Quantify Risk
The current risk cost to an organization is equal to the current probability of failure multiplied by the cost of the consequences of the failure.
This includes direct costs as well as ancillary costs to the business, such as loss of public image or political backlash.
If nothing is done to improve the condition of an asset, the probability of failure will increase over time until the asset actually fails. The risk cost will therefore increase, as shown below:
| Present | Just in Time | Just Too Late |
Cost of Failure | $1,000,000 | $1,000,000 | $1,000,000 |
Probability of Failure | 0.1 | 0.8 | 1.0 |
Risk Cost | $100,000 | $800,000 | $1,000,000 |
It is desirable that the asset management system assists staff to predict the increase in Risk Cost against a timeframe.