AssetManagementStandards Consolidado

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AES Asset Management

Global Standards

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Table of Content

STD0001 Asset Management System......12
STD0002 Capital and Operating Expenditures.......25
STD0003 Management of Change......42
STD0004 Risk Management.....53
STD0005 Asset Operation and Maintenance....76
STD0006 Asset Supply Chain Management...92
STD0007 Life Cycle Value Management.105
STD0008 Training Awareness and Competence.....117
STD0009 Root Cause Analysis...128
STD0010 Performance Monitoring....137
STD0011 Recovery Plan..146
STD0012 Information Management.156
STD0013 Continuous Improvement..165
STD0014 Business Continuity Management..176
STD0015 Peer Review..192

Abbreviations

The following abbreviations are used in this document:

Abbreviation Description
AF Availability Factor
AGIC AES Global Insurance Company
AM Asset Management
AMIP Asset Management Improvement Plan
BPC Business Planning & Consolidation
BSC Balanced Scorecard
CA Commercial Availability
CapEx Capital Expenditure
CBM Condition-Based Maintenance
CMMS Computerized Maintenance Management System
DMAIC Define, Measure, Analyze, Improve, Control
EAF Equivalent Availability Factor
EAMS Enterprise Asset Management System
EHS Environment, Health and Safety
EFOF Equivalent Forced Outage Factor
EFOR Equivalent Forced Outage Rate
ELT Executive Leadership Team
ERP Enterprise Resource Planning
FMECA Failure Modes, Effects and Criticality Analysis
FP&A Financial Planning and Analysis
GRC Global Risk Consultants
IFRS International Financial Reporting Standards
KPA Key Performance Area
KPI Key Performance Indicator
MoC Management of Change
MRO Maintenance, Repair and Operations
MSDS Material Safety Data Sheet
MWH Megawatt Hour

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NCF Net Capacity Factor
NFOM Non Fuel Operation and Maintenance
O&M Operation and Maintenance
OEE Overall Equipment Efficiency
OEM Original Equipment Manufacturer
OMM Optimum Maintenance Mix
OpEx Operational Expenditure
PM Preventive Maintenance
PDCA Plan, Do, Check, Act
PdM Predictive Maintenance
RACI Responsible, Accountable, Consulted and Informed chart
RAV Replacement Asset Value
RCA Root Cause Analysis
RCM Reliability Centered Maintenance
RDS Risk Diagnostic Survey
ROA Return On Assets
RFI Request for Information
RFP Request for Proposal
RFQ Request for Quote
RTF Run To Failure
SBU Strategic Business Unit
SKU Stock Keeping Unit
SMART Specific, Measurable, Attainable, Relevant, Time-based
SME Subject Matter Expert
SOP Standard Operating Procedure
SRM Supplier Relationship Management
STACE Safety, Technical, Alignment, Cost and Execution

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Definitions

The following definitions are used in this document:

Term Definition
5S A workplace organization methodology which uses a list of five Japanese
words which are seiri (sort), seiton (shine), seiso (set in order), seiketsu
(standardize) and shitsuke (sustain).
Assessment
Systematic, independent and documented process for obtaining
assessment supporting data and evaluating it objectively to determine the
extent to which the assessment criteria are fulfilled.
Assessment criteria
set of policies, procedures or requirements used as a reference against
which assessment supporting data is compared.
Assessment
Supporting Data
Records, statements of fact or other information which are relevant to the
assessment criteria and verifiable.
Asset Management Systematic and co-ordinated activities and practices through which an
organization optimally manages its assets and their associated
performance, risks and expenditures over their life cycle for the purpose of
achieving its strategic business objectives.
Asset Management
Drivers
Parameters critical to business performance in order to meet or exceed
performance targets.
Asset Management
Improvement Plan
A business process which includes an assessment of an organizations
asset management maturity.
Asset Management
Scorecard
Best practice document that quantifies cumulative benefit of performance
improvement projects.
Business Plan Organizational strategic plan which documents the vision, mission, values,
goals, and broader organizational strategies of the business.
Business Planning &
Consolidation
SAP system that is used to support global consolidation and reporting for
actuals, forecast and budget at AES.
Capital Expenditure Funds used to construct or acquire a long-term asset that the owning
company has defined as a capital asset (subject to cost levels and/or other
thresholds), or to add to the value of an existing asset (i.e., upgrade or
refurbish) for which the owning company has defined as a capital
expenditure.
CapEx Consolidation
Template
Tool that will be used by businesses to consolidate the portfolio of projects
and their benefits.
CapEx Project
Template
Tool that will be used by businesses to evaluate and compare the benefits
of each project.
Competence The necessary abilities to achieve a certain goal or complete a project.

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Term Definition
Computerized
Maintenance
Management System
A computer-based system used to maintain an electronic database of
information about an organization's maintenance operations.
Condition-based
Maintenance
This covers all inspections and tests (condition monitoring) which are done
to verify the condition of equipment in order to predict and prevent
failures before they occur.
Conformity Fulfillment of a requirement.
Contingency A possible path forward when equipment or critical system loses its
function or has its function degraded in order to maintain the
equipment/system performance.
Contingency Plan Plan(s) and/or procedure(s) to identify and respond to incidents and
emergency situations, and maintain continuity of critical assets operation.
Cost-Benefit Analysis The process used to evaluate projects by investigating the relative impact
of financial returns versus costs.
Critical equipment or
system
Equipment or system providing functions for which no alternative or
reserve exists and whose loss will result in a significant negative safety,
environmental, availability, financial or regulatory impact.
Design Improvement
Maintenance
This covers all modifications and projects which are made to equipment to
remove a cause of failure.
Document Control
System
A formal set of procedures used to control all aspects of the information
covered under the Information Management System.
Driver See Asset Management Drivers.
Information
Management
The organized collection, storage and use of information for the benefit of
a business.
Information
Management
System
A system or combination of systems that manages information, including
asset information, used to support operational, EH&S, legal and regulatory
requirements.
Information Manager An individual responsible to maintain the integrity and functionality of an
Information Management System.
Life Cycle The time interval between the creation, acquisition or enhancement of an
asset and its decommissioning or disposal.
Management of
Change
A formal process to assess the associated risks when existing
arrangements are revised or new arrangements are introduced, such as
revised processes or procedures for asset management activities or the
introduction of new or modified assets, asset systems, technologies.
Master Plan An asset management plan covering actions, responsible person and due
date.

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Term Definition
Measure A well-defined, concrete or objective performance attribute.
Metric An abstract, higher-level, or somewhat subjective performance attribute.
MRO items Items kept in an engineering store/storeroom to support asset
management activities, including spare parts, fasteners, lubricants,
consumables, jigs, fixtures, etc.
Non-conformity Non-fulfillment of a requirement.
Non-tactical
Maintenance
Non-tactical maintenance is work that does not originate from RCM or
OMM analysis or that is not part of the asset care plan. Non-tactical
maintenance covers activities associated with unexpected equipment
failure and potential failures.
Objectives Specific results that a business aims to achieve within a time frame and
with available resources.
One Time Loss See Potential Loss Avoided.
Operational
Expenditure
An on-going cost for running a business or system. This includes an
expense required to maintain the organizations existing assets.
Operational
Performance
Staff organization that is aligned and works in conjunction and
coordination with Operations to optimize asset performance.
Outage Plan A scope of work, developed in advance, to be performed on assets while a
system of assets is not in operation.
Outcome What will be achieved as result of performing a defined action.
PAS 55:2008 The British Standards Institution's (BSI) Publicly Available Specification for
the optimized management of physical assets.
Peer Review

An independent assessment of the maturity level a business has attained
implementing processes to address all Asset Management Standards.
Peer Review Plan Description of the activities and arrangements for a Peer Review.
Peer Review Program Arrangements for a set of one or more assessments planned for a specific
time frame and directed towards a specific purpose.
Performance
Monitoring
Continuous or periodic qualitative assessments of the actual performance
compared with specific objectives, targets and standards.
Plant Level KPIs (also
known as Level 3 KPIs)
KPIs identified by the SBU and/or the Corporation that shall be tracked
against established targets and routinely reported by a business.
Potential Loss avoided Avoided losses due to: one-time failures such as equipment failing and
requiring replacement or repetitive failures such as equipment failing
repetitively and not requiring replacement.
Probability of Failure Probability of failure in each year with regard for what happened in the
previous years.

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Term Definition
Refurbishment The act of restoring an asset to its former good condition, thereby
resulting in an extension of its useful life.
Repetitive losses See Potential Loss Avoided.
Replacement in Kind Any change that lacks a sufficient material difference to the original
condition to warrant initiation of the MoC process.
Reporting Relaying information about how an organization has performed against
what it said it would deliver.
Resources The level of resources (including assets, time, cost and people) that an
organization can afford in order to meet objectives.
Risk Diagnostic Survey One of the methods used by Global Risk Management for collecting
information about business risks for further evaluation, reporting and risk
management.
Risk Register Data warehouse of clearly defined risks faced by a business which includes
items such as: risk name, risk description, and risk owner.
Root Cause The most basic reason(s) for the occurrence of an unwanted event after all
other possible reasons have been disproven. There are three types of
Root Causes:
Physical Failure of physical components;
Human Failures resulting from decisions made by people; and
Latent Deficiencies in management systems and restraining
cultural norms that allow failures to occur.
Root Cause Analysis The process used to find the root cause(s) of a Triggering Event. In this
context, the RCA process also includes identifying and implementing
corrective actions and tracking results to measure success.
Run to Failure A maintenance tactic that intentionally allows for the failure of an item,
because it is impossible or not cost-effective to prevent the failure.
Shall Indicates a requirement.
Should Indicates a Business has discretion based on expected value.
Sourcing team The local Sourcing team at the Business level, the SBU level Sourcing team
and/or the Global Strategic Sourcing team, as applicable.
STACE Evaluation
Scorecard
Sourcings standard evaluation matrix of Suppliers proposals covering
safety, technical, alignment, cost and execution parameters.
Statistical Process
Control
The use of statistical tools to determine if processes are working
satisfactorily.
Strategic Driver A factor that influences the business to such a degree that a plan or set of
plans should be put in place to ensure an acceptable outcome is achieved.

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Term Definition
Strategic Leverage Weapons that the organization has to implement the strategic drivers.
Such weapons can be directed to strategy, marketing, engineering,
processes, communication.
Strategic Objective Long term objective based on the Risk Management Standard and the
Asset Management System Standard.
Supplier Relationship
Management
Comprehensive, all-inclusive approach to strategically planning and
managing interactions with Suppliers in order to maximize the value of
those interactions.
Tactical Maintenance Tactical maintenance tasks have been developed through some analytical
process, such as RCM or OMM as an applicable and cost-effective way to
improve equipment reliability. We define four types of tactical work:
usage-based maintenance, condition-based maintenance, run-to-failure
and design improvement maintenance.
Tactical Objective Short term objective based on the Risk Management Standard and the
Asset Management System Standard.
Team Level KPIs (also
known as Level 4 KPIs)
KPIs identified, targeted, tracked and reported by the business teams that
align with KPIs at the Plant, SBU and corporate levels.
Training Process to provide and develop knowledge, skills and behaviors to meet
requirements.
Trigger Criteria Predetermined values or conditions that once exceeded, and in
conjunction with the frequency of occurrence of similar events, dictate a
Trigger Level and the need to perform RCA.
Triggering Event An occurrence that causes one or more Triggering Criteria to be exceeded.
Total Cost of
Ownership
Estimate of all direct and indirect costs associated with an asset over its
entire life cycle.
Usage-based
Maintenance
Maintenance practices conducted at regular, scheduled intervals of usage
(kilowatt-hours, running hours, months, etc.), which are established to
avoid failure. It can include inspections, services or replacements. It is only
effective if there is a certain age-related deterioration (wear-out).
Whole Life Costs The sum of costs incurred by the asset owner over the lifetime of an asset,
i.e. from the stage at which the asset is planned to the stage at which the
asset is disposed of or decommissioned.

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Records
The business shall establish and maintain records as necessary to demonstrate conformance to the
requirements of these Asset Management Standards.

Records shall be legible, identifiable and traceable.

Records should be controlled in the same way as other important information.

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Asset Management System

STD0001

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Contents

1. Introduction ................................................................................................................. 15
2. Roles and Responsibilities ............................................................................................ 17
3. Process ....................................................................................................................... 18
4. References ............................................................................................................................. 24

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1. Introduction

The purpose of this Standard is to provide the guiding principles for development of the primary
elements in an Asset Management (AM) System at the business level.

An AM System is primarily designed to support the delivery of an organizational strategic plan (Business
Plan), which in turn is aimed at meeting the expectations of the stakeholders. The Business Plan is the
starting point for the development of the primary elements, the AM Policy, Strategy, Objectives and
Plans. These, in turn, direct the optimal combination of life cycle activities to be applied across the
portfolio of asset systems and assets (based on their criticality, condition and performance). This
connective thread is a key feature of an AM System, providing clear line of sight from the
organizational direction and goals down to the individual, day-to-day activities. Similarly, looking
upwards, the monitoring of asset problems, risks and opportunities should provide the factual basis for
adjusting and refining AM strategies and plans, through a process of continuous improvement and
should inform stakeholders by way of adjustments to the Business Plan.

The AM Policy is a high level statement of the business principles, approach and expectations relating to
asset management. To a business, the AM Policy should receive the same level of commitment as the
Safety Policy. The AM Policy provides the framework around which the AM Strategy, Objectives and
Plans are developed and implemented.

The AM Strategy should set out how the AM Policy will be achieved. It is the coordinating mechanism
that ensures activities carried out on physical assets are aligned to optimally achieve the Business Plan.
The AM Strategy prioritizes improvement initiatives, defines expected benefits from those initiatives,
establishes targeted performance levels, defines major AM processes and sets major milestones, with
specific responsibilities. It should provide sufficient information, direction and guidance to enable the
specific AM functions to develop detailed AM Plans.

AM Objectives are SMART objectives established throughout the relevant parts of the business to enable
the AM Policy to be implemented and the AM Strategy to be achieved. AM Objectives should be aligned
with business objectives by appropriate levels of management, using pertinent data or information.
Where possible, performance targets should translate AM Objectives into practical measures that can be
achieved and maintained through AM Plans and operational controls.

