catastrophic’ consequence? E.g. 10, 50, 100 persons?

Without the ability to summate or determine a total risk for an event, low impact but high-volume consequences could leave your organization exposed.

Cost benefit

Assessing risk based purely on outcome risk levels is only one-half of the equation for making effective decisions. The usual risk matrix methodology prioritizes the highest risk levels first, with little regard for the cost to achieve the mitigation. Because organizations have limited resources, determining the best way to utilize these resources is key to remaining competitive in the marketplace. The missing component is cost (monetary or otherwise), and without a cost component, we are unable to answer the following question.

If I can mitigate one of two ‘moderate’ safety risks with the same likelihood, which one should I mitigate?

Once you identify that mitigation of the first risk costs 50% less in dollars, time and resources, the decision becomes clearer. The answer to this critical question is missing from most risk matrixes and risk frameworks.

Cost Benefit


To make effective investment decisions around risk mitigation and exposure, an organization must be able to compare and trade-off the value from different risk types (e.g. stakeholder risk vs. environmental risk). In a budgetary or resource constrained environment, this is especially important. An organization must understand which consequences are more important relative to others. A risk matrix partially does this by grouping the consequences into ‘negligible’ or ‘moderate’ groupings, however, this does not answer the question of:

If I can spend $1000 and mitigate either a ‘moderate’ stakeholder risk or a ‘moderate’ environmental risk with the same likelihood, which one should I do?

The matrix type framework is not flexible enough for most organizations to achieve exact alignment of risk types.

X by Y grid and descriptions

When thinking about consequences, the risk ‘levels’ must be meaningful to be constantly applied. This is why safety risks are often thought about in terms of ‘first aid’, ‘medical treatment’, ‘disabling’ or ‘fatal’ injuries. These can be measured and conceptually linked to an event as the most likely outcome. The ‘negligible’ and ‘moderate’ descriptions aren’t meaningful enough.

In the safety risk example above, there are four consequence levels. What if an environmental risk type is introduced into the matrix, and it only has three consequence levels (e.g. ‘<100L spill’, ‘100L-500L spill’ and ‘>500L spill’)? Because the number of meaningful levels can be different between risk types, they cannot fit into an X by Y matrix without distortion.

The solution: ‘The Value Framework’

Identify what is important to your organization (value measures)

The first step in creating a value framework is to identify the things that your organization values or considers to be important. An existing risk management framework or risk matrix is a good place to start. Risk types (e.g. safety, environment, stakeholder, legal and compliance etc.) are common values that can be measured and are found in most value frameworks.

Benefits such as financial returns, increases in employee efficiency and so on are also important and should be included. Another common inclusion in a value framework is strategic targets, KPIs or other measures. Everything identified in this step is known as a ‘value measure’.

Identify the common levels and calculations

Each ‘value measure’ obviously needs to be measured! The next step is to determine the discrete levels for each measure (e.g. for safety, they could be ‘first aid’, ‘medical treatment’, ‘disabling’ or ‘fatal’ injuries). Then add calculations for KPIs or values like ‘employee efficiency’ where an exact value can be obtained. For example:

Employee efficiency = Number of employees affected x hourly rate x hours saved per employee


Once the value measures and their calculations have been identified, they need to be aligned to a common scale. This is to allow a non-biased tradeoff between any of the measures in the framework. Typically, this common scale is dollars or a dollar equivalent unit. Every level and calculation of every value measure needs to be quantified. For most risk types, this is calculated as the direct cost or benefit to the organisation.

For example, the cost to the organisation for a safety medical treatment injury (MTI) would be:

$10,000 penalty cost + $1,000 legal cost + $1,500 compensation cost = TOTAL $12,500


Now that we have a rational and consistent way to assign a value to every risk, benefit, cost and other measure that an organisation values, the value framework can be used to assess every investment the same way.

Figure 2 What a Value Framework could look like

Figure 2 What a Value Framework could look like


The risk matrix is a great tool for rapid risk qualification, but it cannot be used effectively to make risk and value based decisions. More information is required.

