APM: Finding the Hidden

Risk in Your Business

White Paper
APM: Finding the Hidden Risk in Your Business

Asset Performance Management (or APM) strategies, solutions and technologies are being used more
frequently these days, but many asset-intensive companies struggle to justify the need for a comprehensive
APM solution. The largest, safest and most profitable enterprises have adopted APM for one very compelling
reason: RISK mitigation. Risk can take a variety of forms, and threatens the enterprise from countless
different directions. Risks are constantly changing and extremely difficult to predict with certainty. It’s
tempting to focus on the immediate, obvious short term risks to daily operations, but focusing only on
what you can see - versus the risks you can’t see – has the potential for negative financial and operational
impacts on your people, your processes and your profits. Businesses in today’s competitive environment
have little to no tolerance for inefficient operations and the associated cost overruns, missed production
targets, ineffective workforces, or safety/environmental incidents.

Asset Performance Management is all about connecting assets, effective strategies, people, and information
to create an enlightened, holistic view of plant operations that can be used to better manage asset strategies
and operational risk. When it comes to understanding risk, data can tell you things you never thought to
ask. But first you have to listen – to your people, your data, and production assets. They have a critically
important story to tell.

In a recent study, Gartner Research found that 47% of companies cited “lack of
visibility into actual asset condition and performance” as a barrier to achieving their
asset management goals.

Companies must then combine data from these “listening posts” and many disparate sources and
transform it into meaningful information that is usable throughout the organization. In order to mitigate
those risks and improve your asset-management strategies, just “knowing” is not enough. You need
contextual information to make good decisions, take action, and then close the loop by evaluating results
and communicating what you have learned to make improvements.

Keep in mind one simple truth: all risks are interconnected and can have tangible, negative financial
impacts. To mitigate risk, you must start at the source: the asset. The list of risk factors driving the need
for a comprehensive APM initiative is long, but can be grouped into five major categories, all related to
the effective management of your production assets. These risks outline the challenges your company is
already aware of or will be facing, and emphasize why leading global companies use APM solutions to
manage risk for operational excellence.

Risk #1 - Safety
Keeping production assets operating safely is critical to reducing equipment failures, catastrophic events
and environmental incidents. Operating safely also protects your workforce and your company’s reputation
and brand, not to mention driving compliance with evolving safety and environmental regulations.
To reduce the risk associated with safety in a plant environment, companies need a holistic safety approach
with an APM strategy that includes:
• Regularly validating asset performance and conducting analyses to predict and minimize incidents
• Analyzing data to determine your company’s risk management profile
• Identifying operating best practices, including training, supervision, and accountability
• Communicating safety goals and implementing processes to drive continuous improvement
APM: Finding the Hidden Risk in Your Business

• Having timely, accurate information and analysis of asset performance keeps production assets
operating safely by reducing or eliminating equipment failures, catastrophic events, and
environmental incidents, thus better ensuring the safety of people and protection of
the environment.

Risk #2 – Production
When you manage your assets strategically and effectively, you’ll improve key operating metrics for
asset and system reliability, which subsequently improves production and revenues. In fact, managing
assets efficiently helps you to accurately predict asset failure and improve production significantly, thus
potentially saving millions in lost profit opportunity.

For some industries, just a 1% reduction in system inefficiency can be worth billions.
– Industrial Internet: Pushing the Boundaries of Minds & Machinery, GE

Manufacturers have an obligation to shareholders to ensure predictable production, in part by making

certain that their assets are properly designed, operated, and maintained throughout their service lifetimes.
During these lifecycles, those assets will generate massive amounts of data – both from an operating and
inspection standpoint - that can be analyzed both historically and in real-time with a robust APM system.
This data and analysis needs to be given the proper context so that appropriate corrective and adaptive
actions can take place to optimize production.