AM Plan(s) should identify the various tasks that need to be implemented in order to meet each AM
Objective. AM Plan(s) should provide for the allocation of responsibility and resources (financial, human,
equipment, logistics) to meet the overall timing of the related AM Objective.

The graphic below depicts the interrelationship between the AM System elements, the Business Plan
and other functions that comprise the AM System.

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The successful implementation of AM requires the commitment of top management, which should
assign clear responsibility to individuals for the management of asset systems, including appropriate
accountability for financial and/or non-financial performance and for investments/expenditures. Those
individuals (Asset Managers) need to have the capacity, authority and resources to carry out their
responsibilities.

AM Plan(s) should address all phases of the life cycle and all asset types, although the structure,
composition and implementation of those plans will vary, based on organizational and industry
requirements. It is essential that any tools, facilities or equipment that are required for the delivery
and/or control of AM activities are themselves identified and managed as assets, at a level of detail
appropriate to their criticality.

The proactive and reactive monitoring of AM performance is important to evaluate the implementation
of AM objectives, the effectiveness of controlling risk and the efficacy of the recovery planning process.

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2. Roles and Responsibilities
Roles and responsibilities are described in the RACI chart below. The process is not intended to change
the organizational structure or create additional headcount. Responsibilities required for successful
implementation of this standard should be assigned to the appropriate people within the business.
These roles can be assigned to existing resources based on individual knowledge, experience and skill
set. Individuals can also assume multiple roles.

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3. Process
3.1 Organizational Strategic Plan
The business shall have a Business Plan, to which all subsequent AM aspects are aligned. Inputs to the
Business Plan include the completion of a documented commercial strategy that includes analysis of
market drivers (e.g. Xtrategy). The Business Plan should also be based on a financial model consistent
with AES financial policies.

The Business Plan shall document the vision, mission, values, goals, and broader organizational
strategies of the business.

3.2 Asset Management System Considerations
The following recommendations should be considered when developing AM System elements:
i. The level of detail and complexity of the AM System, the amount of documentation required
and the resources devoted to it are dependent on the size of the business and the nature and
scope of its activities;
ii. While a business should have the flexibility to define the boundaries of the AM System, the
scope should cover the full portfolio of assets that are required for the successful execution of
the Business Plan;
iii. To the extent the AM System draws upon processes already in existence (quality, EH&S, etc.)
care should be taken to ensure that processes work together to form an effective overall system
and that there is effective control of the entire system by Business Leaders; and
iv. The AM System should assist the business in meeting legal, regulatory, statutory and other AM-
related requirements that are applicable.

3.3 Asset Management Policy
The business shall establish, document, and communicate an AM Policy. With respect to the business
the AM Policy shall:
i. Be derived from and be consistent with the Business Plan;
ii. Be appropriate to the nature and scale of the assets and operations;
iii. Be consistent with other policies;
iv. Be consistent with the overall risk management framework;
v. Provide the framework which enables AM strategy, objectives and plans to be developed and
implemented;
vi. Include a commitment to comply with current applicable legislation, regulatory and statutory
requirements and with other requirements subscribed by the business and/or by AES;
vii. Clearly state the principles to be applied (e.g. the approach to EH&S or quality);

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viii. Include a commitment to the continuous improvement in asset management and asset
management performance;
ix. Be documented, implemented and maintained;
x. Be communicated to all relevant stakeholders, including contracted service providers; and
xi. Be reviewed and approved at least annually by the Business Leader to ensure that it remains
relevant and consistent with the Business Plan.

3.4 Asset Management Strategy
The business shall establish, document, implement and maintain a long-term AM Strategy, which shall
be authorized by the business Leadership Team. The AM Strategy shall:
i. Be derived from, and be consistent with, the AM Policy and the Business Plan;
ii. Be consistent with other organization policies and strategies;
iii. Identify and consider the requirements of relevant stakeholders;
iv. Consider the life cycle management of relevant assets;
v. Take account of asset-related risks, asset and asset system criticalities;
vi. Identify the function, performance and condition of existing asset systems and critical assets;
vii. State the desired future function(s), performance and condition of existing and new asset
systems and critical assets, the timing of which is aligned to the Business Plan;
viii. Clearly state the approach and principal methods by which assets and asset systems will be
managed (e.g. criticality and value criteria, approach to asset risk/reliability management);
ix. Provide sufficient information, direction and guidance to enable specific AM objectives and
plans to be produced;
x. Include criteria for optimizing and prioritizing AM objectives and plans;
xi. Be communicated to all relevant stakeholders, including contracted service providers; and
xii. Be reviewed periodically to ensure that it remains effective and consistent with the AM Policy,
Business Plan and with other business and/or AES policies and strategies.

3.5 Asset Management Objectives
The business shall establish and maintain AM Objectives, which shall:
i. Be measurable (i.e. quantified or capable of being objectively assessed);
ii. Be derived from and consistent with the AM Strategy;
iii. Be consistent with the commitment to continuous improvement;
iv. Be communicated to all relevant stakeholders, including contract service providers;
v. Be reviewed and updated periodically to ensure they remain relevant and consistent with the
AM Strategy;
vi. Consider legal, regulatory, statutory and other AM requirements;
vii. Take into account the expectations of relevant stakeholders and financial, operational and
business requirements;
viii. Take into account AM-related risks; and

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ix. Consider improvement opportunities, including new technologies and AM tools, techniques and
practices.

3.6 Asset Management Plan(s)
The business shall establish, document and maintain AM Plan(s) to achieve the AM Strategy and deliver
the AM Objectives throughout the life cycle phases of assets, including creation/acquisition/
enhancement, utilization, maintenance and decommissioning/disposal. The development of AM Plans
and life cycle activities shall include consideration of the impact of actions in one phase upon the
activities necessary in subsequent phases.
AM Plan(s) shall be optimized and the actions prioritized. Plans covering a portfolio of asset systems or
assets shall take into account overall value, resource requirements, interdependencies, risks and
performance impact.
The AM Plan(s) shall:
i. Document: a) the specific tasks and actions required to optimize costs, risk, and performance of
assets and/or asset systems, b) the designated responsibilities and authorities for the
implementation of such actions and for the achievement of AM Objectives, and c) the means
and timing by which these actions are to be achieved;
ii. Be communicated to all relevant stakeholders to the level of detail appropriate to their
participation or business interests in the delivery of the plan(s);
iii. Ensure that appropriate arrangements, functional policies, standards, processes and procedures,
AM enablers and resources are made available for the efficient and cost-effective
implementation of the plan(s) (i.e. plans are realistic);
iv. Include actions to improve the AM System; and
v. Be reviewed periodically to ensure that they remain effective and consistent with the AM
Strategy and Objectives.

Organizational
strategic plan
"Business
Plan"
Asset
Management
Policy
Asset
Management
Strategy
Asset
Management
Objectives
Asset
Management
Plans

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3.7 Asset Management Enablers and Controls
The business shall establish and maintain an organizational structure, complete with roles,
responsibilities and authorities, consistent with the execution of the AM System.
Top management shall demonstrate commitment to the development and implementation of the AM
System and the continuous improvement of its effectiveness by:
i. Providing AM Champion(s) responsible for design of the AM System and who ensure the assets
and asset systems deliver the requirements of the AM System elements;
ii. Ensuring that asset-related risks are identified, assessed and controlled and are included in the
overall risk management framework;
iii. Ensuring the availability of adequate resources; and
iv. Communicating to all relevant stakeholders the importance of complying with the requirements
of the AM System, in order to achieve the Business Plan.

3.8 Asset Management Implementation of Plans
The business shall establish, implement and maintain processes and/or procedures for the
implementation of AM Plan(s) and control of AM activities across all phases of the life cycle.
These processes and procedures shall:
i. Be sufficient to ensure that operations and activities are carried out under specified conditions;
ii. Be consistent with the other AM system elements (policy, strategy, objectives); and
iii. Ensure that costs, risks and asset system performance are controlled across the asset life cycle
phases.

3.9 Performance Assessment and Improvement
The business shall establish, implement and maintain processes and/or procedures to monitor and
measure the performance of the AM System and the performance/condition of the assets and asset
systems. These processes and/or procedures shall provide for:
i. Monitoring and indicators (KPIs) to identify past or existing non-conformities in the AM System
and any asset-related deterioration, failures or incidents;
ii. Monitoring and KPIs to ensure that assets and asset systems are currently operating as
intended; and
iii. Recording and reporting of monitoring data and KPIs to facilitate subsequent analysis of problem
causes to assist in determining corrective or preventive actions.
KPIs should be developed at all organizational levels, and they should demonstrate alignment upward
through the organization from individual and team goals to business, strategic business unit and,
ultimately, corporate goals.

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As an example:
Level Indicator
AES Corporate Total Shareholder Return > S&P 500 Utilities Index
SBU Meet or beat annual scorecard targets
Business (Generation) Meet or beat plant Heat Rate target
Individual / Team Maintain boiler Loss on Ignition < 10%

The tables below illustrate a simple process to identify the KPIs used to monitor AM Objectives.

Indicator Template: {name}
AM Objective KPI
This field must be populated with the strategic
objectives related to strategic leverage
This field must be populated with the indicator
related to strategic objectives

Indicator Example: Internal Process Improvement
AM Objective KPI
Improve reliability of critical equipment

Turbine Reliability

The plans developed in response to the analysis of strategic drivers and objectives are inputs to the
Asset Management Capital Spending, Asset Management Maintenance Plans, Asset Sourcing and
Management of Change elements as appropriate.

3.10 Asset Management Drivers
The development of an AM Strategy will identify parameters critical to business performance (drivers).
In order to meet or exceed performance targets, AM Objectives and Plans need to incorporate activities
that positively impact drivers. The process below explains how to use the identified drivers to develop
and document AM Objectives and Plans.

Asset management drivers might include such things as an aging work force or competitive markets. Key
objectives, such as improving the engagement of individual contributors (human performance) or
focusing on improving customer satisfaction, are then established to address identified asset
management drivers. The objectives then must be included in asset management operational,
maintenance and/or investment plans.

Additional value creating strategic drivers can also be found through internal and external
benchmarking, customer surveys, process improvement efforts, process control, automation, cost
reduction programs, EAMS implementation, continuous monitoring, flow mapping, productive
maintenance, material control systems, supplier relationships and many other evaluations.

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The tables below illustrate a simple process to document strategic drivers and then address them with
corresponding documented strategic objectives and asset management plans.

Strategic Driver Template: {name}
Strategic Driver AM Objective(s) AM Plan(s)
This field must be populated
with the strategic driver
This field must be populated with
the strategic objectives intended
to address the strategic driver
This field must be populated
with the plan or plans that are
designed to achieve the
strategic objectives

Strategic Driver Example: Internal Process Improvement
Strategic Driver AM Objective AM Plans
Reliability of critical assets

Improve reliability of aging assets
critical to operational
performance

Capital Investment shall
address network reliability,
availability and customer
requirements.
Capital projects shall be
prioritized to limit risk to
network availability and
reliability.

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4. References
4.1 Appendix
PAS 55-1:2008; http://www.bsigroup.com/en-GB/PAS-55-Asset-Management/

4.2 Example of Alignment of AM System elements
AM Policy
_________ will fulfill our obligations, be legally and environmentally compliant, and apply the principles
set out in the AES Asset Management Standards. Using programs such as APEX, establish appropriate
metrics for measuring and benchmarking the performance of the Plant and of the Asset Management
Regime to provide feedback for continual learning and improvement, applying innovation, new
technologies and Good Industry Practice.
AM Strategy
_________ has also adopted the APEX process for its continuing improvement initiatives. This process
includes use of root cause analysis (RCA) and process improvements utilizing a formal methodology.
Major investigations and future projects will exist in the APEX queue until such time as a disposition has
been determined. At that time, they will either be closed or moved to a capital project.

AM Objectives
__________ has set the following APEX targets for 2013:
i. Basic training 15 people
ii. Basic re-training 6 people
iii. Six Sigma training 2 people
iv. 2013 new projects - 8
v. 2012 carryover project financial impact - $550K
vi. 2013 new project financial impact - $500K
AM Plans
_________ will increase financial contribution from APEX performance improvement projects in 2013,
relative to 2012, by significantly increasing the number of projects completed and yielding impact in the
calendar year. This increase will be accomplished in part by initiating an ambitious training program
covering Basic, Leader and Advanced training curriculum in the 1
st
quarter.

4.3 Other Reference Materials
Other reference documents can be found on Docushare at:
https://www.ouraes.com/docushare/dsweb/View/Collection-479347

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Capital and Operational Expenditures

STD0002

27
Contents

1. Introduction ...................................................................................................................................... 28
2. Roles and Responsibilities ....................................................................................................... 30
3. Process ................................................................................................................................... 35
4. References.41

1. Introduction
The purpose of this Capital and Operational Expenditures Standard is to provide AES businesses with the
guiding principles to identify, prioritize, plan, budget, execute, control, and closeout capital expenditure
projects and major operational expenditures.
All CapEx projects and major operational expenditures (OpEx) greater than a specific dollar amount, as
defined by SBU, are required to follow this process. Key objectives of this process are to:
i. Evaluate CapEx projects and major operational expenditures according to the companys
Business Plan, Strategic Planning, and Asset Management Policy and Strategy;
ii. Ensure a complete analysis (make vs. buy, lease vs. buy, rent vs. own, outsource vs. in-house,
should cost modeling, OEM vs. non-EOM) has been conducted;
iii. Leverage best practices used by AES businesses and industry;
iv. Provide consistent evaluation of financial and non-financial factors to understand the total value
during the life cycle;
v. Evaluate the risk and exposure of not doing the capital or maintenance project;
vi. Compare alternatives to determine the best solution (e.g., replacing vs. repairing equipment,
doing the project now vs. later);
vii. Evaluate the project costs on a life cycle basis (long-term value);
viii. Provide advance sourcing planning to meet long-term objectives and manage supply risk;
ix. Lower costs through consistent integration of corporate and regional resources and reduce
process duplication through integration of financial requirements;
x. Select the options to ensure the best investment of funds through consistent prioritization of
projects and transparency in decision-making; and
xi. Provide flexibility by addressing needs of the different types and sizes of businesses and
projects.