Organisations today need to:

  • Differentiate large volumes of risk, and risks with extremely small likelihoods
  • Evaluate and totalize multiple risks
  • Incorporate costs into risk-based decision-making processes
  • Trade off one risk type for another achieving a better overall economic outcome
  • Have a framework that accomplishes all the above with consistent application and transparency

Creating a value framework meets these requirements and allows organizations to make effective value based and risk informed decisions.

To learn more about creating a value framework download the executive whitepaper ‘Value Based Decision Making’


This is a guest post written by Copperleaf.  ARMS Reliability is an authorised distributor of Copperleaf’s C55 Asset Investment Planning & Management solution. 

Author: Barry Quart – Copperleaf, VP of Marketing

Close up of hand of man playing chess holding queen. Business ma

In any discussion about asset management these days, the ISO 55000 standard is bound to come up. ISO published the standard in 2014 to provide guidance on best-in-class asset management practices and help organisations “realise the maximum value from their assets.”

In a nutshell, it’s about choosing the ‘right’ things to invest in—the projects that will deliver the highest value, and are most aligned with your company’s strategy.

It’s also about creating a plan—a roadmap for success—laying out what will be done, when, by whom and how it will be evaluated. The plan must address how to keep assets operating at their optimal level of performance, while managing risk, and respecting the available budgets and resources. Goal Wish

Sounds simple but this is no easy task, especially in organisations with tens of thousands, or even millions of diverse assets.

Asset Investment Planning & Management (AIPM) is an evolving discipline that helps organisations focus their available resources on doing the right things at the right time. AIPM can help you:

  • PREDICT the long-term needs of your asset base
  • OPTIMISE portfolios of investments to realize the greatest value from your assets
  • MANAGE your portfolios to achieve the highest execution performance

When these three principles of AIPM are put in place, organisations can start to make these complex investment decisions with confidence. AIPM

PREDICT:  Asset managers must focus on predicting the needs of their corporation’s assets, and on developing a realizable investment strategy to meet those needs.  The key word here is realisable. It’s not just about identifying the ideal thing to do for every asset, because you invariably won’t be able to afford to do every “ideal” thing you are asked to. You need to propose a strategy that you can afford, and have adequate resources to carry out. This is where the second part of the strategy comes in.

OPTIMISE:  If your investment requests exceed your available budget and/or resources, you need to develop a plan that delivers the most value for the money and resources you do have. When you can’t do it all, you need to consider deferring some investments and/or evaluate alternative ways to address the needs identified above. Value-based decision making can help you make the difficult trade-offs between risk, cost, and performance, and ensure that for your available funding and resources, you are always executing a plan that delivers the maximum value from your assets.

MANAGE:  Even the best plans never execute as expected. Emergent work, delays, and cost overruns all affect your organisation’s ability to deliver on the original set of objectives. Actual spend and accomplishments should be compared to the original plan, variances explored, and the plan re-optimised to ensure that looking forward, the organisation is always focused on those activities that deliver the highest value. This process of continuous planning is an integral part of a best-in-class asset investment strategy.

AIPM can help you make higher value investment decisions, and justify those decisions to stakeholders. Learn more about how AIPM supports the ISO 55000 standard.

This is a guest post written by Copperleaf.  ARMS Reliability is an authorized distributor of Copperleaf’s C55 Asset Investment Planning & Management solution. 

Author: Stefan Sadnicki

Modern urban wastewater treatment plant. Close-up view

Anglian Water is an innovative company whose mission is “to put water at the heart of a whole new way of living” and raise awareness about how essential water is to life, to the environment, and to a vibrant and growing economy. The company is the largest water and water recycling company in England and Wales—and Copperleaf’s first client in this sector!

We recently completed the implementation of Copperleaf C55 and it was one of the most challenging, yet rewarding projects any of us have ever worked on. I sat down to catch up with Chris Royce, our primary stakeholder and project champion, to get his thoughts on how everything went. As Head of Strategic Investment Management for Anglian Water, Chris was involved with the project from before it was a project! As the implementation draws to a close, I’d like to share some of the highlights:

What was the most challenging part of the project?