It’s also important for risk-mitigation management strategies to focus not only how individual critical
assets are managed at the plant level but by looking at the management of equipment and their production
performance at the enterprise level. It’s at that enterprise level that owner/operators can begin to realize
significant benefits that come with leveraging data, trends and analysis for APM improvements and
production improvements across the organization.

Risk #3 – Workforce
How difficult is it for your staff to access operating and inspection history, maintenance strategies,
equipment diagrams, recommendations and tracking? Can they measure current risk levels and operating
statistics against the industry peers? Lack of access to this kind of information creates workforce risk.
Without the data they need to do their jobs effectively, your workforce can’t be operating at peak efficiency.

According to IHS, the industrial workforce is increasingly driven by connectivity,

inexpensive processing and sensor solutions, and using the Internet to expand
communication between electronic devices, which can be used to automate complex
and/or tedious industrial processes, and provide a wealth of information.

In the ideal industrial/manufacturing world, workers would monitor potential risks in real-time using
mobile devices and other enabling technologies to identify issues, determine root causes and solutions,
and establish easily searchable electronic records and audit trails. Monitoring and collecting information
related to incidents and events would be automated, as would change recommendation and tracking
APM: Finding the Hidden Risk in Your Business

Workforce communication gaps and lack of connectivity impact safety and production.
Learn how Eastman Chemical put management, operators and maintenance on the same
page and reduced reactive events by 60%.

effectiveness of these changes. In that ideal world, workers could access all pertinent asset information,
and also receive continuous training on their mobile device.

But, while many plants have embraced this mobility and connectivity, the workforce often lacks the
technology needed to access critical data in real-time to help them understand their assets, the history
of the asset, the strategies to manage the asset, the impact on production due to asset failure, or even the
asset’s current health. This lack of information creates significant risk to overall safety and profitability.

And, with more than half of the U.S. workforce retiring within the next 10 years – and similar situations
occurring globally – “brain-drain” and tribal knowledge loss is going to have a significant impact on
how our plants are managed and how plant information is analyzed and used. Since millennials will
make up more than 50% of the workforce by 2020, companies must rely increasingly on technologies and
systems to help sustain and continue to grow their knowledge base and create and manage sustainable,
standardized and evergreen strategies and processes. In addition, this particular generation has grown up
with computers and connected devices, so advanced technology will be a requirement for this emerging
workforce, not an option.

Risk #4 – Compliance
With an ever-evolving regulatory and governance landscape, companies must be able to demonstrate
their ability to meet the compliance requirements that dictate how to manage physical assets, protect the
workforce, and effectively mitigate risk. (And if the threat of litigation isn’t enough to motivate compliance
efforts and the resultant risk reduction, keep in mind that lower risk results in lower insurance premiums.)

Codes and regulations change quickly in an effort to create an increasingly safer workplace. Manual or
paper-based processes and spreadsheets that are used to track data for compliance are labor intensive and
error-prone, and create silos of often-inaccessible big data that can become useless without context or
recommendations. Additionally, such methods are rarely acceptable during audits.

For a successful compliance strategy that will ultimately result in safer operations, management needs
to put their authority and focus behind the effort, defining responsibility and accountability throughout
the organization, and guiding the policies into everyday practice. Successful companies build a data
governance model to support compliance: they ensure that their data is clean and stays that way and is
managed in a way to drive regulatory adherence. Those models have a well-defined vision and mission that
are aligned with the organization’s strategic objectives. All roles and responsibilities, across all business
units, are clearly defined and assigned to specific owners.

Up to 20% of an organization’s risk profile is determined by their ability to demonstrate

that they are compliant, are managing their physical assets well and are effectively
mitigating risk.
– Marsh Insurance and Risk Management
APM: Finding the Hidden Risk in Your Business

Additionally, compliance and data governance metrics should be established and regularly measured and
evaluated as to their effectiveness in driving improved asset reliability and availability. Leading companies
also regularly evaluate the technology and tools used to support their APM strategies, as well as assess the
effectiveness of their efforts against industry peers.

