Risk mitigation

1. Financial risk

This presents itself in two ways: firstly, the internal risk of capital outlay for the business; and secondly, the risk of working within supply chains generally formed of SMEs.  

Capital outlay risk can take the form of either depletion of cash reserves or cash flow. This can be managed by weighing up expenditure and analysing the best form of finance for the project. More firms are moving away from fully financing a project themselves and are instead focusing on lease arrangements, thereby making automation an operational cost. This can certainly lower risk, offering a fall-back option should the project not meet expectations, or if you have shorter term customer contracts. 

Supply chain risk can be managed through contractual terms, for example staged payments for when a supplier hits certain performance metric such as design, procurement, build, or acceptance testing. Additional methods can also be considered, e.g. liquidated damages and bank guarantees. 

2. Technical risk

This is this easiest risk area to mitigate, as process risks are generally covered by the integration partner or process solution provider. 

Most system integration partners will provide upfront proof of concept support for anything that:

- Sits outside of normal known process risks

- Represents a new process

- Constitutes a combination of processes that rely on each other. 

Once the process risks are removed, a full User Requirement Specification is normally issued, which enables the integration partners to provide a quote. At this point, potential suppliers may simulate the process to prove cycle time and throughput, allowing some confidence in future OEE calculations. The final chosen solution partner should also demonstrate capacity and competence in the solution being offered. 

3. External risk

Anything external to your or your supplier’s ability to deliver the project on time and to the quoted price should be reviewed prior to commitment. Currently, the geopolitical challenges impacting tariffs and global supply chains have caused a few headaches, as have domestic changes to UK Government policy, such as National Insurance payments. These all affect decision making, and should be considered from both a short and long term perspective.

4. Human factors

Managing employee risk can be critical to an automation project’s overall success and may also improve buy-in from the workforce in the longer term. Getting support from suppliers, trade associations and other manufacturers can help firms to introduce automation in a manageable way. Early education and involvement of key stakeholders within the organisation around the ‘why’ and ‘how’ surrounding an automation project can also help to minimise future challenges. Remember, no-one knows your processes or products like those currently making them. Make use of that knowledge! 

The most influential area when it comes to mitigating automation risk is communication. Talk internally with key stakeholders to define the financial risks, technical risks, external risks and human risks that will undoubtedly present themselves as part of the decision-making process. Talk externally to suppliers, trade associations and other firms who have automated. And finally, consider talking to third party consultants, who can bring experience and expertise to your automation investment plan. 

Talk to Automate UK about how they can point you in the right direction with accredited suppliers and consultants to reduce your investment risk.

www.automate-uk.com