For Copperleaf, this was a new country (UK) and a new sector (water). We could see the potential of the C55 system and the benefits it would provide, and in reality many utility assets are very similar and the principles of risk-based decision making are similar. Ultimately, we now have a fantastic solution that combines the power and capability of the core C55 solution with the maturity of the UK water sector. It’s really exciting to see. This continuous planning and management capability really puts us in a new space.

What was the most rewarding part?

For the procurement process, we put together our set of requirements, including many ambitious areas of functionality that we were going to need to meet future challenges. We were unsure if any suppliers could achieve them all, but we knew what best practice could look like—and the Copperleaf team committed to deliver them all. It’s been hugely rewarding to see the vision become reality throughout the project.

Is there anything unique that AW is doing with C55 – something that hasn’t been done before?

There are lots of things. In particular, we started capturing cost data in 2005 and have been carrying out cost estimation-linked investment planning since 2007, using over 1,800 cost models built up from that data. As such, it was very important for our new solution to be able to build on that library of knowledge. Working closely with our Cost Estimating Team, Copperleaf built out a new Cost Estimation module, integrated with the rest of C55, to execute our cost models within the planning process.

Have there been any other added benefits?

At the start of the process, we undertook a comprehensive process mapping of ‘as is’ and ‘to be’. This highlighted a number of pinch points in our process, which Copperleaf was able to ‘systemise’ as part of the implementation.

How has the C55 solution been received in the wider business?

We’ve had a great response from end users. As one user put it during a training session: “I’ve only been using C55 10 minutes and it’s already a significant improvement over our previous system.”

Any anecdotes from the project?

During evaluation, we held a number of reference calls and I joked that Copperleaf must have some magic stardust they put on their users’ keyboards, because I had never heard such positive references about an IT provider. I have to say they were honest! I believe it’s Copperleaf’s focus on the customer experience that made the difference.

What made the project a success?

It may be a cliché, but the joint Anglian Water and Copperleaf delivery team deserves a large amount of credit. We started from a strong position; we had a clear idea of what we wanted to achieve due to our maturity, and the right product to deliver it. But ultimately, the drive and dedication of the team is what has carried us to a successful go-live. Anglian Water is very strong in alliancing and is recognised as an industry leader in this regard, so I wanted to carry this through into this project. And on the Copperleaf side, just the simple thing of having one dedicated project manager for the duration of the project made all the difference in having a collaborative and innovative delivery approach.

To learn more about Copperleaf’s work with Anglian Water, click here.

About Stefan Sadnicki

Stefan is Managing Director for Copperleaf in Europe. He works both with Copperleaf partners and directly with asset-intensive organisations to solve their asset investment planning challenges. His background is in business analytics and consulting and he is an active member of The Institute of Asset Management (IAM). Connect with him on LinkedIn.

The Age of Renewables 


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Landsvirkjun is Iceland’s largest producer of electricity, and one of the 10 largest renewable energy companies in Europe. Its power infrastructure is ranked among the World’s best and most reliable—an important competitive advantage that allows the company to attract and retain industrial clients like Alcoa, Rio Tinto Alcan and others. With its asset base both growing and aging, Landsvirkjun was outgrowing its existing asset management systems and needed a more robust approach to investment decision making and long-term planning.

In this case study from the December 2015 issue of Assets magazine, ARMS Reliability’s partner in Asset Investment Planning and Management—Copperleaf Technologies—describes the journey the company took to implement C55, and the benefits they’ve achieved.


ARMS Reliability and Copperleaf Technologies are partners in delivering asset intensive industries in the Australian and New Zealand Markets with cutting edge solutions in the area of Asset Investment Planning and Management (AIPM).  Under this partnership agreement, ARMS Reliability acts as the distributor for Copperleaf’s AIPM solution, C55, and provides implementation services and on-going support for the C55 product in the ANZ region. 

Click here for more information about Copperleaf and C55.