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Categories of CapEx Projects

Category Sub-category Description
EHS and
Other
Safety Projects required to meet safety-related regulatory
requirements and AES Safety Management System (SMS)
and mitigate or eliminate safety risks identified in safety
walks, near miss reports, safety audits, etc.
Environmental Projects required to comply with environmental legislation
or regulatory requirements, avoid penalties due to
environmental non-compliance and mitigate or eliminate
environmental risks identified in environmental audits.
Other Regulatory Projects required to comply with legislation or regulatory
requirements and avoid penalties other than safety and
environmental.
Maintenance Reactive
Maintenance (due
to failure)
Corrective and emergency maintenance projects due to a
failure. This category also includes forced outages. A root
cause analysis may need to be performed to identify the
root cause of the failure and develop a solution.
Proactive
Maintenance (prior
to failure)
Preventive, predictive, and reliability centered
maintenance (RCM) projects prior to a failure. This
category also includes planned outages and projects that
are identified through the risk analysis (i.e., High Impact
/Low Probability events, AGIC Risk Review, Engineering
Risk Review, X-Strategy Commercial Risk). This may
include purchase of spare parts identified during the risk
reviews.
Profit
Enhancement
Projects to improve profit by revenue enhancement or
cost savings while maintaining maximum capacity.
Administrative Projects to improve and repair infrastructure and facilities.
Growth Capacity Increase Projects to increase revenues by increasing capacity
beyond the original design.
Life Extension Projects to extend the original life cycle time of asset,
including refurbishments addressed to extend the
operation time without change in the original design.
New Construction New construction projects (i.e., greenfield, brownfield,
and acquisition) excluding Business Development pipeline
projects.

These classifications are required by AES Corporation for the BPC reporting process and the internal
order creation in the EAMS.

30
Typical roles and responsibilities are described below. The process is not intended to change the
organizational structure or create additional headcount. These roles can be assigned to the existing
resources based on the individuals knowledge and skill set. Individuals can also assume multiple roles
(e.g., Asset Management Champion and CapEx lead).

31

2.1 CapEx Process Detailed Functions
2.1.1 Asset Management Champion
Each business (or collection of businesses) shall have a designated Asset Management Champion.
Responsibilities include:
i. Champion the implementation of CapEx process;
ii. Coordinate and lead the implementation of this standard STD0002;
iii. Liaise with the SBU Asset Management Performance Leader; and
iv. Identify and train personnel.

2.1.2 CapEx Committee
Each business (or collection of businesses) shall have a multi-disciplinary committee to review and
recommend proposals and monitor status of the projects. Please note that this committee does not
have budget approval authority but is responsible for making recommendations to the Project Approver
in accordance with the AES Expenditure Approval Policy. Businesses will decide on the committee
members and frequency of the periodic CapEx Committee meetings. Recommended members include
Business Leader, Engineering Manager, Asset Management Champion, CapEx Lead, Strategic Sourcing

32
Lead, and FP&A Lead. SBU Asset Management Performance Leader is also recommended to attend
these meetings to guide the committee with the process and achieve consistency across the region.
CapEx Committee shall assign to its members roles and responsibilities such as:
i. Evaluate proposals and recommend projects to the Project Approver, according to each business
financial policy;
ii. Recommend cancellation of approved proposals that are no longer feasible, no longer required,
or not likely to succeed;
iii. Verify state of planning efforts and readiness for transition to execution phase;
iv. Evaluate delayed or postponed projects for negative impacts and recommend remedial actions;
v. Monitor the projects progress and results achieved against the objectives and investment pro-
forma; and
vi. Provide guidance, steer the project to resolve issues and help secure resources, when needed.

2.1.3 CapEx Lead
Each business (or collection of businesses) shall designate a person to be CapEx Lead. Responsibilities
include:
i. Receive the analysis of all projects and store them in a central repository;
ii. Consolidate the projects;
iii. Coordinate and attend CapEx Committee meetings; and
iv. Be the point of contact between the project teams and the CapEx Committee and groups such as
SBU AM Performance Leader, Finance, FP&A, and Sourcing.

2.1.4 Project Initiator
Each project shall have a designated Project Initiator. This is typically the person who came up with the
solution. This person can be designated as the Project Lead as the solution moves to the proposal phase.
i. Enter the required information and submit the CapEx Project Template during the solution
phase; and
ii. Initiate the MoC process according to the Management of Change Standard (STD0003).

2.1.5 Project Lead
Each project must have a designated Project Lead during the proposal, planning, and execution phases,
to lead the project.

33
i. Complete and submit the CapEx Project Template during the proposal phase and thereafter if
assumptions change significantly, and during closeout of the project;
ii. Analyze/validate the change;
iii. Provide status updates to CapEx Lead and CapEx Committee; and
iv. Evaluate results achieved against the objectives and investment pro-forma.

2.1.6 Project Approver
Each proposal must be approved by the Project Approver before moving to the Planning phase.
Approval and authorization limits are provided in the AES Expenditure Approval Policy.
i. Act on proposals recommended by CapEx Committee;
ii. Approve cancellation of approved projects when they are no longer feasible, no longer required
or not likely to succeed;
iii. Approve the change (in the MoC process); and
iv. Approve changes to the budget.

2.1.7 SBU Asset Management Performance Leader
Each SBU should have a designated SBU AM Performance Leader. Depending on the SBU, the
responsibilities enumerated in this standard may be delegated to other, responsible and capable
individuals. If the responsibilities are delegated, all pertinent references in this standard to the SBU AM
Performance Leader should be deemed to refer to the delegated person.
i. Champion the implementation of CapEx process at the regional/group level; and
ii. Approve deviations to the CapEx process requested by the businesses.

2.1.8 Local FP&A area
Responsibilities of Financial planning and analysis include:
i. Support the business during the Annual Budget Review process for approval of the budget;
ii. Participate as consultant in the projects evaluation and recommendation stage as to whether
projects are in the scope of budget;
iii. Report budget vs. actuals on a periodic basis to the CapEx Lead and SBU Performance Director;
and
iv. Control of the budget per annual CapEx and per each project.

34
2.1.9 SBU Financial Leader
Responsibilities of SBU Financial Leader include:
i. Create internal order in EAMS/ERP;
ii. Close the internal order in EAMS/ERP; and
iii. Start depreciation of the asset.

2.1.10 Strategic Sourcing Lead
Responsibilities of the Strategic Sourcing Lead include:
i. Provide price references;
ii. Request budgetary proposals from the supply market place as needed;
iii. Create and execute the CapEx Sourcing plan;
iv. Create and execute the OpEx Sourcing plan; and
v. Estimate sourcing benefits and report actual benefits.
Sourcing activities may be performed by the Local Sourcing Manager or/and Global Strategic Sourcing,
according to the Asset Supply Chain Management Standard (STD0006).

35
3. Process
3.1 OpEx Process
Major Operational Expenditures (OpEx) are necessary in order to operate and maintain the assets in the
expected functional condition across their whole life cycle and according to strategic and business plan
requirements. Adequate levels of approval shall be in place to ensure the optimum level of OpEx is
planned. Special care must be taken in order to avoid shortsightedness in overall economics. The OpEx
budget and control process shall consider the risk management drivers according to the Risk
Management Standard (STD0004). Therefore, the OpEx budget should address risk control or mitigation
according to the technical risk evaluation performed for the critical assets of the business.
The OpEx plan shall consider the commercial expectations, the asset condition, the regulatory and legal
requirements and the risk considerations. The following figure illustrates the OpEx process overview and
includes a generic decision flow.

36
3.2 CapEx Process
Project life cycle includes a sequence of phases and phase gates to approve transition from one phase to
the next. Phase gates ensure that projects are not moved to the next phase without proper planning
and completion of certain steps, and projects that are no longer feasible or required or not likely to
succeed are stopped early.
The following figure illustrates the process overview by role and phase:

3.2.1 Evaluate Solution
Process steps include:
i. Evaluate Solution: Project Initiator will submit the solution to CapEx Lead using CapEx
Project Template at a minimum two years prior to start of a project unless it is an
unexpected project; and
ii. Approve Solution: CapEx Committee will approve or reject the solution. If the solution is
approved, it moves to the proposal phase and Project Lead must be assigned to develop
the proposal.

37
3.2.2 Evaluate Proposal
i. Evaluate Proposal: Project Lead shall submit the proposal to CapEx Lead using CapEx
Project Template at a minimum in the prior year budget cycle to the start of a project
unless it is an unexpected project or the sourcing lead-time is greater than one year.
Sourcing Lead shall provide budgetary proposal from the supply marketplace as needed.
The same evaluation process will be used to reevaluate projects with a total cost greater
than 110% of the originally estimated cost.
ii. Recommend Proposal: CapEx Committee shall review and make a recommendation to
Project Approver to approve, reject, revise or defer the project;
iii. Approve Proposal: Project Approver shall approve, reject, revise or defer the project. If
the proposal is approved, it moves to the planning phase including development of the
project team, detailed scope and specifications, and sourcing strategy. Approval of
proposals can take place throughout the year to have a balanced and consistent
workload and prevent bottlenecks during the Annual Budget Review process. For those
projects that require reevaluation, the same approval process shall be used to approve
the revised projects;
iv. Approve Budget: CapEx Lead shall consolidate all projects and submit the completed
template to the SBU Performance Leader. During the Annual Budget Review process,
approved projects shall be collectively reviewed and compared. They are subject to
cancellation or deferral depending on the budget constraints; and
v. Create Project: After the budget is approved, the SBU Financial Leader shall create an
internal order and upload the budget information to enable tracking of budget vs. actual
costs. The SBU Financial Leader shall also complete the Asset Master Data Form
provided in the CapEx Project Template. For those projects reevaluated, if the
reevaluation process authorizes the increased costs, the internal order shall be updated.

3.2.3 Monitor Execution
If the project CapEx budget increases by at least 10% or a specific dollar amount as determined
by the SBU leadership, the project shall be reevaluated by updating and resubmitting the CapEx
Project Template. Process steps outlined in Evaluate Proposal shall be repeated.

3.2.4 Close Project
i. Request Project Closeout: Project Lead shall review, update, and approve CapEx Project
Template and submit it to CapEx Lead updating information such as service date as well
as any outdated information. CapEx Lead shall submit the template to the SBU Financial
Leader to initiate closeout of the project; and

38
ii. Close Project and Depreciate: SBU Financial Hub Lead closes the internal order in the
EAMS and starts depreciation.

3.2.5 Evaluate Results
The business shall have a formal process to evaluate the results of CapEx projects. Evaluation
can be completed when the benefits start to be realized. Process steps include:
i. Evaluate Project Results: Project Lead shall compare the actual benefits to the
corresponding estimated benefits and document lessons learned; and
ii. Review Project Results: CapEx Committee shall review the evaluation and forward a
copy to the SBU AM Performance Leader. CapEx Lead shall store the evaluation for
future projects.

3.2.6 Prioritization Methodology
The intent of this methodology is that each project is evaluated, and prioritized in relation to
the Business Plan and Strategic Planning of the company, its goals and commitments,
considering the Asset Management Policy and Strategy and Risk Management methodology
defined in the Risk Management Standard.
Several kinds of benefits can be used to measure the impact of the project for the business. All
of the benefits used to evaluate the project have to be measured with and without the project
to show the expected impact of the project. These impacts shall be considered by the
designated approvers to evaluate the projects.

3.2.6.1 Financial Benefits
These benefits are divided into two groups:
i. Cost Savings Benefits from reducing operations and maintenance costs such as fuel
and non-fuel O&M or reduced future capital expenditures; and
ii. Additional Revenue Benefits produced by increasing the revenue such as MWH
increase and EFOR reduction.

3.2.6.2 Potential Loss Avoided
The loss probability and impact should be calculated according the Risk Management Standard
(STD0004). Two types of losses can be considered for the calculation of benefits:
i. One-time Loss this includes one-time failures such as equipment failing and requiring
replacement. They are considered dependent events for probability calculation, since

39
equipment can fail only once and outcome in a given year affects the probability in a
consecutive year; and
ii. Repetitive Losses this includes repetitive failures such as equipment failing repetitively
and not requiring replacement. They are considered independent events for
probability calculation, since equipment can fail multiple times and outcome in a given
year does not affect the probability in a consecutive year.

Following are components of benefits calculation for the potential loss avoided:
i. Potential Loss Potential loss due to each failure. Enter potential loss without the
project and with each applicable alternative. Examples of losses include lost profit due
to business interruption, damages, remediation costs, penalties; and
ii. Probability of Failure Probability of failure in each year without regard for what
happened in the previous years. Enter probability of failure without the project and
with each applicable alternative by year starting after the year the project will be
completed. Do not start calculating benefits until the project is completed unless partial
benefits are realized.

3.2.6.3 Non-financial Benefits
Non-financial benefits can be quantitatively calculated using the following components of the
non-financial benefits calculation and according to the Risk Management Standard (STD0004):
i. Objective Non-financial objectives affected if a risk occurs. Objectives include
strategic, tactical, regulatory/ governance, safety, environment, and reputation;
ii. Impact Level and Value Level of effect on objectives if a risk occurs. The relative scale
should include minor, moderate, high, and very high. Each impact level has a
corresponding value, which is used to convert the impact level to a common value to
calculate the non-financial benefits; and
iii. Probability Probability of a risk occurring. The probability with and without the project
should be indicated. The difference is used to calculate the non-financial value provided
by the project. The relative scale should determine, according to business reality, the
risks that are tolerable, moderate and intolerable.

3.2.7 CapEx Project Template
This template should be used for identifying the solution, depicting the executive summary and
operational context, tracking the project changes and benefits, and closing the project.
Each SBU will have the opportunity to develop its own CapEx Project Template(s), according to
its plans and objectives. However, it is mandatory that the CapEx Project Template includes:

40
i. an analysis of projects benefits for the business as described in this standard;
ii. Management of Change Standard (STD0003) analysis for each project; and
iii. appropriate leader approvals.