Mitigating the compliance risk to the organization is critical but it must be done in a way that doesn’t hamper
the organization’s ability to function, produce, be innovative and make money. This is why alignment
with business objectives is critical. You can create a culture for compliance and risk management just as
you probably already have for the importance of quality, or environment, health and safety. Compliance
creates an environment for operating in a legally and morally appropriate fashion, where there is
traceability to evidence that the organization is acting with due diligence. Compliance and demonstration
of adherence to regulatory requirements does not have to come at the expense of operational efficiency,
and an enterprise-wide APM solution helps ensure both are balanced.

Risk #5 – Big Data Risk

Your assets and systems are talking. Are you listening? The ever-increasing number of connected devices
has created a wave of big data that can overwhelm your systems and people, potentially creating huge
risk exposure – but also a great opportunity. The key to balancing risk and opportunity is the effective
application of asset strategies that alert you to asset health trends or real-time conditions coming out of
that big data that demand immediate attention.

Lower risk leads to lower insurance premiums. Read an ARC Advisory brief to learn more.

ARC Advisory Group recently reported that manufacturers and other industrial
organization need to prepare their plants for the emerging, connected world of the
Internet of Things. Manufacturers must also simplify and consolidate their networks to
avoid ‘sprawl’ and associated security vulnerabilities.

With the proliferation of smart systems, connected assets and mobile devices, the need for an integrated
solution to manage your asset strategies has never been greater. Consider the number of different systems
and devices purchased from equipment manufacturers, and the problem can seem overwhelming for
many organizations. This growing complexity contributes to the need for an integrated APM ecosystem
fully and seamlessly connected to the multitude of systems and stakeholders in your organization to
ensure transparency and efficiency.

Big data is much more than the latest buzzword. Having access to more data sources and turning that data
into contextualized information offers the capability to understand your business in ways that provide true
insight into asset performance opportunities. But only if you have the right systems in place to organize,
filter and monitor vast volumes of data, and then derive meaningful operational insights.
APM: Finding the Hidden Risk in Your Business

“APM encompasses the capabilities of data capture, integration, visualization and

analytics tied together for the explicit purpose of optimizing the performance of assets to
increase availability, minimize costs and reduce operational risks.”
– Asset Performance Management Transforms How Operational
Assets Are Managed and Maintained, Gartner Research

The challenge: How do you aggregate data from hundreds of different equipment and control systems
acquired from different vendors? The solution: heterogeneous connectivity. A fully integrated, vendor-
neutral APM system will provide access to all your historical, new, and increasingly accurate asset data. A
comprehensive APM solution will also provide contextualized information, when you need it and where
you need it with a multitude of ways to view that information, including dashboards for executive review.

APM: A Proven Foundation for Reducing Risk

& Improving the Bottom Line
Managing these five areas of risk – Safety, Production, Workforce, Compliance and Big Data – can seem
overwhelming, so many organizations may settle for meeting minimum standards and the same old
reactive way of managing their assets. Yet a true, comprehensive APM solution can put you on the path
to real operational excellence and asset performance optimization to drive significant improvements in
profitability, productivity, and safety.

The performance of your assets is one of the major factors – if not the most critical – in determining
the bottom line health of your enterprise. Effective management of those assets allows you to accurately
predict asset failure and increase reliability, leading to higher availability, improved costs and productivity,
and potentially millions of dollars in savings. Those cost benefits can come in the form of lower inspection
and maintenance costs or a reduction of lost product.

Performance data from multiple sources throughout your plant ecosystem can tell you things you never
thought of asking. But it can’t speak for itself. A process – driven by enterprise-wide connectivity – must
be developed and implemented to help you determine what data actually has value in assessing risk.
Performance data, when given context, becomes information, which – when applied correctly – results
in powerful, profitable performance at reduced risk levels that delivers a competitive edge.

Connectivity that leads to insights for opportunities to reduce risk and improve the bottom line.
This is APM.
 APM: Finding the Hidden Risk in Your Business

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