2.3.2 Incorporating risk management

A key element that agencies must consider and seamlessly integrate into the asset management framework is risk management. Risk is defined as “the positive or negative effects of uncertainty or variability upon agency objectives.” (see ISO 31000, 2009) Road organizations have for decades applied risk management at the project level. Increasingly, road organizations are integrating risk management more formally into their asset management processes, including the development of their asset management plans. This includes addressing the following questions (PIARC 2010):

• What are the risks to my assets?
• What are the critical assets and which critical assets are at high risk?
• What is the risk at the project level or to specific assets?
• What are the asset risks to the enterprise or the agency as a whole?
• What are the asset risks at the program or asset class level?
• What is the asset risk tolerance and mitigation strategy?
• What is the risk tolerance at the enterprise, program, and project level?
• What is the cost to keep my assets within the acceptable risk tolerance levels?
• What is the financial asset risk gap?
• What is the risk mitigation strategy?

The use of risk management among transportation agencies largely is limited to managing risk at the project level (PIARC 2008, PIARC 2013), generally during construction. Risk management at the project level helps to identify threats and opportunities to a project’s cost, scope, and schedule. However, road organizations need to recognize the growing need for a better understanding of risk management at program and organizational levels.

Today, the leading international transportation, banking, and insurance organizations have explored the benefits of risk management at the program and enterprise level and use it as a tool to protect their investments (PIARC 2016). It is important for road transportation agency officials to consider incorporating risk management into the decision-making process for several reasons. First, officials have seen the benefits of risk management at the project level. Second, they have heard from their international colleagues that risk management can pay dividends when used at the broader program and enterprise levels, particularly when agencies do not have enough funding to address their priorities. Third, managing risk is an integral step in following a comprehensive asset management framework, as described in the International Infrastructure Management Manual (IIMM, 2015), AASHTO Transportation Asset Management Manual - A Focus on Implementation (AASHTO, 2011), the UK Roads Liaison Group’s Road Infrastructure Asset Management Guidance Document (UKRLG and HMEP, 2013), etc.