Project Initiator or Project Lead should use the same template throughout from solution to closeout.
When the template is updated, version and status of the document should be indicated in Document
History section of the Summary tab and each version should be submitted to CapEx Lead.

3.2.8 CapEx Consolidation Template
This template should be used for consolidating all projects relevant information. Each business shall
complete this template according to its necessities. CapEx Lead shall maintain and update this template
for each business. Prior to the Annual Budget Review process, CapEx Lead shall consolidate all projects
using the CapEx Consolidation Template for each business and submit the completed template to the
appropriate financial leader.

41
4. References
Reference documents such as the AES CapEx Project Template and the AES CapEx Consolidation
Template can be found in Docushare:

43

Management of Change

STD0003

44
Contents

1. Introduction..........................................................................................................................................45
2. Roles and Responsibilities.46
3. MoC Process48
3.1 Categories of Changes49
3.2 Stages of MoC Process..49
3.3 Process Control..51
4. References...........................................................................................................................................52

1. Introduction
Management of Change (MoC) is a formal process to evaluate, authorize and document modifications to
equipment, operative parameters, policies and procedures, raw materials and process conditions, other
than "replacement in kind", before they are done and to ensure proper implementation and closure,
once they are complete.

The purpose of this standard is to provide guiding principles to businesses for managing changes with
regard to assets and asset systems, such that changes are effected that eliminate or mitigate
consequences to health, safety and/or operational risk.

MoC is a structured process that will communicate the status and existence of changes to all affected
parties. Management of Change covers, but is not limited to, permanent, temporary and emergency
changes, either minor or major, in process, technology, facilities, procedures, and changes to equipment
and instrumentation.

MoC is a tool to ensure decisions are not made in a vacuum. It is a process intended to:
i. Ensure no unintended hazards are introduced in the process of implementing change;
ii. Ensure risks are properly evaluated and managed;
iii. Keep track of current process safety information, hazard analyses, operating procedures,
training, mechanical integrity, pre-startup safety review and updates to accommodate the
change; and
iv. Be completed before changes are implemented and supported with post change
documentation and communication.

The MoC process ensures that changes are effected in a very robust and seamless manner such that the
intended benefit is realized without introducing undesirable consequences to the system.

The Management of Change Standard clearly defines roles and responsibilities with respect to any MoC
process within the business as well as the logical order to be followed as depicted in the figure in Section
3 of this standard.

The focus of Management of Change is to establish processes and procedures involved in implementing
and managing changes related to physical assets and their interfaces with the human, financial,
information and intangible assets, and should not be confused with the process of organizational
behavior change management.

46
Business Leaders shall have responsibility to designate the key roles and responsibilities connected with
the MoC process to individuals within their respective businesses. The roles include an Asset
Management Champion, MoC Coordinator and MoC Review Committee. These are not intended to be
full time roles, and an individual may take on multiple roles.
The Asset Management Champion shall:
i. Ensure that employees receive training and are competent in the process and implementation of
MoC;
ii. Conduct yearly plant audits to ensure compliance to this procedure;
iii. Approve all changes, except changes fitting the replacement in kind definition, in accordance
with this procedure;
iv. Provide training to enable employees to recognize Process/Procedural/Technical Change;
v. Provide the opportunity for employee input in analyzing change for hazard analysis and
operability;
vi. Establish procedures to comply with this standard; and
vii. Maintain documentation for this procedure.

All persons working in businesses (i.e. employees and contractors) shall be eligible to initiate the MoC
Process as described in Section 3 of this standard.
The Team Leader of a MoC Initiator shall have responsibility for review and pre-approval prior to the
implementation of a MoC.
The MoC Review Committee and the MoC Coordinator, under the coordination of its leaders, shall
perform the roles described in Section 3 of this standard.

47

48
3. MoC Process
When existing conditions are revised, or new conditions are introduced that could have an impact on
asset management activities, the organization shall develop a process to assess the associated risks
before the changes are implemented (see Risk Management Standard STD0004). The new or revised
arrangements to be considered shall include changes to:
i. Process technology;
ii. Facilities;
iii. Procedures;
iv. Operational limits;
v. Equipment and Instrumentation;
vi. Raw materials; and
vii. Human resources.
The Management of Change process should follow the steps in the flowchart outline below:

Initiation
Appraisal /
Evaluation
Emergency
Changes
Quality Assurance
of Change
Approval
Implementation
Closure
Temporary
Emergency
Confirmation
Risk
Pre evaluation
Implementation
Standardization
YES
NO

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3.1 Categories of Changes
To manage change properly, we must consider three categories of changes that may arise as described
below:
i. Temporary Change: Intended for a limited or relatively brief period of time usually less than 6
months and requires monitoring for that period;
ii. Permanent Change: Intended to exist or function for a long, indefinite period of time. Not
intended to be reversed or returned to the original condition or status; and
iii. Urgent / Emergency Change: The change needs to be implemented urgently, such that it
becomes counter-productive to follow the full Management of Change process. Examples could
include changes made to prevent equipment damage, prevent risk to employees, conform to
legal requirements or avoid severe economic penalties. While the process for emergency
changes may be expedited, at no time will safety, environmental or integrity issues be
compromised.

3.2 Stages of MoC Process
The Management of Change process shall have in place the following stages:
3.2.1 Initiation / Identification
The Initiator is the person who recognizes a need for change and initiates the MoC process.
The Initiator shall define the need for change and, to the extent it is understood, the scope and the
impact of the proposed change. All this information must be recorded in a document (MoC form), and
submitted to his/her Team Leader.
Upon receipt of the completed MoC form, the responsible Team Leader shall:
i. Make an initial determination if this is a valid emergency change request. If so, the Team Leader
should follow expedited process steps to identify and complete work as quickly as possible to
mitigate the emergency;
ii. Provide additional information on the form, if required; and
iii. Send the MoC form to the MoC Coordinator (for an emergency MoC request, send form within
24 hours and ensure the expedited process is followed in order to complete and record the
analysis).

The MoC Coordinator, upon receiving a MoC request shall:
i. Assign a MoC number to the proposed change and enter the information in the MoC Log;
ii. If necessary, arrange a MoC review meeting with the MoC Review Committee and, if possible, the
MoC Initiator; and
iii. Initiate the MoC evaluation process.

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3.2.2 Appraisal / Technical Evaluation
The MoC Review Committee shall have appraisal and approval responsibility for all non-emergency,
permanent MoCs. The MoC Review Committee is an identified group consisting of leaders and other
business personnel that can provide insight and expertise into all aspects of the MoC under evaluation,
including but not limited to:
i. Engineering;
ii. Operations;
iii. EH&S;
iv. Commercial;
v. O&M; and
vi. Sourcing.
To ensure a balanced review, it is important the Committee include members not intimately involved in
the proposed change. Whenever practical, the Initiator should participate in the review process.
The MoC Review Committee shall evaluate the submitted MoC request and, if needed, seek support
(Subject Matter Expert) to analyze the changes. They can also use methods such as: Preliminary Hazard
Analysis, WHAT IF or Hazard Analysis. In order to define the risk, the appraiser/evaluator must also
follow the Risk Assessment Standard (STD0004). The evaluation of the MoC must be routed to the leader
qualified and authorized to assess the level of risk created by the MoC request.

The MoC Committee members shall:
i. Review proposed MoC request and determine if an MoC is actually required, and if so;
ii. Assess all potential risks associated with the change;
iii. Identify the controls needed to address the hazards and risks associated with the change;
iv. Determine the tasks needed prior to approval;
v. Determine the personnel who should be involved in the implementation plan;
vi. Determine the tasks needed to be completed in order to close out the MoC;
vii. Identify the departments and personnel who shall be involved in the review and approval of the
proposed change;
viii. Identify what documentation requires modification; and
ix. Identify all other information needed prior to implementing the change.

The MoC Coordinator shall enter pre- and post-change requirements in the MoC form.

3.2.3 Approval
Final approval authority to proceed shall rest with the MoC Committee members. Once pre-change
requirements are completed, MoC Committee members will sign off on the MoC request, indicating
their approval to proceed to implementation.
Once approval has been reached, the MoC Coordinator shall:
i. Ensure all MoC pre-change requirements are complete;
ii. Log MoC as Released; and
iii. Notify the Initiator.

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3.2.4 Implementation
Following release of the MOC, Work Request(s) shall be completed to implement the change.

3.2.5 Quality Assurance of Change
Quality Assurance of the process shall be the responsibility of the Asset Management Champion at the
business unit.

3.2.6 Post Change Operation
Post implementation analysis and evaluation shall be conducted by the Initiator or other responsible
party to evaluate the performance and the results achieved against the plan, based on established
indicators. If the results are acceptable, the MoC shall move to closure. In the unlikely case that
acceptable results are not achieved, a review process shall be initiated to determine the root cause of
the unsatisfactory outcome.

3.2.7 Closure
When the post-change requirements are completed and approved, the Initiator shall forward the
necessary paperwork to the MoC Coordinator, who will then:
i. Ensure all MoC requirements are complete;
ii. Log MoC as Closed;
iii. Notify the Initiator; and
iv. Document any lessons learned.

3.3 Process Control
3.3.1 Log Review
The MoC Coordinator shall schedule quarterly MoC Log reviews with the MoC Review Committee. The
purpose of the review is to ensure that the post change documentation process is being completed in a
timely manner and to assure that a temporary change doesnt linger.

3.3.2 Audits
At least annually, the Business Leader shall direct the Asset Management Champion to audit the MoC
process and report any findings.

3.3.3 Training
The Asset Management Champion at the business shall ensure that all new employees receive MoC
process training and that all employees receive annual refresher MoC process training.

52
4. References
Reference materials such as the MoC Form can be found on Docushare at:

54

Risk Management

STD0004

55
Contents

1 Introduction.................................................................................................................................... 56
2 Roles and Responsibilities .............................................................................................................. 57
3 Process ........................................................................................................................................... 59
3.1 Risk Management 59
3.2 Communication. 59
3.3 Risk Assessment 60
3.3.1. Identification. 60
3.3.2. Risk Analysis.. 62
3.3.3. Evaluating Risk. 64
3.4 Monitor and Review.. 66
3.5 Uses of Risk Information ....................................................................................................................... 66
4 References ................................................................................................................................................ 68
4.1 Appendix A 68
4.2 Appendix B 75

56
1 Introduction
The definition of risk is the effect of uncertainty on objectives. In this definition, uncertainties include
events (which may or may not happen) and uncertainties caused by ambiguity or a lack of information
(ISO 31000/ISO Guide 73:2002). It also includes both negative and positive impacts on objectives.
Risk Management is a central and important component of proactive asset management. Risk
Management should include risks rooted in the four stages of the asset life cycle. Additionally,
consideration of risks should be purposefully embedded into the culture of the organization, affecting all
of the activities throughout the asset management system.
The management of asset risk should consider not just the physical asset risk but also asset management
program risks. Asset-related risks need to be identified, analyzed and evaluated in a way that is
appropriate, taking into account asset utilization and all significant types of failure consequences.
The management of risks within asset management should be carried out using a process that is
consistent with the Global Risk Management Practices and the broader business management risk
processes (see illustration below) such as the risk register, heat maps, and Enterprise Risk Management
practices. This alignment should include ranking risks in a way that allows them to be reported through
the AES Risk Diagnostic Survey for those risks of significant impact and likelihood of occurrence.

57
2 Roles and Responsibilities
The process is not intended to change the organizational structure or create additional headcount.
These roles can be assigned to the existing resources based on the individuals knowledge and skill set.
Individuals can also assume multiple roles.
Responsibilities required for successful asset management implementations should be assigned to the
appropriate people within the business. The roles and responsibilities include assigning leaders and
contributors to accomplish the following:
i. develop and deploy a risk management process;
ii. lead the identification, assessment, evaluation, monitoring and review of risks;
iii. contribute to the identification, assessment, evaluation, monitoring and review of risks;
iv. communicate the importance of and commitment to active risk management;
v. communicate risks to an appropriate level of awareness for approval of controls;
vi. review and approve risk assessments and controls (may involve various levels of approval
authority);
vii. develop plans for the application of risk information;
viii. include evaluated risks in the Risk Diagnostic Survey reporting process, where appropriate, to
ensure proper escalation of risks;
ix. establish and periodically complete risk management reporting; and
x. periodically review and improve risk practices, as needed. The assignment of these and other
asset management roles and responsibilities can be ideally tracked using a Responsible,
Accountable, Consulted and Informed (RACI) chart or a similar accountability tracking tool to the
one illustrated below.

58

59
3 Process
3.1 Risk Management
The purpose of risk management is to understand the cause, effect and likelihood of opportunities and
adverse events occurring and devise risk controls where these are found to be necessary or desirable.
The main requirements for the effective management of risk include identifying, assessing,
communicating, monitoring and reviewing of risks, including risk mitigation strategies and early warning
signs.
Risk assessment, which is a component of risk management, can be further broken down into the
analysis of the nature of the risk. This analysis shall define the likelihood and impact. Ideally, the analysis
should also define the velocity and trajectory of the risk. The trajectory documents if the risk is
increasing or decreasing in the last twelve months. The velocity is a measure of how quickly the risk
would impact the organization.

3.2 Communication
It is important that the information flows in such a way as to inform decision makers, wherever they are
located in the organization. It is similarly important that resulting concepts of risk control flow out to
those that require the information in the field, where it can be applied. Risk management is a process
Categorize
Prioritize
Control
Trend
Determine
effectiveness
Adjust
Likelihood
Impact
Trajectory
Velocity
Condition
Controls
Causes
Identify Assess
Evaluate
Monitor
&
Review

60
that benefits from iterations of review and continuous improvement and input from a broad cross
section of the organization, which requires well established channels for communication regarding risks.
There are four primary requirements for communication relative to risk management:
i. Leadership shall communicate to the members of the organization the expectation that people
are to be proactive; making decisions based on the principles of risk management. This
expectation is often included in the Asset Management Policy.
ii. The organization shall educate its members regarding the risk management program, each
persons individual responsibilities and organizational risk management processes.
iii. Communication barriers shall be eliminated to ensure the top down and bottom up flow of
information important to risk management because the information regarding risks is often
clearest closer to the asset operation and maintenance, while decisions about risk control are
made at various levels.
iv. Lessons learned regarding risk control shall be shared within the local, regional and corporate
business environments to improve results. This function will require regional and corporate
facilitation to be most effective.
AES businesses shall establish and maintain a risk register in order to support consistent communication
relevant to risk at the business level. This risk register can take many forms but at a minimum, it should
include a way to document the risk, the risk owner, conclusions of risk assessment and evaluation. The
risk register may also be used to track risk controls (mitigation strategies), identify future conditions to
be monitored (early warning signs), the frequency to be monitored, and support the periodic review of
the documented risks. The risk register most often is a spreadsheet or database that documents the
information from the risk assessment.

