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Is Facility Risk Real?

Understanding Facility Risk Management
by Gregory Weddle, Jonathan Coburn, and Javier Morell

uildings can inspire us with their beauty or impress us with their functional elegance. In the life sciences industry, the relationship between form and function is influenced by the process requirements of products we wish to bring to market. Pharmaceutical and biotechnology companies may build their corporate headquarters with inspiration in mind. But, they build, operate, and maintain manufacturing and laboratory facilities as functional sites. Such facilities are built to serve a specific purpose that supports an owners business. But facility construction also brings risk into a business that can be significant and unforeseen. On closer inspection, you dont have to look far to see the implications of facility risk.



One good example from outside the biopharmaceutical industry illustrates an important element of risk awareness. At ConAgra two seemingly minor and inconsequential facility problems caused Salmonella contamination of Peter Pan peanut butter, ultimately sickening 628 people across 47 states in early 2007 (Facility Risk At Work box). ConAgra recalled the product on 14 February 2007 and reintroduced it five months later after both internal and external (US Food and Drug Administration, FDA) investigations. The problem there was not a lack of knowledge. Undoubtedly the people at ConAgra, whose core business is food production, know how moisture can affect the presence of bacteria and how their manufacturing processes work, and they are certainly concerned about product contamination. Yet it appears that no one at ConAgra connected the
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leaking roof and fire sprinkler to the risk of product contamination. A contributing factor to this disconnect, and common practice among many large companies, is specialization. Specialists who work in different departments each have pieces of a big picture. But their collective knowledge is not brought together and focused through the lens of facility risk. ConAgra reported $66 million in direct (accounting) costs associated with the incident. However, those costs are only a fraction of the total economic cost the company now faces. They do not include revenue and profit foregone during the recall, lawsuit exposure (lawsuits were filed within days), increased regulatory audit costs over the coming years, and long-term damage to the brand. With additional costs, the $66 million price tag currently associated with this incident is shockingly low. Regardless of the final tally, its clear that the overall cost from this incident is huge when compared with the minor cost of understanding the possibilities and probabilities of failure in addition to preventing the problem from the start. How Could That Happen? This question plagues us as we struggle with the consequences of an incident hindsight is always 20:20. Unfortunately, the human tendency is to think deterministically, not probabilistically.

We dont know about all the times, if any, that water leakage at the ConAgra factory didnt result in product contamination. The people involved received no clues about the risk associated with those particular events and, apparently, treated them as routine repair issues. Extensive research indicates that humans are extremely poor judges of risk. Nothing in our evolution prepares us for the masses of information and the complexity of the environments we live and work in today. Our history prepared us to react to visible and concrete risks (e.g., an attacking lion), but not to abstract ones. Individually, we have learned to make decisions based on traditional rules of thumb that have then been shaped by our individual experiences. This makes us especially illequipped to accurately assess lowprobability, high-consequence events because we dont have enough experience with them to develop an accurate instinctive response after all, they dont happen that often. Instead, we are conditioned to equate low-probability events to low risk, without considering that such an event can still be very risky if the consequences are high enough. Additionally, when people think about facility risk, they often include some common misconceptions (see Facility Risk Management Myths box).


Although the concept of risk can mean many different things to many different people, risk is defined by a simple equation: Risk = Probability Consequence Facilities are used to establish and maintain indoor environments necessary to support business activities.


Associated Press, 6 April 2007 Moisture from a leaky roof and faulty sprinkler helped Salmonella contaminate peanut butter at the Georgia plant of ConAgra Foods last year, sickening more than 400 people nationwide, ConAgra said Thursday. The Omaha, NE, company conducted nearly a two-month investigation into the contamination and pledged to insure that Peter Pan peanut butter is safe when it returns to stores in mid-July. Stephanie Childs, a ConAgra spokeswoman, said the company traced the Salmonella bacteria to three problems at its Sylvester, GA, plant in August. The roof leaked during a rainstorm, and the sprinkler system went off twice because of a faulty sprinkler, which was repaired. Moisture from these three events mixed with dormant Salmonella bacteria in the plant that Childs said likely came from raw peanuts and peanut dust.

