The Fine Line between Risk Management and Preventive Maintenance (Part 1 of 2)

A few of my partners, clients and regular blog visitors have been asking me about the diagram I recently published on my blog. Why is the arrow labeled “Risk Management” pointing towards “Preventive Maintenance”? So I’ve decided to take this opportunity to publicly answer this question through my usual Friday afternoon blog.

To be really honest with you, there’s actually a fine line between risk management and preventive maintenance. I assume most of my readers are responsible drivers and therefore would like refer to a simple analogy based on the concept of car maintenance.

Car maintenance requires regular inspection and testing of car conditions to ensure safety, drivability and longevity (I know there’s more to it but I’m not really a car person). The question to when and how depends largely on the type and the current condition of the car. I’m sure most of your service engineers would recommend regular maintenances as per the scheduled intervals described in your manuals.

Before I carry on, let me review the concepts of Risk Management for our non-risk readers/takers. In a nutshell Risk Management is defined by the following procedures:

- Identification of risk based on likelihood and severity
- Determination of risk appetite
- Classify risk into 5 main categories (strategic, operational, financial, compliance, environmental)
- Ranking of risks based on impact and other criterions
- Defining appropriate actions for minimize/mitigate risks
- Task action (as defined)
- Regular monitoring and reporting
- Continuous improvement based on feedback (The concept of closed-loop management)

Be sure to read Part 2 of this article for the moment of truth!

Shivek Sachdev, Consultant
Thai Informatic Systems Co., Ltd. (TIS)