3.3 Risk Assessment
Risk assessment is the process of (1) identifying, (2) analyzing and (3) evaluating risks. Each step is
important because it contributes to the understanding of the risks and allows for timely decisions
regarding those risks, leading to a proactive organization with optimized and more predictable business
results.

3.3.1. Identification
When assessing risk, the first step is to identify risks. For the purpose of Asset Management, risk
management is focused on those risks related to the physical assets, which may or may not be significant
enough to also be identified on the AES RDS. Identification of risks includes identifying the controls in
place and the underlying causes of the risks. The goal of this process is to identify as many risks as
practical that may enhance or obstruct the ability of the organization to achieve success.

61
By considering different categories, teams can often identify risks that might have otherwise been
overlooked. Two main categories of risk are internal and external. Risk can also be differentiated by the
phase of the asset life cycle when they are most likely to originate. Further examples of the types of risks
inherently related to the different phases are listed below.
i. Risks in Acquisition - During design, engineering and construction, many decisions which have a
long term impact on asset risk are made, while a large focus may be on risks only related to
procurement and construction cost. These decisions can establish risks that are then inherent to
the business, adding higher costs of unreliability or added costs for risk controls as a result of the
initial decisions. Some risks related to acquisition include project over-runs, plant layout,
redundancy of equipment, and specific equipment selection. Similar evaluation of design risks
must be considered for asset purchases.

ii. Operational Risk - Operational risk addresses those parameters which arise from people,
processes, and procedures in the operation of the business. Examples are the procedure for
responding to abnormal conditions, the process of capturing events and operational experiences
and the routine communications process between shifts.

iii. Maintenance Risk - Maintenance risk addresses those parameters which arise from the
maintenance practices that are implemented at a business. These risks are influenced by the age
of the business and its equipment, maintenance staffing and budget and availability of external
resources.

iv. Condition Risk - Condition risk addresses those parameters which arise from the current physical
condition of the business. Factors influencing this risk include the age of the plant and its
equipment, previous execution of maintenance, and the historical budgeting for maintenance.

v. Actuarial Risks AES businesses are insured, most often by AGIC, an AES global captive
insurance program. Regardless of what entity provides insurance, the providers typically employ
experts on risk assessment, and they can be a valuable source of risk information. For those AES
businesses that participate in the AGIC program, they receive risk assessment services through
the GRC loss control program, and all businesses have access to other risk guidelines and tools.
a. Boiler and Machinery Technical Requirements Provides B&M engineering and related loss
control services and develops detailed and comprehensive B&M loss control reports for AES
facilities. It is the objective of the analysis to identify the risk to personnel safety as a result
of mechanical or pressure vessel failure and to identify significant loss potential to both
property and the continuity of facility operations (Business Interruption).
b. Fire Protection Technical Analysis Provides property and fire protection engineering and
related loss control services and develops detailed and comprehensive fire loss control
reports on AES specified facilities. It is the objective of this analysis to identify risk to
personnel safety as a result of fire and explosions and to identify significant loss potential to
both property and the continuity of operations (Business Interruption).

62
c. Infrared Thermographic Surveys Provides early detection of risk related to the condition
of mechanical and electrical systems, which can often be detected by temperature changes.
Infrared examination is one of the most effective and efficient non-destructive testing
programs available to prevent the untimely shutdown of electrical distribution equipment
and primary mechanical systems, resulting in lost production, higher operating costs, and
lost profits. Therefore, AGIC provides these services to the businesses they insure.

vi. Additional Techniques Many other techniques exist to aid in identifying risks. The AES Risk
Diagnostic Survey includes a list of specific risks which should be considered. Additionally,
businesses should select other techniques with which they are familiar and apply them while
being informed of the types of risks identified previously. The purpose of using various
techniques is to be certain to identify as many risks as possible for subsequent assessment and
evaluation. Some examples of additional risk identification techniques include:
a. SWOT (Strengths, Weaknesses, Opportunities, Threats);
b. BPEST (Business, Political, Economic, Social, Technological);
c. PESTEL (Political, Economic, Social, Technical, Environment, Legal);
d. HAZOP (Hazard and Operability Studies);
e. Risk assessment workshops;
f. Industry benchmarking;
g. Incident investigation; and
h. Auditing and inspection.

3.3.2. Risk Analysis
Risk Analysis involves researching a risk to understand the risks causes, undocumented controls that are
in place and the criticality or the consequences and probability of experiencing an undesired outcome.
An important outcome from risk analysis is the quantification of various risks, which is a key to the
subsequent risk evaluation. In a general sense, risk is measured as the probability times the impact. In
some cases, these measures are based on estimates from a team of informed people.
Probability, often called likeliness, is one of the two main dimensions of risk that must be examined. The
terms probability, likeliness and likelihood are used interchangeably in most contexts as they are in this
standard; however, in some cultures probability implies a mathematically calculated likeliness. For most
low frequency risks, probability cannot be identified reliably using mathematics because there are often
not enough events to make statistical tools accurate. For this reason, judgment is required. Equivalency
tables (explained later) will support expert judgment effectiveness and consistency throughout the
organization.
The degree of impact or consequence is the second dimension of risk and is a measure of the scale of
adverse outcomes. These adverse outcomes can occur on several scales, such as financial or reliability.
Risk management literature suggests developing a single common unit of measure of consequences to

63
support comparative risk evaluation. Often, consequence or impact is measured with a unit of currency,
such as dollars in the United States of America, because for businesses, this is a key measure of success.
Each business must establish its own criteria and weighting, relevant for its market and business.
Equivalency tables are useful for developing consensus on how to equate various measures of
consequences to currency. Alternatively, Appendix A to this standard is an example of a methodology
with risk criteria that include eight dimensions of impact. Additionally, velocity and trajectory are
common factors used in assessing as mentioned in Section 3.1
Because equivalency tables are the best way for an organization to reach consensus on how to convert
dissimilar units of measure to a single scale, for likeliness, the tables document an agreed correlation
between true mathematical probability and descriptive terms. For impact, they establish a scale
equating various adverse outcomes to currency. They are important to risk management because risk
management works best when all risks are documented on a single scale of impact and a single scale of
probability.
Equivalency scales should be well reasoned so that a majority of the users agree that the scales reflect a
reasonable correlation. An example equivalency table is shown below. Each business should create a set
of scales that works for their situation, with at least 3 and no more than 7 increments. Another
advantage of the resulting scales is that, if they are found to not represent a reasonable correlation, the
scales can easily be adjusted and the change will affect all of the ranked risks with a minimal effort.

Likeliness Equivalency Scale
Scale AES RDS Descriptor Probability Frequency
1 Low Highly Rare 0.000001 Once per hundred years
2 Low Very Rare 0.00001 Once per ten years
3 Moderate Rare 0.0001 Once per year
4 High Less Likely 0.001 Once in forty days
5 High Likely 0.01 Once in four days
6 High Very likely 0.1 Once in ten hours
7 High Certain 1 Hourly

A similar table should be developed for impacts; such as safety, environmental and reliability. The
example below is derived from the AES Capital Expenditure Management Guideline (Version 2.0; July

64
2011). The impacts should ideally be linked to the local or U.S. currency and a scale value. The two
dimensions (impact and likeliness) will then be plotted on a matrix, as will be explained in the next
section on evaluation.
Impact Equivalency Scale
Scale RDS Descriptor Dollars Regulatory Safety Environment Reputation
1 Low Minor $100,000 Minor/Small Fine First Aid
Minimal
remediation
Local and
short term
2 Moderate Moderate $1,000,000
Considerable
penalty
Recordable
Minimal
remediation,
breach of law
Local, long
term
3 High High $5,000,000
Temp. Shutdown
and/or significant
penalty
LTI
Considerable
remediation
Regional
4 High Very High $15,000,000
Permanent
Shutdown and/or
major penalty
Potential
Fatality
Extensive
remediation
Global

Because of the large number of risks to be managed at AES businesses, more increments may be needed
to provide adequate differentiation. These increments should be equated to the AES RDS scales to allow
for a consistent transfer of risk information for those risks found to have a high enough measure of
likeliness times impact.

Some techniques that have proven to be effective aids for risk assessment include:
i. Failure Modes and Effects Analysis (FMEA);
ii. Failure Modes and Effects Criticality Analysis (FMECA);
iii. Threat analysis;
iv. Root Cause Analysis (RCA); and
v. Fault Tree Analysis (FTA).

3.3.3. Evaluating Risk
Risk evaluation is the act of comparing the results of risk analyses with certain criteria that the
organization has established in developing its risk management framework. The comparison serves to

65
rank the risk in relation to other risks, supporting effective decisions regarding the treatment of risks and
the relative priority of the risks. Put simply, quantified risks are compared to each other and those
posing the greatest threat to the business then become obvious and should be considered for risk
mitigation.

Risks should be evaluated based on the current state of the risk, including any existing risk reduction
from existing controls. Risks that are significant enough to be transferred to the AES RDS will also have
the trajectory and velocity documented and considered in the evaluation.
i. High Risk For adverse risks rated as high risk, mitigation measures are essential and should be
identified with urgency, and these risks should be closely monitored. While lowest cost
alternatives should be sought, these risks must be mitigated if activity is to continue.
ii. Medium Risk In a mature program, these risks are often managed to be as low as is reasonably
practicable. This may be a level of risk that is tolerable because it cannot be reduced further
without costs disproportionate to the benefit gained or where the solution is impractical to
implement. Lower cost mitigating measures should still be researched periodically, with early
warning signs established to detect when the risk could cross into the High category.
iii. Low Risk - Risks are negligible or so small that they can be managed by routine procedures and
no additional risk treatment measures are needed.

Of course, the main goal of risk management is to reduce risks while creating value, so mitigation or
control of risks is important. One should seek the lowest cost alternatives to reduce both the impact and
likeliness of a risk until the cost to reduce the risk further outweighs the probability adjusted impact.
The cost to mitigate or treat risk is an important factor in risk evaluation that should be considered in
setting priorities, in addition to the overall measure of the risk. The trajectory and velocity of change are
additional measures of risk that may be considered and should be documented. Risks which are
4
L M M H H H H
3
L L M M H H H
2
L L L M M H H
1
L L L L M M H
1 2 3 4 5 6 7
High
Medium
Low
I
m
p
a
c
t
Likelihood
Example Risk Matrix Heat Map Based on Equivalency Tables 5.3.2

66
changing quickly or risks of a strategic importance should have defined monitoring plans as will be
discussed in Section 3.4.
After determining the risks ranking, if it is determined that risk controls should be researched for
implementation, the following hierarchy is a useful guide to identify risk controls that target reducing
risk at the most fundamental level. This list may not apply to all risks encountered. For example, when
addressing equipment reliability risks, consult Asset Operation and Maintenance Standard (STD0005).
i. elimination
ii. substitution
iii. physical control (engineering)
iv. signage/warning (administrative)
v. protective equipment

3.4 Monitor and Review
Proper risk management is a continuously improving process which requires monitoring and review to
identify opportunities to improve. To support this, risks will be documented on a Risk Register (example
listed in Appendix B). The Risk Register is a document which may track known risks, the current
assessment of those risks, and any controls that have been put in place. A copy of the Risk Register
should be forwarded to the Global Risk Management Group.
The monitoring and management of this Risk Register will include senior management reviews according
to a routine process and frequency, establishing accountability for any planned mitigation. Some risks
may require more frequent monitoring intervals than the routine interval and processes should be
established as needed to accomplish this monitoring.
The process of maintaining, updating and reviewing the Risk Register is a key AM process, and should be
referenced in the AM Strategy. Any change introduces new risks so it is important to identify and assess
these risks on a routine frequency and as new risks are discovered in the course of business. If changes
are made, an updated copy of the Risk Register should be forwarded to the Global Risk Management
Group.
The organization shall ensure that the results of the risk assessments, which should reflect the residual
risk after considering the effectiveness of risk control measures, are considered and provide appropriate
input into Asset Management processes as identified below.

3.5 Uses of Risk Information
The business shall ensure that the results of risk assessments are considered and as appropriate, provide
input into the following aspects of asset management:
i. The Asset Management System (STD0001);

67
ii. Capital spending plans (STD0002);
iii. Maintenance and operating plans (STD0005);
iv. The identification of sourcing needs and supplier bid evaluations (STD0006);
v. The identification of training and staffing needs (STD0008); and
vi. Contingency plans (STD0014).

68
4 References
4.1 Appendix A

The following are two examples of how a business may utilize the different methodologies to identify
and categorize risk. The first example is a generic risk categorization example and the second example
is a specific risk assessment performed at Tiete using a more detailed approach.

Example A:
The following example is a 3 by 3 matrix using a 1 to 3 rating where a rating of 3 for impact, 3 for
likelihood, a deteriorating trajectory and fast velocity is the most severe rating. This methodology
assesses risks by Impact (high, medium, low), Likelihood (remote, possible, and likely), Trajectory
(deteriorating, stable, and improving), and Velocity (fast, medium, slow). By plotting the risk using a 1 to
3 scale on the x and y axes, the risks can be identified and categorized as Closely Monitored, Emerging,
or Low Impact. Closely Monitored Risks require immediate attention and a mitigation strategy. These
risks need detailed evaluation, assessment and mitigation. Escalation to the proper level of management
is mandatory.