Therefore, facility risk is related to the ability to achieve and maintain those environments. An office building has relatively simple human comfort requirements. By contrast, a pharmaceutical manufacturing space can have stringent specifications for work flow, security, temperature, humidity, air flow, and containment or particulate count. Most life-science facilities contain a variety of space types: office and common areas, production suites, laboratories, animal rooms, warehouse and stability areas, and utility plants. Different environmental requirements can exist for the same type of space at different locations in a facility. Here we refer to a phase as a unique combination of space type and environmental requirements. In all facilities two primary elements establish the proper indoor environment. The first is the building envelope: It isolates the indoor environment from the outside world and creates the physical spaces in which unique environments are established. The purpose of the second element is to establish, maintain, and monitor required environmental parameters. That is achieved through complex interaction of electrical and mechanical utility systems (e.g., switchgears, boilers, chillers, air compressors, air handling units, exhaust
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fans, and fume hoods). Everything is interconnected by pipe-, wire-, and ductwork and orchestrated by some sort of control system to maintain the environment within acceptable limits. So how does this view of facilities translate into a comprehensive interpretation of the risk equation? Probability reflects the chances that an unacceptable indoor environment will occur in one or more of the facility phases as a result of system or component failure. Because utilities and equipment can be interrelated and interdependent in establishing indoor environments, system and equipment dependencies should be considered when assessing probabilities. Consequence reflects the monetary loss incurred by not maintaining proper indoor environmental conditions required to sustain product integrity throughout various phases. Consequences can take the form of lost production time (lost revenue), lost research (opportunity cost of delays in bringing product to market), lost product (direct cost), regulatory fines (regulatory risk), brand damage from adverse publicity, and any number of other potential outcomes that businesses want to avoid. By defining both probability and consequence in this way, the risk equation becomes quantified in monetary units. For example, the amount of lost revenue is directly affected by the length of downtime incurred. In terms of monetary loss potential, risk as defined by this equation simply becomes another cost, just like fuel, electricity, and operations. Ultimately, this is the ideal way to approach facility risk to dramatically and positively affect a manufacturers bottom line. But that is not how most businesses view their facilities and facility risk. These questions could be asked: Is facility risk real? Does this viewpoint provide value? The results of facility risk analyses at several life sciences facilities make it clear that companies are exposed to significant business risks directly linked to their facilities. Their risks are going unrecognized, often because of compartmentalized (departmental) thinking that fails to understand the interdependencies of plant operations. Facility risk assessment brings focus to the core business deliverable, the potential for and the value of loss, and

what will help reduce facility risk. By adopting this paradigm, companies can greatly reduce their risk exposure. Here are some general observations to pull from.
No Holistic Approach to Risk Management Exists: The current risk-

assessment tool kit available is inadequate. The most popular tools such as FMEA (failure mode and effects analysis), FMECA (failure mode, effects, and criticality analysis), and GAMP (good automated manufacturing practice) methodology are not quantitative and do not consider the complex systems and equipment interdependencies associated with facility risk (Figure 1). These tools yield outcomes based on opinion, which makes the results subject to the natural risk judgment limits we share. When implemented through a get experts together in a room and vote process, outcomes are also subject to additional distortions imposed by interpersonal dynamics and politics within the group.
Risk Considerations Are Not Part of the Operational Mindset: Even at

facilities where it is clear that severe business consequences can result from environmental failure, a risk paradigm has not been adopted. Staff at such


People are good at judging facility risk. In fact, people are very poor judges of risk that does not arise directly from their own experience or is complex in nature. Complying with regulations is the same as managing risk. This view is understandable. After all, government regulation exists to minimize risk to the public. If a company complies with regulations, it pays much more attention to regulatory compliance than it does to facility risk management. The experts know where the risk is. There have been many cases where expert opinion has been wrong when considering risk quantitatively. No one person or group knows enough to make a thorough and accurate risk assessment. Facility managers and operators have the tools needed to make risk-based decisions. The current tool kit for risk assessment is mostly quantitative and does not consider complex interaction between systems and equipment.

Figure 1: In this risk assessment spectrum, current risk assessment tools are largely qualitative, resulting in arbitrary and inconsistent reporting. Fault tree analysis (FTA) takes risk assessment several steps further by incorporating component failure data, modeling how components and systems interact to achieve required environments. When coupled with outcomes such as the monetary cost of downtime, FTA makes risk assessment truly quantitative.

facilities tend to think too narrowly, do not understand the interdependencies of plant operations as they relate to risk, and have little understanding of the consequences within their scope of influence at the worker level. The older the facility, the greater the disconnect between risk and operations. How many times have you been asked to participate in a postmortem that doesnt consider any possibility of failure other than the specific event that precipitated it?
Regulatory Compliance Is Mistakenly Equated with Risk Management:

Regulatory compliance targets regulatory risk. It is possible to comply with all applicable regulations and still be exposed to significant business risk. If a production facility goes down because of equipment failure, the public may not be in danger. However, the company that owns the facility will experience a substantial economic loss.


