Risk Management in Aviation

With two major air disasters in the past year and a half, risk management remains a top priority of airlines around the world.  Even with the Malaysia Airlines flight 370’s  mysterious disappearance and Malaysia Flight 17 being shot down over Ukraine, The New York Times recently published an article titled “Airline Industry at Its Safest Since the Dawn of the Jet Age.” The article reads that a single passenger could fly every day for 123,000 years before they encountered a fatal flight. As the chances of having a safe flight continue to increase, so does the complexity of risk management.

Over the years we have seen different types of risk become reality.  From engine failures, piece part failures, terrorism, and now cybercrimes, risk profiles of airlines and airports are rapidly changing. Risk managers are forced to broaden their coverage since many different issues can arise.  Issues range from potential liabilities relating to pollution to situations like a loss of GPS satellite communication.  Another area buyers are interested in has been protection against cyber-attacks.  This issue is not just in aviation, but can be found in most industries.

At the end of the day, airlines take every precaution possible to keep their passengers and crew safe while flying.  As in other industries, some risks cannot be avoided if they were to occur.  Airlines focus on mitigating the risk and the having a backup plan if something were to actually happen. Larsen and Grey give us two strategies for mitigating risk.  “First, reduce the likelihood that the event will occur and second reduce the impact that the adverse event would have on the project” (Larsen and Grey,2014).  This is a key point that anyone can take away and use in their daily job.  As we read in chapter 7, a contingency plan is an alternative plan that will be used if a possible foreseen risk event becomes a reality.  Every airline has and practices different contingency plans in case of emergency.  These plans don’t eliminate risk, but definitely reduce and help employees of the airline manage the different risks effectively.  Also, in chapter 7 we learn risk avoidance “that changes the project plan to eliminate the risk or condition” (Larsen and Grey, 2014).  Airlines avoid certain risks like scanning their passengers in security for guns or knives to avoid passengers shooting anyone on board during flight.  They even take into consideration what types of food they serve their passengers in flight to avoid certain allergic reactions.

Working in the aviation industry for an aircraft parts manufacturer there are many risks that we manage on a daily basis.  Mainly, we avoid the risk of selling a faulty part to an airline by ensuring that we run every single part through many testing phases throughout the building process.  With many different tests being run we can pinpoint the exact issue and make sure everything is running smoothly by the time the part leaves our plant.

What are some different risks your company faces and how do they manage these risks?

Source: http://www.technologyreview.com/view/535716/managing-risk-in-a-high-flying-industry-a-look-at-aviation/


2 thoughts on “Risk Management in Aviation

  1. Risk management is a term that I see used in many contexts through the business world, and it is interesting to see how one of the seemingly riskiest industries of aviation can put forth practices to reduce hazards to such a tolerable level.

    The company that I work for (in the construction industry) is also a proponent of implementing risk management within the different facets of our business. Operations reduce risk through thoroughly planning projects, our contracts are reviewed by our risk management team before execution, and we factor in risks into our estimates. Being an estimator, I perform risk analyses prior to projects beginning, and factor in financial impacts into the price. Without going into too much detail, we factor in the likelihood of an adverse event occurring and the financial impact of the event. The summary of all of these events listed out is the contingency that we place in our prices. No matter what position that you have, risk management is something that we all should be planning for.

  2. Thanks for the interesting post Lindsay. You brought up some interesting risks in aviation that I had not even thought of like the food they serve. I work in finance at a medical products manufacturer and distributor. There are many risk when dealing with this type of product but I am not involved in finding out what those risks are and mitigating them. I have a micro function in finance where the biggest risk is getting behind on work. The way we handle work volume is putting in extra hours and coming to work on the weekends. If we do not have our work done in time for month end, this can cause a big issue with financials. It is a private company so we do not have to follow strict procedures but if the owners do not get their numbers by 5 PM on the last day of the month, someone is going to be in trouble. We have many automation programs being created to handle the increase in volume that we have had in the last 5 years. We are the largest private medical products manufacturer and distributor in the country with virtually no debt. Every year, they acquire new businesses and increase sales but they do not want to add more personnel to handle the increase. More and more data entry jobs like AP posting, cash applications, and returns are being transferred to our India location. This doesn’t necessarily mean that our job is volatile but it does mean that if you leave your position, it probably won’t be filled in the U.S. but somewhere else where the labor is cheaper.

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