69
Example B:
The following is an example of a detailed analysis performed as part of Tietes risk management
assessment and evaluation process. It is shared as a best practice, but does not form the minimum
requirements of the Risk Management Standard.
To accomplish a risk assessment we consider 8 points that need to be evaluated in order to categorize
(tolerable, moderate and intolerable) and quantify risks (0 to 100 scale), which are: probability, safety,
environment, company image, EFOR variation*, AF variation*, Variable Margin Lost impact* and repair
cost*.
* Financial indicators presented are only an example; could be defined appropriate financial indicators
for each business.

In the following tables are presented each one of the 8 points with their valuation in terms of rationales
Probability
Value Rationale
1 Theoretically possible, but there are no known cases
2 Improbable
3 Less likely
4 Probable
5 Highly Probable

Repair Costs
Value Rationale
1 Up to $ xxxx,00
2 From $ xxxxx,00 to $ xxx.xxx,00
3 From $ xxxxx,00 to $ xxx.xxx,00
4 From R$ xxxxx,00 to $ xxx.xxx,00
5 More than R$ xxxxx,00

70
Safety Environment
Value Rationale Value Rationale
1 No incidents, accidents or injuries 1 No impacts
2 Occurrence of incidents 2 Minor impacts inside plants perimeter
3
Minor accidents with no days
away from work
3
Minor impacts outside plants
boundaries
4
Accidents with days away from
work
4
Big impacts outside plants perimeter
affecting nearby communities
5 Fatal accident 5
Major impacts resulting in fines/press
releases

Company Image EFOF Variation (only reference)
1
No fines. May generate minor notifications
from regulatory agencies
1 Up to x %
2
Small value fines. Notification from
regulatory agencies
2 From x to x %
3
Average value fines. Companys image
may be temporarily impaired
3 From x to x %
4
Big value fines. Companys image will be
compromised with regulatory agencies
4 From x to x %
5
Major fines. Companys image will be
compromised
5 More than x %

EAF Variation (only reference) Variable Margin Lost (only reference)
1 Up to x % 1 Up to $ x.000,00
2 From x to x % 2 From $ x.000,00 to $ x00.000,00
3 From x to x % 3 From $ x00.000,00 to $ x.000.000,00
4 From x to x % 4 From $ x.000.000,00 to $ x.000.000,00
5 More than x % 5 More than $ x.000.000,00

71

A. Evaluating Risk
Risk evaluation is the act of comparing the results of risk analyses with certain criteria that the
organization has established in developing its risk management framework. The comparison serves to
rank the risk in support of making effective decisions regarding the treatment of risks and the relative
priority of the risks. Put simply, risks are compared to each other and those posing the greatest threat to
the business then become obvious and should become the focus of risk mitigation
An example framework for risk evaluations follows. Businesses may choose a different structure to serve
their unique needs, but must have some framework for ranking the risks after they have been identified
and assessed.
Intolerable risk - Intolerable levels of risk- Adverse risks are intolerable whatever the benefits,
and risk mitigation measures are essential at any cost if activity is to continue.
Moderate risk - As Low as Reasonably Practicable, a level of risk that is tolerable and cannot be
reduced further without expenditure of costs disproportionate to the benefit gained or where
the solution is impractical to implement.
Tolerable risk - Risks are negligible or so small that they can be managed by routine, procedures
and no additional risk treatment measures are needed.

B. Risk categories
The risk categories come from the risk matrix shown below:
Risk = Probability x Criticality

72

The probability value is obtained from the first table and the criticality we obtain as follows:
Area Criticality 0 Criticality 1 Criticality 2 Criticality 3
Safety 3,4 or 5 2 - 1
Environment 4 or 5 3 2 1
Company Image 5 4 3 or 2 1
EFOF Variation* 5 3 or 4 2 1
EAF Variation* 5 3 or 4 2 1
Variable Margin
Lost Impact*
3,4 or 5 2 - 1
Repair Cost 5 3 or 4 2 1
* Financial indicators presented are only an example, should be defined appropriate financial indicators
for each business.

C. Risk Quantification
Once we have all the 8 points defined for a certain risk we can quantify it in a scale from 0 to 100 in
order to aid the decision making process. The risk value can be calculated as:

Risk Value = Probability x Dimensions
Where:
Dimensions = Non-Financial Losses + Financial Losses
Non-Financial Losses = Safety + Environment + Company Image
Financial Losses = EFOR Variation + AF Variation + Variable Margin Lost Impact + Repair Cost

Each one of the points used to calculate the Non-Financial and Financial Losses vary from 1 to 5 as show
in the tables previously. With this we come to the following minimum and maximum values for
Tolerable, Moderate and Intolerable risks:
Risk Category Minimum Maximum
Tolerable 12 300
Moderate 30 600
Intolerable 54 1500

73
As it can be seen from the previous table, we can have the same risk values for different categories in
specific ranges. For example:
Lets imagine we have a risk with Probability = 5 and the following Non-Financial and Financial Losses
i. Safety = 3
ii. Environment = 1
iii. Company Image = 1
iv. EFOR Variation = 1
v. AF Variation = 1
vi. Variable Margin Lost Impact = 1
vii. Repair Cost = 1

And we also have a risk with Probability = 5 and the following Non-Financial and Financial Losses
i. Safety = 1
ii. Environment = 1
iii. Company Image = 3
iv. EFOR Variation = 1
v. AF Variation = 1
vi. Variable Margin Lost Impact = 1
vii. Repair Cost = 1

For the first risk we come to a Criticality = 0 because of Safety = 3, which combined to a Probability = 5
gives us the category as Intolerable according to the Risk Matrix. We can calculate the risk as:
Risk Value = 5 x ((3+1+1) x (1+1+1+1)) = 100

For the second risk we come to a Criticality = 2 because of Company Image = 3, which combined to a
Probability = 5 gives us the category as Moderate according to the Risk Matrix. We can calculate the risk
as:
Risk Value = 5 x ((1+1+3) x (1+1+1+1)) = 100

To prevent this to happen, it was established a scale from 0 to 100 and the values are fitted into this
scale according to their category as show in the following table:
Risk Category Minimum Maximum
Tolerable 0 Less than or equal to 34
Moderate Greater than 34 Less than or equal to 77
Intolerable Greater than 77 100

74

To achieve this, the following calculations are used:
Tolerable 34
12 300
12 Pr

=
Scale evious
Scale New
Moderate
Intolerable

For the example presented above we get the following results:
First risk Previous Scale = 100, Risk Category = Intolerable

Second Risk Previous Scale = 100, Risk Category = Moderate]

D. Treating Risk
The treatment of risk can be divided into three levels and controls. Should be considered the cost /
benefit and risk levels for the prioritization of actions
Intolerable - Priority Events
Moderate - Events precaution;
Tolerable - Events surveillance;

( ) 001 . 34 001 . 34 77
30 600
30 Pr
+
=
Scale evious
Scale New
( ) 001 . 77 001 . 77 100
54 1500
54 Pr
+
=
Scale evious
Scale New
( ) 73 . 77 001 . 77 001 . 77 100
54 1500
54 100
= +
= Scale New
( ) 28 . 39 001 . 34 001 . 34 77
30 600
30 100
= +
= Scale New

75
4.2 Appendix B

Listed below is an example of a Risk Register
Risk Overseer Risk Risk Definition Risk Category Risk Owner
Compliance Compliance Not work with reputable
counterparties or partners
Compliance
and Values
Scott
Smith
EHS Environmental
Risks
Managing the environmental
impact of our operations (air,
water, solid waste, etc.) in
compliance with all applicable laws,
regulations and AES environmental
standards and policies
Karen
Johnson
Compliance/
Internal Audit
Fraud Unethical behavior or deception
resulting in economic loss, physical
injury or harm to reputation
Alice
Henson
EHS Safety Establishing and maintaining an
incident free work environment for
all AES People, contractors and the
people in our surrounding
communities that is also in
compliance with all applicable laws,
regulations, and AES safety
standards and policies
Alex Kris
Legal Litigation Lawsuits filed against the company
by shareholders, competitors,
creditors, regulatory bodies, etc.
William
Jones

4.3 References

Other reference documents can be found on Docushare at:

77

Asset Operation and Maintenance

STD0005

78
Contents

1. Introduction ........................................................................................................................... 79
2. Roles and Responsibilities ....................................................................................................... 82
4. References91

79
1. Introduction
The AES business shall establish and maintain arrangements to ensure the effective implementation
of the asset management operation and maintenance (O&M) plans with analysis that aligns the
operation and maintenance activities across the whole life cycle. The life cycle includes:
i. Identify the need for an asset;
ii. Create or acquire;
iii. Operate and maintain; and
iv. Dispose or replace the asset.

The operation and maintenance plans must consider the life cycle of a facility for maximum
effectiveness and value. Operation and maintenance planning is a key focus of the organizational
activities due to its vital role in the areas of environmental preservation, productivity, high system
reliability, regulatory compliance, safety and profitability.

Controls for the maintenance of assets should be aligned with the asset management policy, asset
management strategy and asset management objectives and take account of the assets design
operating parameters.

80
The process is not intended to change the organizational structure or create additional
headcount. Responsibilities required for successful asset management implementations
should be assigned to the appropriate people within the business. The roles and
responsibilities related to operating and maintenance plans include assigning leaders and
contributors to accomplish the following:
i. Review and understand objectives in the development of asset management strategy
(STD0001);
ii. If not completed in the strategic process, determine if operation or maintenance
plans are needed to address each objective;
iii. Develop operating and/or maintenance plans as identified;
iv. Document the plans;
v. Communicate and/or train the affected people regarding the plans (STD0008);
vi. Monitor the use and effectiveness of the plans (STD0010); and
vii. Take corrective action if it is determined that the plans are no longer adequate.

The assignment of these and other asset management roles and responsibilities can be
ideally tracked using a Responsible, Accountable, Consulted and Informed (RACI) chart or a
similar accountability tracking tool to the one illustrated below. The chart below is in no
means complete, but serves as an example and starting point.

81

82
3. Process
3.1 Operation and Maintenance of Assets
Asset management operating and maintenance plans are intended to achieve specific results and
reduce or limit levels of risk. Organizational objectives are a product of the overall Business Plan as
documented in the Asset Management System (STD0001) and as illustrated below:

The Asset Management Strategy, which is based on a clear understanding of the key organizational
objectives, will serve as the guideline to establishing effective plans for asset maintenance. The
objectives from the Asset Management Strategy serve as a link to the operation and maintenance
plans.

Operation and maintenance plans are comprised of selected work tasks or guidelines of various types
that will achieve targeted levels of performance for the asset and work controls. The plans must
protect and maintain the asset in the condition required to meet the needs of the organization in the
current period and in future periods.

3.1.1 Operation Plans
The business shall define operation plans for assets that detail how operations will be conducted in
order to achieve the organizational objectives. These plans are recorded in various ways, but often
include limits set in control systems and various operational procedures. Regardless of the form, the
plans should provide guidance for how to meet the sometimes competing demands of asset limits,
regulatory requirements and delivery of optimum value while limiting risk.

Businesses should consider the use of experts and/or expert systems when developing operation
plans. Determining an optimal balance between the conflicting factors mentioned previously is a key
aspect of operational asset management and sometimes benefits from the use of expert systems.
Asset
Management
Strategy
Asset
Management
Objectives
Operations &
Maintenance
Plans
Operations &
Maintenance
Work Control

83
For example, computerized performance software, such as EtaPro from General Physics, can deliver
optimized heat rate performance in a thermal power plant, while operators also achieve
environmental limits. Another example, for distribution systems, is the commercially available expert
systems used to optimize line losses. These types of systems should be evaluated and used or
developed where the benefits are appropriate.

3.1.2 Maintenance Plans
The business shall define maintenance plans that detail the specific activities selected to manage the
rate and level of asset deterioration. These plans are most often recorded in the CMMS, but may be
documented elsewhere. In addition to outage and routine work, maintenance types include proactive
and corrective work. Corrective maintenance restores assets to service by reacting to failures.
Proactive work includes planned tasks that are intended to avoid in-service failures and tasks that are
identified based on various conditions that will prevent an impending failure.

Determining the optimal balance of proactive and corrective maintenance is a key asset management
decision. The chart below illustrates the optimal cost zone that should be achievable with optimal
selection of the types of work. Decisions regarding optimizing cost should also include balancing the
cost of unreliability and risk. The right balance depends on the commercial environment and risk
context for a business.

Proactive maintenance is further distinguished as:
i. Preventive maintenance tasks carried out on a specified frequency to prevent faults and
disruption from faults;
ii. Predictive maintenance taking action at the earliest detectable sign of impending failure;
and
iii. Condition based maintenance taking action to repair an asset based on its condition.

3.1.3 Balancing Unplanned and Planned Maintenance
Businesses shall apply appropriate effort considering their business model to identify the optimal
balance between planned and unplanned maintenance, risk, and cost. There is an optimal cost zone
between planned and unplanned maintenance, balancing cost, service reliability and risk. The right
balance depends on the organizational risk context. The chart below illustrates that as planned
maintenance costs increase, typically unplanned costs decrease. The aim of maintenance planning is to
find the area where total costs are lowest while still meeting performance requirements.

84

3.2 Foundations for Operation and Maintenance Plans
3.2.1 Definition of Hierarchy, Functions and Functional Failures
Businesses should determine operational and performance standards for each system analyzed in order
to define the acceptable level of functional failures affecting the performance of the system. This
requires several precursors to be in place.

All equipment shall be identified, with the installed location defined and documented in an asset
hierarchy.

3.2.2 Analysis of Criticality
The criticality of assets and significant components shall be defined based on risk analysis. This should
be done following the requirements of the Risk Management Standard (STD0004). Other analytical tools
that can help with assessing the impacts of failures include the following:
i. Threat analysis;
ii. Failure Modes and Effect Criticality Analysis (FMECA);
iii. Failure Modes and Effect Analysis (FMEA);
iv. Root Cause Analysis (RCA);
v. Event Tree Analysis (ETA); and
vi. Fault Tree Analysis (FTA).

Typical reasons for classifying an asset as critical are that asset failure results in one of the following:
i. Unit trip, shutdown or unintentional loss of load;
ii. Damage with high cost to mitigate;
iii. Reduction in power output or service delivery;

85
iv. Personnel hazard; and
v. Violation of one or more regulations (e.g. environmental or grid operator requirements).

