Risk Management:

Corporate management has been getting more complex during the past years. The influencing factors have multiplied, criteria for decisions have become opaque, the risk potentials have increased. The global opening of the markets above all, the new information technologies and innovations, the low costs of transport and the withdrawal of the state have at least speeded up this trend. The consequence for decision makers: If their companies do not adapt to these new conditions, this could lead to developments which might threaten their very existence.

In spite of the aggravated risk situation and the increased interest this has brought about there is still a certain loss of orientation in industrial practice about the appropriate structuring of risk management. At present there are hardly any complete and practicable risk management approaches for this. Because of the demand for such approaches the Chair for Economics and Management of Montanuniversität Leoben developed a holistic risk management model and tested it practically in industrial enterprises.

At the core of the risk management model (illustr. 1) is the perception that systematic risk handling should be implemented as a structured process (risk analysis, risk coverage, risk control). The risk management process therefore is a major component of risk management, although the latter must not be reduced to it only, since besides the risk management process all relevant aspects of the management function must be taken into consideration for a holistic risk management perspective. For this it is necessary, amongst other things, that the risk management is being strategically oriented and integrated into a comprehensive management concept. This view therefore deals with the same problems like business management as a whole, but it deliberately emphasizes the risk perspective. For risk management the human aspect must be taken into consideration. It is also important not to look at the identified risks in an isolated manner, but to consider in an appropriate manner the interactions between the individual risks and their importance for the entire corporate risk.

Practical implementation

The risk management model of illustration 1 was then concretised by the Chair for Asset Management. The importance of risk management in asset management results mainly from the trend that work is being replaced more and more by capital. The increased catenation and automation of the assets connected with this increases not only the intensity, but also the complexity of the assets. New possibilities of failure result from these factors, namely from the high capital commitment and fixed costs burden and the increased complexity and intensity of the assets. They can be for example asset planning risks as well as amortization, utilisation, adaptation or contingency risks. Moreover the demands on asset management increase because of the changed attitude towards the environment and occupational safety, the new legal problems and the increased cost pressure on the asset management. These risk potentials and the increased demands explain the increased interest of company practice in risk-oriented asset management concepts. When the risk management model is used in asset management, the components of the model are linked on the basis of a closed-loop perspective.

Illustration 2 shows the integration of risk management into asset management resulting from this perspective. A major challenge for the use of the risk management model in asset management is the need for giving proper consideration to the interconnections of the individual asset management functions and the other corporate areas. When applying the risk management model one also needs to consider those risk potentials of other corporate areas which might pose a danger to reaching the asset management targets or which can be influenced by the asset management. Such risk potentials and interconnections must therefore be taken properly into consideration when formulating the risk-oriented policy, strategy and targets of asset management.

For the risk-oriented asset management concept of the Chair a special aspect of asset management is taken into consideration explicitly, namely the fact that a highly automated operation normally consists of a large number of (machine) units whose risk effect would need to be examined in principle. There are limits here: An analysis of all asset elements according to the risk-oriented method is not possible for reasons of capacity and economy. It therefore makes sense to limit the examination to risk-relevant asset parts. If one proceeds in such a way one can mitigate a disadvantage of the "conventional" asset management method, namely the danger that on the one hand an excessive number of preventive activities are implemented in certain areas under economic aspects whilst on the other hand such activities are carried out too little in risk-relevant areas. In a risk-oriented analysis however the expenditure is concentrated on those components which contribute the major risk, and this in turn will optimise the economic implementation of the asset management tasks.

Keeping it simple

A holistic risk management perspective can above all also support the strategic management by pushing the risk management in core competency areas. In this way wrong trends in these areas can be recognized in good time. Moreover a holistically applied risk management acts all in all as a "coordination instrument", since in an "actively supported" risk management not only function-specific but also cross-functional risks resulting from existing interdependencies between the different areas of the company are uncovered. This aspect of risk management is particularly important in asset management since the cost picture and the risk situation of the asset management are to a major extent determined by measures which are realised in different decision and function fields. A risk orientation thus offers an approach for solving one of the core challenges of asset management, namely der Bewältigung der Vielzahl der zwischen den einzelnen Aktivitätsfeldern existierenden Zusammenhänge (innere Komplexität),

covering the multitude of interconnections existing between the individual fields of activity (internal complexity)

assigning the asset management measures to different organisational units (decomposition of the field of decision)

handling the large number of external relationships to other corporate areas and to the corporate environment (external complexity).

With an appropriate integration of risk management into the asset management one can therefore achieve a further professionalisation of the asset management function. The practice should therefore face this task more strongly in future.

In spite of the advantages of the risk-oriented approach mentioned one must however also keep in mind that one can only marginally influence the "purchased" asset life with it. A high wear-out reserve and the avoidance of construction errors, inadmissible operational stress and undesired damage mechanisms can only be achieved through a detailed asset configuration (specification) and through a comprehensive quality assurance during the entire asset life cycle. A successful risk management must therefore start from the asset procurement already and is only possible via a holistic and integrated asset management.