How does a company find a balance between profitability and risk? How does it go about ensuring a well-informed and -prepared future? At the core, our experience in applying a quantitative risk assessment methodology defines a facilitys risk in specific dollars exposed. We identify this number by understanding the impact that inadequate maintenance has on environmental conditions required to ensure product quality. To start, this approach identifies the basic requirements of both stated and regulated product need. The methodology breaks a facility down into its basic support areas, identifying dependent utility and system
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components. It then compares product timing and exposure with phase value. Ultimately, this approach models facility envelopes, utilities, equipment performance, and maintenance methods against exposed consequence. That results in a scientific measure of risk at any one time. A facility can consist of several phases, spaces, or distinct production steps. Each phase has its own set of required environmental conditions. Product value tends to increase as it progresses through each phase (e.g., formulation to fill and finish). Additionally, product exposure also changes from phase to phase because of process limitations, packaging, and yield variances. From a risk standpoint, research phases pose interesting challenges in evaluation and identification of consequence. Moreover, as facilities age and evolve, many changes muddy the waters, allowing facility owners and operators to lose sight of their original requirements. A facility can consist of many systems that support the production requirements of each phase. Our approach focuses on understanding interdependencies between systems that support each phase. Some phases depend on more systems than others. Multiple phases often depend on a single system or utility. The failure of a single system has significant consequences to each dependent product phase. The types of utilities and systems that are considered include power, chilled and hot water, steam, air handlers, and exhaust fans. All those utilities and systems can support areas around multiple production suites.

Systems and utilities are modeled against their age, construction category, historical and statistical failure probability, and maintenance exposure. Advanced statistical tools such as fault tree analysis (FTA) generate failure probabilities for such systems, also considering performance interdependencies. The fault tree approach also known as a reliability block diagram is a big step beyond the industrys current practice, using largely qualitative approaches to assessing risk. Although it is not a cure for our natural risk-analysis deficiencies, FTA provides a disciplined framework that forces risk analysts to identify interdependencies. This approach requires scientifically reliable data that creates meaningful results. For facility risk, the failure consequence of a phase is combined with the probability of failure outlined by the FTA, quantifying risk in monetary units. Figure 2 represents our recommended risk analysis method. It goes beyond equipment and system levels to address business outcomes. It allows for explicit analysis of risk-reduction benefits against the cost of operations, maintenance, and capital spending. As a result, systems and components can be ranked according to their contribution to total risk. That allows a company to prioritize its maintenance and monitoring efforts. This approach can also help reduce and refine the scope of qualification, helping facilities put resources where there is the highest risk.


The above approach can be used to design facilities for optimum risk/cost balance, expose continuous risk management needed during facility operations, and guide facility investment. Facility risk modeling can be used to adjust building and equipment configurations and prevent redundancies to the optimum cost and/ or risk point before actually breaking ground. Use this approach to answer the following questions: What is my risk exposure as a result of my facility design? Would changes in the design provide sufficient payback in terms of risk reduction? Does this justify the additional investment in the facility?

Figure 2: Facility risk-assessment methodology at Johnson Controls, Inc.

manufacturers to truly understand their facilities as well as the overall business risk inherent in a process.


Admittedly, this is a great amount of information. The life sciences industry is on the verge of adopting a holistic approach to manufacturing and business. This is a huge step forward that requires a bit of gumption and many open doors. To decrease the risk of a Peter Pan peanut butter situation and avoid the huge loss associated with such an event, the industry must look inward. Each company must open its eyes to the possibility that a seemingly inconsequential system has the potential to cause significant and long-term harm. Risk modeling redefines mission critical, identifying where true risk lies. And ultimately, this is the kind of knowledge that will help the industry understand how the nuts and bolts of facilities play into the big picture. By strategically addressing risk scientifically, the industry can make smarter more business-conscious decisions.
Gregory Weddle is global manager of critical environments, Jonathan Coburn is enterprise account director in life sciences, and Javier Morell is critical environments solutions consultant at Johnson Controls, Inc., 5757 North Green Bay Avenue, PO Box 591, Milwaukee, WI 53201; 1-414- 524-1200; www. johnsoncontrols.com.

What is the risk impact of my capital project portfolio? How should I prioritize my investments to gain the biggest reduction in risk within my capital budget? A facility risk model (connected to production schedules, current equipment status and availability) can guide maintenance decisions. Typical questions that may arise include Can I change my maintenance program to reduce both risk and expenditures? How can I prioritize my maintenance and operation activities in terms of their risk impact? What is the individual risk impact of each system or utility in my facility? What are the interdependencies between various components and systems? How do these interdependencies affect risk?

Can I perform maintenance without a production shutdown? Can I respond to this emergency without a production shutdown? Additionally, facility risk modeling can help companies understand the impact of implementing both major and minor modifications to its facility. Through this process, you may ask How will my risk profile change when adding a new product line or phase to existing systems? Will statistical risk analysis show that I can implement energy savings projects without causing undue risk to existing production areas? How do I prioritize capital projects? By conducting a detailed assessment of a facilitys life cycle through risk modeling, companies can make informed decisions. The process of long-term risk planning empowers