Businesses should analyze the following sources of information, useful for developing effective
operation and maintenance plans:
i. System descriptions;
ii. Manufacturer recommended operational limits and maintenance regimes;
iii. System drawings (P&D, electrical schematics, logic diagram, etc.);
iv. Component maintenance history;
v. Computer based simulation;
vi. Existing preventive maintenance and predictive maintenance tasks (PM and PdM); and
vii. Organizational knowledge from past experience such as RCA reports.

3.2.3 Operation and Maintenance Task Selection Factors
Critical assets require operation and maintenance plans that will prevent or at least mitigate
the impact of failure. Additionally, critical assets may also require anticipating the need for
available spare parts, which should be addressed by referring to the Asset Supply Chain
Management Standard (STD0006). If the effects of the failure modes are tolerable, this asset is
usually classified as non-critical. The non-critical evaluation allows a cost based optimization
approach for when maintenance should be performed. In some cases, a run to fail strategy may
be appropriate for non-critical components.

For critical assets, the business shall identify operating limits and procedures, as well as
proactive maintenance tasks based on research of failure modes and warning signs.

Operation plans include three main aspects. These are (1) setting operational limits and
procedures, (2) applying the AES Best Practice Guidelines, and (3) setting an operational
regime. Each business shall establish operating limits and procedures that suit their specific
assets and operating environment. The business should either apply the standards or record
reasons for not applying them. Finally, each business shall set an operating regime that
optimizes asset performance in changing markets. For example, when markets change
significantly, businesses should challenge assumptions regarding the operational regime to be
sure that a long term optimal value will be created and that fixed O&M cost and capital profiles
suit the profitability of the asset in the new markets.

The AES Best Practice Guidelines include operations, maintenance, engineering and loss control
considerations. They are intended to share organizational knowledge so as to reduce risk and to
optimize the balance between effectiveness, cost and performance.

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Regarding in service failures and maintenance requirements, the illustration bellow depicts how
a failure initiates and through time becomes a functional failure. The time interval between
point P and F is called the P to F Interval. In theory, the proactive maintenance interval should
be less than the P to F interval time so the organization should be able to catch potential
failures and correct them before an in service failure occurs. However, determining where the
points P and F are in time often takes engineering analysis and study. Analysis of condition and
operating data can help estimate an assets location on the failure curve and the time
remaining to prevent an in-service failure.

3.3 Types of Equipment Maintenance Tasks
After completing the analysis of criticality, failure modes and symptoms for the critical
components, and in addition to setting operational procedures and limits, the business shall
select maintenance tasks that will achieve its reliability and cost goals. The determination of
tasks should consider the types of tasks listed below for, at least, the critical assets. The tasks
should be selected based on P to F interval, warning properties, and optimal use of technician
time. The analysis should be expanded to include evaluating the less critical assets as time
permits.

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3.3.1 Condition Monitoring
Condition Monitoring is the inspection for symptoms (noise, leaks, loose parts, integrity, etc.)
before problems progress to become an in-service failure. These tasks aim to detect incipient
faults before they become worse.

3.3.2 Predictive Maintenance
Predictive Maintenance consists of vibration analysis, thermo-graphic analysis, oil analysis,
ultrasonic detection, etc. These tasks are intended to detect potential failures before they
become functional failures. Components are technically applicable to "warn" when a failure is
in progress.

3.3.3 Preventative Maintenance
The maintenance of equipment before a failure occurs is considered preventative maintenance
(PM). PM is reserved for instances where the warning properties of failure do not present
adequate assurance of detection of impending failure. PM frequency is typically based on asset
operating hours or cycles.

3.3.4 Run to Failure
In some cases, low priority equipment can be run until it fails. For this type of asset, the cost of
proactive maintenance is higher than the cost of the result of the failure. This strategy is only
appropriate for non-critical equipment. It is important to consider inventory levels for
equipment with a Run to Failure (RTF) strategy to ensure resulting downtime in managed at an
acceptable level.

3.3.5 Redesign
In situations where RTF is unacceptable and when there is no task technically capable of
reducing risk sufficiently, redesign of the component, equipment, or asset is recommended to
improve the project. This can be accomplished either by increasing the reliability of the
component or adding redundant equipment based on cost-benefit analysis.

3.4 Work Control for Operations and Maintenance
Businesses shall have operational work controls set and monitored for critical set-points and
limits. Work controls include:
i. Setting operational limits and procedures;

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ii. Observing the application of the limits and procedures;
iii. Providing feedback to operators; and
iv. Adjusting procedures as needed when objectives are not met or the objectives change.

Operational controls should be monitored through the use of reports that review data trends or
historical data to identify excursions.

Regarding maintenance, both proactive and reactive work shall be subject to work control as
described below to improve efficiency of work execution. The business should determine the
level of detail appropriate for their asset and business type. Work tasks are planned and
scheduled as part of the five most common work control stages illustrated below. Each
business should have documented procedures to govern these stages. These stages are
typically administered through the use of a CMMS.

Planning and scheduling are separate efforts. No work task will be scheduled until it is planned,
all required resources are available and all precursor work has been completed, except in an
emergency. Ideally, standard work packages should be used so planning will improve with
feedback from previous work.

Planning and scheduling take into consideration the criticality ranking of the asset and the
priority of the work request. These two values are recorded using scales and are multiplied to
arrive at a work order priority. Only an operations manager or qualified designee(s) will have
the authority to change work priorities.

Work execution shall ensure all safety requirements in AES Safety Standards are met and that
preparations are completed before the work is started to optimize worker efficiency.
Work
Identification
Work
Planning
Work
Scheduling
Work
Execution
Work Closing

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Otherwise, work execution is subject to normal skills and technical considerations addressed
outside these asset management standards.

Work closing shall ensure that feedback is provided to the planners, work is properly
documented to track the use of parts, the time to repair and the cause(s) of failure.

3.5 Operations and Maintenance Key Performance Indicators (KPIs)
The business shall select and monitor appropriate operational and maintenance KPIs. The
Performance Monitoring Standard (STD0010) specifies requirements for general performance
monitoring while this section is specific to operational and maintenance performance. The
purpose of monitoring asset operations and maintenance performance is to evaluate the
implementation of asset management plans and measure the effectiveness of the
arrangements for controlling risk. Significant deviations often identify the need for a Recovery
Plan (See STD0011) to recover or improve asset management performance.

The business shall measure and analyze its operations and maintenance performance as
needed to ensure compliance with plans and to prescribe improvements needed for staying
competitive in markets. The performance measures must be derived and aligned with the
organizational goals and strategies of the business.

Ideally, metrics should include some proactive measures. A simple way to determine if a metric
is leading or lagging is to ask a question Does the metric allow us to look into the process, or
are we outside of the process looking at the result?

Leading indicators are forward looking and help to manage the performance of an asset,
system, or process, whereas lagging indicators tell how well we have managed. Lagging
indicators are results that occur after the fact. They monitor the output of a process.

Examples of leading metrics include:
i. % Scheduling compliance;
ii. % Planned Work; and
iii. Work order cycle time.

Examples of lagging indicators include:
i. Maintenance Cost as % of RAV;
ii. Return on Net Assets; and
iii. Mean Time Between Failure (MTBF).

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3.6 Continuous Improvement
Continuous improvement in operation and maintenance plans is essential for meeting the challenges
in competitive markets. One increasingly popular strategy for enabling continuous improvement is
through a high level of involvement of the workforce in sustained incremental problem-solving. The
Continuous Improvement Standard (STD0013) contains general guidance on how to apply these
principles and techniques.

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4. References
Best Practice Guidelines and other references material can be found at the following
Docushare folder:


93

Asset Supply Chain Management

STD0006

94
Contents
1. Introduction.... 95

2. Roles and Responsibilities ................................................................................................. 97
3. Process ............................................................................................................................. 98
3.1 Asset Sourcing Planning ..................................................................................................... 98
3.2 Supplier Relationship Management ................................................................................... 98
3.3 Asset Sourcing Execution ................................................................................................... 99
3.4 Supply Chain Contingency Plan ......................................................................................... 101
3.5 Inventory Optimization .................................................................................................... 102
3.6 Asset Life Cycle Procurement ............................................................................................ 103
4. References ....................................................................................................................... 104

1. Introduction
Sourcing and Supply Chain Management is an important element of asset optimization with
relevance during the entire life cycle of asset management. The goal of Sourcing is to provide the
best total cost of ownership to businesses through the supply of high quality equipment, materials,
parts, or services. This objective is only achievable with a close collaboration with the asset
management efforts to ensure that all the materials and services acquired are functionally consistent
with the assets operation requirements and asset best practices, and fulfill the required delivery
times, safety rules and regulatory requirements.
Besides the continuous maintenance and technical improvement of our assets, this close
collaboration also aims to develop innovative solutions from our external partners through a
structured and sustainable suppliers relationship program.
This standard defines the responsibilities of Sourcing and the inputs it needs to efficiently plan and
perform its activities, roles and responsibilities, key considerations in developing specific
procurement strategies and the interdependencies with other elements of asset management.
In this standard, Sourcing means either the local Sourcing team at the business level, the SBU level
Sourcing team or the Global Strategic Sourcing team. The local Sourcing team shall work with
SBU/Global Strategic Sourcing to define the sourcing strategy, coordinate/consolidate activities and
consult with Subject Matter Experts for a particular project. The sourcing activities may be
centralized or decentralized, performed in collaboration with SBU/Global Strategic Sourcing or solely
led by the local Sourcing team.

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The Sourcing team shall be responsible for the activities depicted in green below. To do so, Sourcing
needs the input depicted in blue from Maintenance, Engineering and Operations.

Map Assets
Describe Assets
(Tech Specs)
Define Criticality
(Risk Mgt Std 04)
Plan
Maintenance
Budget
Plan Sourcing
(Long Term
Sourcing Plan)
Define Supplier
Relationship Mgt
Strategies
Execute Asset
Sourcing
Provide Spare
Parts List
Optimize
Inventory
Create Sourcing
Contingency plan
Perform Life
Cycle Asset
Sourcing
Execute
Maintenance
Maintain Asset
History
Monitor Supplier
Performance
Dispose/
Rehabilitate
Asset

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The Sourcing and Supply Chain Management processes require extensive input from and
communication with various departments of AES Businesses. It is customary for Sourcing to form a
sourcing committee with all interested parties within the organization, and to lead and coordinate
the work of this committee. The table below lists the typical responsibilities of the different parties.
Businesses shall assign responsibilities based on their Asset Management system and to fit their
business conditions. See example of RACI chart below. This is by far not a complete list of roles or
activities, and it is important that all areas contribute as needed to accomplish the optimized
sourcing and supply chain management of assets.

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3. Process
3.1 Asset Sourcing Planning
All businesses shall have a Long Term Asset Sourcing Plan. The Long Term Asset Sourcing Plan should
be developed by Sourcing with the following input from maintenance, engineering, finance and
operations:
i. provide a five-year forecast of major asset acquisitions and ten-year Outage Plan, reviewed
at least annually or when required, gradually including the lower-cost assets over time to
some optimal level;
ii. complete asset description and workable technical specifications of major items, services
and parts;
iii. provide the list of critical spares;
iv. provide the long term maintenance plan including risk-based asset criticality;
v. provide the long term budget assumptions; and
vi. communicate timely updates to the five-year forecast.

The Outage Plan will be critical to the Sourcing team in order to:
i. efficiently plan and allocate resources where and when needed;
ii. pro-actively schedule Sourcing activities with the lead-time necessary to perform an
optimum sourcing process;
iii. identify potential suppliers based on upcoming needs;
iv. communicate sourcing activities to Global Strategic Sourcing team to coordinate and/or
consolidate several needs into one sourcing activity to leverage AESs size and synergies;
v. prioritize sourcing activities;
vi. monitor and track the timing of sourcing activities;
vii. properly respond to possible emergencies or unexpected issues; and
viii. proactively develop a risk-based Supply Chain Contingency Plan for critical assets.
The Sourcing team shall update its Outage Plan at least annually upon yearly budget approval, or as
required by business operations.

3.2 Supplier Relationship Management
AES strategically plans and manages the relationship with its suppliers in order to maximize the value
of those relationships. Such Supplier Relationship Management (SRM) is a comprehensive approach
which involves Sourcing and AES staff at all levels of the organization, from business staff
instrumental in providing supplier performance feedback to ELT involvement for those critical
suppliers at a global level, and the suppliers themselves. Relationship Management for critical asset
suppliers should be aligned with company-wide Supplier Relationship Management initiatives.

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Some components of Supplier Relationship Management are supplier base segmentation, supplier
development, supplier meetings, supplier performance tracking (performance KPIs), and supplier
recognition/awards program. Any major issue or success with suppliers shall be reported to Global
Strategic Sourcing so it can be addressed or recognized at a higher level if needed.

In order to successfully perform Supplier Relationship Management, the Sourcing team needs the
input, and as necessary, the active involvement (in meetings for example) of Maintenance and
Operations on the performance of suppliers. Each business should have a feedback mechanism in
order to capture important supplier performance data.
For critical assets, Sourcing should only use suppliers which have been pre-qualified.

