The manufacturing industry in Australia is large and complex. This makes it difficult to manage the risks faced by the various departments and locations, alongside keeping up to date with legislation that companies need to stay compliant with. Hence, Risk Management in manufacturing is essential
Risks may emerge due to the nature of the employed materials, equipment, employees, etc. It is essential to have a program that identifies the various risks that can occur, and by extension, their likelihood of occurrence and potential impact on the business, staff, shareholders, customers, and suppliers should a risk be realised.
Thus, for the manufacturing process, there is a need for comprehensive risk identification, risk assessment, risk measurement, risk minimisation, and risk monitoring programs, regardless of the reason for wanting to understand and control risks. This program will need to encompass all business functions to ensure that all key areas of risk concern are accounted for. Typically when companies are attempting to obtain ISO certification, these factors are considered.
Objectives of Risk Management in Manufacturing
- To minimise injury to staff, customers, and/or the local community and by extension, the financial impact on shareholders and long-term damage on business reputation. Therefore, identifying and controlling the risks that could impact the organisation's reputation is monitored to minimise the likelihood of such risks being realised.
- To achieve a competitive edge through the development of risk management practices that enable businesses to produce higher-quality goods.
- To aid manufacturers in gaining the most from an enterprise-wide perspective on risk management requires a more analytical and adaptable approach.
- To encourage safe work practices and increase awareness with the company culture.
Types of Risk in Manufacturing
There are various types of risks that are encountered in the manufacturing industry, including:
- Supply chain interruptions
- Workplace safety
- Product liabilities
- Errors and omissions
- Cargo in transit
- Cyber risks
- Employee fraud and injuries
- Equipment failures
- Evolving workforce dynamics
- Product recalls
Risk Management Plan
Creating a robust Risk Management Plan is the first step for many manufacturing organisations when implementing a risk program.
A risk management plan is instrumental to create an organised road map that promotes objectivity in risk identification and prevents the omission of essential risk elements. The plan identifies the individuals involved and is accountable for the efficient implementation of the risk management process.
The plan addresses the need for risk management process management reviews and specifies how and when evaluations will be conducted. If the plan pertains to a particular product, it addresses the entire product lifecycle, from design through production and post-production use (i.e., used by the end customer). Similarly, the risk plan for a manufacturing process or manufacturing organisation's output encompasses the full scope of responsibility and impact throughout the process or organisation. In the plan, the criteria for risk acceptability are specified and a description of how the implementation and effectiveness of any required risk controls are validated. Furthermore, the plan details how information is continuously gathered and fed back into the risk analysis process.
Risk Management Process Implementation
There is a constant need to enquire to implement the risk process.
The Risk Management team continually ask the following questions:
- What dangers might there be?
- Which ones are the worst?
- What are the underlying causes of the risks?
- Which risks are most likely to materialise?
The risk management team, comprising a group of people with a variety of skills and competencies, will also contribute to the risk process. After the risk team identifies potential risks, they determine potential responses to each risk.
These measures are agreed upon and carried out.
After the implementation of the risk management process, the success of the action taken is assessed
Employees who are responsible for managing risks need to continuously monitor the efficacy of the actions taken and update the risk plan to account for any changes to products or processes and the resulting risk levels.
Measuring the Manufacturing Risk Level
For each aspect of risk, a method for identifying and measuring the risk levels, whether they are financial, customer-related, regulatory, etc. is established.
As you progress through the risk assessment process, you will identify the list of potential risks and used a risk tool to determine the potential severity, probability, and detectability of each potential risk. Each of these aspects are combined to characterise the risk.
One method for combining these various measures is to create a single number as follows:
Severity * Probability * Detect-ability (S*P*D) = Risk Level Number (or a Risk Prioritization Number – RPN).
Once the Risk Prioritization Number is determined, the acceptability of risk is defined and prioritisation of potential risks to be reduced is be agreed upon.
Manufacturers should consider the following in elevating the value of risk assessments:
- Incorporate risk identification into the process of strategic planning.
- Innovation and other potential disruptors of strategy should be investigated.
- Determine mitigation and/or monitoring strategies for the risks with the highest priority.
- Prioritize mitigation strategies focused on behaviour modification.
- Define the ownership of key risk mitigation strategies and enforce accountability for results.
- Consider how to track changes to the strategic plan's assumptions.
- Define risk indicators and determine information availability.
- Using both internal and external data to provide objective benchmarks for monitoring key assumptions and strategic risks eliminates bias.
- Focus conversation on continuous improvement to anticipate a shifting risk environment.
- Make strategic risk a regular topic of discussion with the board and senior leadership.
Responsibilities of Senior Management
Senior management in a manufacturing organisation ensures that there are resources available, qualified people are assigned to the risk process, the risk acceptability policy is specified and documented, and effective management reviews of the risk process are carried out at regular intervals.
Risk Management Software
As you can see, there are many things to consider when managing risk in your organisation. To support the processes and responsibilities, it is recommended to look at software solutions that make this easier for you to keep track of.
Lahebo is a one-stop solution for all Company’s risk and compliance needs. It has been developed based on 20 years of its sister company, Anitech, working with Australian manufacturers supporting their management systems.
Lahebo supports internal procedures and controls for quality and regulatory compliance, ever-evolving supply chain risks, and integrated risk management practices. It allows you to bring the whole organisation together to work towards zero harm.
Why does your Manufacturing Company need Risk Management Software?
Supporting management systems and optimising manufacturing quality today is not as simple as achieving quality raw materials, increasing training, or recruiting more skilled employees.
Improved risk assessment provides greater agility and protection against disruptive and potentially catastrophic events that characterize prolonged periods of decline. A manufacturer becomes more agile to recognize and respond to such events and capitalize on the opportunities such events reveal.
Internal procedures and controls for quality and regulatory compliance, ever-evolving supply chain risks, and integrated risk management practices are significant quality drivers.
You can save time and money by optimising these by using software, like Lahebo that supports all the factors required to achieve the Objectives of Risk Management in Manufacturing.
If you wish to take care of your Risk and Compliance issues and boost your business, do reach out to us for a demo.