Managing Risk in the Aviation Supply Chain

The age of advancement in aviation safety being borne out of tragedy is consigned to history and no longer acceptable. It is incumbent on all operators in the aviation supply chain to actively identify and mitigate risk, robbing it of the opportunity to convert into an incident or accident. An active risk management framework can preserve safe operations and business continuity during irregular operations.

Current events are exposing aviation businesses to threats resulting from workforce availability. Airlines are responding in one way to instability within crew resources by reducing capacity, while at the same time travellers are rebounding from an extended period of limited travelling opportunity and returning to airports in droves.

In the short term this means increased airfares and reduced schedule diversity, undoubtedly a source of frustration for customers. On the other hand, network instability left untreated, leads to last minute cancellations and poor on-time performance, which is inarguably more upsetting. Both scenarios carry high stakes leading to potential reputational and financial damage.

Critical decisions like these should be facilitated through the application of a sound risk management framework. Safe and seamless operations are possible when not left to chance and can be achieved when supported by risk appetite, tolerance, and culture tailored for the organisation.

Deciding what to fix and what to flex is difficult

Risk appetite should form the basis for decision-making. Risk appetite is the amount of risk an organisation is willing to carry in order to meet its objectives. It is usually presented as a series of qualitative statements defining risk probabilities and consequences. This structure helps employees and decision-makers to understand in plain language, the risk their organisation is willing to accept. The pragmatic application of risk appetite can be limited however and needs structured support from risk tolerance and culture.

To operationalise the broad statements of risk appetite, risk tolerance enables monitoring and review by setting quantitative measures. Tolerance settings also allow for the augmentation of a risk appetite aligned with specific business functions. An airport may, for example, accept a financial risk developing an airside asset while adopting a zero risk approach during its construction and operation. Including tools for risk tolerance in strategic decision-making is one way to embed a risk management framework into everyday business activities.

Good risk management frameworks both reflect and influence the work you do

Whatever the application, clarity is key. Businesses need realistic and measurable targets to determine success, either as an entity or in delivering a project. In a similar sense, defined thresholds and boundaries for risk tolerance need to be set so that potential success is not wagered against harmful threats. Continuous monitoring and review can close the loop, learning and improving by analysis instead of by accident.

A solid risk management framework sets actionable guidelines, and its actualisation is based upon the risk culture of the people who work in the organisation. Those whose safety and assurance are protected by the framework also have a role to protect others. Risk culture is the way in which an organisation’s profile translates to an individual’s responsibility. Maintaining a risk awareness culture encourages participation and promulgates understanding of how individual decisions and actions contribute to collective performance.

To70’s clients rely on our experience to develop or adopt their risk management frameworks in delivering key projects, advancing beyond these basic elements to comprehensive Safety Management System integration. Being aware of the risks inherent to your operation, and responding with an active risk management framework, is essential to keep it safe, keep it efficient, and keep it moving.