3.3 Asset Sourcing Execution
The early involvement of Sourcing is important and should consider the complexity of the equipment
or service being sourced and the lead-times required to ensure a smooth and successful sourcing
process. In other words, Sourcing should be involved as soon as a need is identified (at budget
approval time or when an unexpected need arises).
In accordance with the AES Procure-to-Pay Policy, businesses shall contact the Sourcing team for any
purchases that may directly affect the business operations or that are associated with major supply
agreements or AESs Supplier Relationship Management strategies.
To plan activities efficiently, Sourcing requires as soon as possible (preferably upon or before budget
approval):
i. the Outage Plan for each major or critical asset/Business;
ii. appropriate notification if equipment failure occurs that is likely to require supplies or
services;
iii. complete technical specifications (generic enough not to restrict supply options and enabling
competitive bidding) and expected supply schedule should be submitted to Sourcing early
enough to enable a timely execution;
1. Segment
Rationalize the
supply base
Focus on
critical
suppliers
Define roles
and
responsibilities
2. Assess
Develop
scorecard &
KPIs
Collect Data
and Measure
KPIs
Solicit
Feedback
3. Manage
Communicate
Expectations
and Progress
Identify &
Execute
Opportunities
Coordinate
Supplier Mgt
Activities
4. Collaborate
Assess &
Prioritize
Collaboration
Capture
Supplier
Innovation
Become a
Customer of
Choice

100
iv. assets specifications or/and scope of work, including design, construction, and rehabilitation
standards;
v. final disposition requirements; and
vi. minimal warranty requirements.
Businesses should have in place formalized procedures for asset inspection (at different stages of
manufacturing, as applicable) and performance assessment of the asset upon delivery. As
constructed drawings, maintenance manuals, training guides, and test schedules and reports shall
be either maintained by Operations or Sourcing; or electronic and hard-copy referenced/archived in
the contract files. Businesses should consider standardization of assets where practical to maximize
synergies and minimize spares inventory within and across businesses.
As evident from the roles and responsibilities table (RACI), the Sourcing team has primary
responsibility for many of the sourcing activities, with support from the maintenance, engineering,
finance, legal, EHS, compliance and operations departments. Listed below are additional activities
for which the Sourcing team is responsible:
i. Definition of the strategy, sourcing process calendar and validation with key stakeholders,
identification of potential bidders and pre-qualification;
ii. Coordination of technical visits or technical clarification events;
iii. Review of design (take into account possible synergies with existing assets, minimization of
tailor-made, sole/single supplier options, etc.);
iv. Review of scope of work to include, where it makes sense, any future parts and spares,
maintenance or other services required during asset life cycle;
v. Consideration of any requirements and needs under the Supply Chain Contingency Plan and
incorporate those upfront in the Sourcing phase and negotiations;
vi. Assessment of information needs to calculate the total cost of ownership during the asset
life cycle rather than solely asset purchase price;
vii. Preparation and issuance of the RFP/RFQ and related documentation,
viii. Preparation of online bidding platform if appropriate (e.g. PowerAdvocate);
ix. Evaluation of proposals using the STACE Scorecard (See Attachment A) and taking into
account supply risk management (see Risk Management Standard STD0004);
x. Development of negotiation strategy for negotiation with short-listed bidders;
xi. Negotiations with short-listed bidders;
xii. Contractual agreement (which shall take into account, among other things, access to sub-
suppliers list and right to trade directly with those sub-suppliers, access to key drawings for
potential reverse engineering, etc.);
xiii. Review and documentation of benefits (cost reductions, cost avoidances, etc.) obtained;
xiv. Hand-over and Lessons Learned report; and
xv. Contract administration.

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3.4 Supply Chain Contingency Plan
High impact events are incidents which, if they occur, may have a substantial negative impact on a
Business. High impact events are defined in the Business Continuity Management (STD0014), Risk
Management (STD0004) and Root Cause Analysis (STD0009) Standards but generally cause the
following:
i. forced outage;
ii. large financial impact;
iii. significant safety or environmental incident; and/or
iv. an event adversely impacting the image of AES with external stakeholders.
Sourcing plays a key role in minimizing the downtime which can occur with asset failure. Supply
Chain Management activities (identification of potential suppliers, identification of parts and
availability, negotiation, purchase agreement, freight, customs clearance, etc.) often represent a
significant portion of the duration of repair. Resolution of high impact events often relies to a great
extent on resources which are outside AES businesses; Sourcing is a key player in obtaining a fast
supply market response.
The business should establish, implement and maintain plans and procedures to identify and
respond to incidents and emergency situations, and maintain continuity of critical assets operation,
which together form the Business Continuity Management Plan (STD0014). Sourcing should assist
this effort as far as Supply Chain Management is concerned.
i. Businesses should maintain the technical specifications of critical assets and ensure that
critical parts are in inventory.
ii. The Supply Chain contingency plan should include:
a. an inventory analysis of all critical assets and spares, identified and prioritized by
Maintenance & Operations;
b. early identification of spare parts and critical services may be requested in
emergencies (inside and outside AES);
c. identification and assurance of supply sources for critical parts, assets and service;
d. a review and preparation of logistics requirements (freight and customs clearance,
hazardous materials authorization, etc.);
e. an internal and external contact list (See Attachment B); and
f. localization of relevant supplier contracts, and the proactive sourcing of emergency
services and equipment that could be required during disruptions or incidents
involving critical assets, as defined by AES Business.
iii. Participation of Sourcing in any test/practice drills.
Sourcing should proactively consider contingency provisions in contracts with suppliers, where it
makes sense (e.g. back-up equipment, commitment for replacement lead-time in case of failure,
etc.).

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3.5 Inventory Optimization
Maintenance and Operations, in collaboration with Sourcing, shall optimize the inventory. Rather than
calculating each SKU inventory target independently, inventory optimization should ideally perform
an intelligent simultaneous optimization over a large assortment of SKUs and several warehouses at
a country level or internationally (if possible). The reason for this is so it statistically models both
demand and replenishment, while taking into account the relationship between inventory and
reliability. Sourcing should also consider alternatives such as vendor-managed inventory. Based on
criticality of assets and parts, commonality of parts, availability and replenishment lead-time, etc.
and input given by Sourcing, Maintenance and Operations shall set the optimum re-order points and
maximum and minimum inventory levels. Sourcing shall monitor inventory movements, obsolete
parts and slow-moving SKUs. Storeroom/Warehouse shall follow the OEMs storage
recommendations.
The optimization of inventory levels is a complex process, requiring cooperation and interaction from
various stakeholders. The optimization decision should be made at the highest business unit level as
practical when considering delivery times and criticality, so spares can be shared by several locations if
the specification matches and the required time to deliver allows for off-site spare inventory. The
following lists include a primary source for information and analysis, but the decisions are complex and
often involve interaction and discussion of these factors. Depending on the issues related to the specific
spare, either Operations and Maintenance or Sourcing may make the final determination, but all voices
must be heard to ensure no issues are overlooked. The parties typically provide the following inputs.
In order to optimize inventory, Maintenance, Operations and Engineering should develop the following
information:
i. Critical spares list (based on criticality assessment (ABCD categorization or other) and
maintenance requirements of the equipment);
ii. Failure rate of the spared asset, such as Mean Time Between Failure;
iii. Critical spares which are common with other AES businesses and may be shared;
iv. Other spares needed and estimate spare usage (including sets);
v. Interrelationship between spares (spare needed or replaced at the same time as another spare);
and
vi. Estimation of usage and justification of items as stock/non-stock and list of critical spares (See
Attachment C) (the spares list should not include general consumables).

Sourcing should develop the following information:
i. Categorization of the spares in terms of: Fast moving (~3/12months), Slow moving (<1/12
months) and Insurance;
ii. Cost of the spare parts;
iii. Current part supplier and supply alternatives;
iv. Part delivery lead-time;

103
v. Known quality or delivery issues with the part, if any;
vi. Option for vendor-held stock (Supplier agreement needed); and
vii. Possibility to obtain the part from another AES business in an emergency (Contract needed).

Note: Ideally, SKU descriptions should be standard across all AES businesses and use the same
taxonomy (See Attachment D). Where possible, businesses should standardize processes and IT
infrastructure to increase automation and inventory visibility across AES businesses boundaries.

3.6 Asset Life Cycle Procurement
Maintenance and Operations should involve Sourcing with the required anticipation (as soon as the
budget is approved or when an unexpected need arises) in the supply chain management of goods
and services required for the optimum operation of the asset throughout its life cycle.
The decisions made by all involved should optimize the life cycle value associated with the
acquisition, operation and eventual disposal of the asset. This may require Sourcing to complete
service and/or parts agreement with OEM or alternative suppliers, or competitively bid work
packages, depending on the specifics of the asset and business, or consider alternative solutions,
scope of work or supply. In structuring supply contracts, particular attention will be given to
warranty terms to minimize risks, liquidated damages and penalties, increase supplier reliability and
improve overall costs for businesses.
Where it makes sense, requirements identified in the Supply Chain Contingency Plan should be
incorporated in on-going supply agreements.
When and where possible, Sourcing will coordinate maintenance and other service activities across
AES businesses to maximize synergies and SRM strategies, as well as minimize risks and costs.
Sourcing can assist businesses to dispose of obsolete assets/parts (surplus portal, sale to other
Businesses or third parties, etc.) as needed. Sourcing should monitor and report suppliers KPIs as
part of a Supplier Relationship Management program.
To plan such activities efficiently, Sourcing shall require from Maintenance and Operations the
Outage plan for the business (as well as timely update(s) of such plan), and to be involved
immediately if an equipment failure occurs.

104
4. References

The following reference materials can be found on Docushare at:
Attachment A STACE Bid Evaluation Scorecard
Attachment B List of critical spares template
Attachment C Taxonomy
Attachment D Supply Chain Contingency Plan Contact List template

106

Life Cycle Value Management

STD0007

107
Contents

1. Introduction.............................................................................................................................108
2. Roles and Responsibilities ..................... ..................................................................................110
3. Process ........................ ............................................................................................................111
4.References 116

108
1. Introduction
AES businesses shall establish and maintain processes and/or procedures for the practical application
of its asset management plans and control activities across the whole life cycle. The life cycle of an
asset begins with the identification of the asset need and ends with the asset decommissioning and
effective resolution of all residual liabilities.
The concept of asset life cycle value optimization is easy to understand at the lowest levels of asset
granularity, such as physical equipment components like a pump. However, assets operate in a
system context and changes at the equipment level will have asset level effects. One could easily
decide to replace a pump with a new pump when repair costs are increasing later in the pumps life.
But, if the larger asset is planned to be decommissioned the following year, perhaps a repair provides
the best risk weighted value.
An asset proceeds through a series of stages from the time its need is first realized. The figure below
shows the major asset life cycle stages (in color) and some of the more common major alternative
methods (in grey) of completing the phases. Each phase has key considerations and different
impacts on the life cycle value that require consideration.

Complex systems such as a power plant seem to have an infinite life, depending on how we choose
to manage them, but the asset is comprised of multiple systems and is subject to many external
factors that will lead to an optimum time for asset retirement and decommissioning. It is clear that
many alternatives must be considered and decisions made during the operating life. Alternatives in
the Operate and Maintain stage include options to patch and continue, make modifications or
procure replacements. The various factors affecting decisions can include obsolescence or changing
functional demands caused by market factors or changing regulations. Furthermore, the asset may
have a series of owners during its life, with different objectives, value criteria and planning horizons.
Asset life cycle planning, life cycle costs, risk and value realization must consider these factors while
applying well designed processes and procedures to decision making if shortsightedness and false
economies are to be avoided.

109
Much of this standard deals with the acquisition of new assets and so it is written assuming the asset
does not yet exist. However, in many cases AES businesses will be developing asset management
programs for existing assets. In those cases, the requirements of this standard still apply and should
be implemented, recognizing that many of the early design decisions have been made. Nonetheless,
it is still important that for whatever planning window is available, coordinated, life cycle based,
sustainable and optimized decisions be made to establish Operations and Maintenance Plans.

110

Roles shall be assigned for the responsibilities described throughout this document. The process is
not intended to change organizational structure or create additional headcount. These roles can be
assigned to the existing resources based on the individuals knowledge and skill set. Individuals can
also assume multiple roles.
business conditions. See example of RACI chart below:

111
3. Process
The Life Cycle Value Management Standard ensures the integration of all of the elements of Asset
Management in a sustainable manner throughout the asset life cycle, from planning to acquire an
asset to asset disposal. The objective is to identify and manage toward the optimized, risk-weighted,
long-term value in each of the phases of the expanded asset life cycle illustrated below.

Life cycle value optimization is crucial in many phases of the asset life cycle. The figure below depicts
a simplified version of the process of asset management, starting with the organizational strategic
plan (See STD0001) and demonstrating the connections to risk management (See STD0004), other
management activities, and the enabling elements that contribute to effective management of an
assets life cycle. Decisions should be made in this coordinated way thereby optimizing the whole life

112
asset value, considering the various elements of Asset Management, and satisfying the constraints
and obligations detailed above.

Life cycle value optimization decisions should align with the Asset Management strategy and
objective setting (See STD0001) and the decisions are inputs to the Asset Operations and
Maintenance Plans (See STD0005).
Certain information is required in order to accomplish life cycle optimization analysis. This
information should be collected according to the Information Management Standard (STD0012)
consulting the Asset Operation and Maintenance and Asset Management System Standards.
It is most important to apply the requirements of this standard to critical assets as determined
according to the Risk Management Standard (STD0004). Less critical assets can be considered in
future refinements. The following types of information are required to support this life cycle
analysis:
i. Asset identification and specifications;
ii. Operational conditions of asset;
iii. Inspection, to include testing;
iv. Monitoring: non-intrusive checks to confirm safety and integrity of assets and to provide
information for determining maintenance and renewal needs;
v. Proactive Maintenance to include records of planned maintenance undertaken to prevent or
reduce the risk of faults, failures or excessive deterioration from occurring;

113
vi. Corrective Maintenance to include planned activities performed to repair defect, damage or
condition that is unintended, outside specified limits and where work is necessary to bring
the asset up to standard and keep it operational;
vii. Frequency of failure;
viii. Pre and post overhaul efficiencies of major equipment components;
ix. Maintenance costs and duration of unavailability; and
x. Asset availability.

Asset management decisions are sometimes made while developing the overall Maintenance or
Operations Plans. At other times they are made as a part of evaluating one-off decisions. An
example of these one-off decisions would be if we wanted to evaluate a repair-versus-replace
decision for a piece of equipment that was not considered in a long-term plan. When the results of
these types of one-off decisions affect long-term plans, they should be documented in a revision to
the Maintenance Plans (STD0005).
If any analysis suggests changes beyond the management of change program thresholds, the
Management of Change Standard (STD0003) should be consulted and followed.

3.1 Identifying the Need
Identifying the need for a new or additional asset is the first phase of the life cycle, and it is
comprised of defining the requirements and developing an asset plan. These are possibly the most
critical steps in the asset life cycle because studies indicate that although only 1 percent of life cycle
costs typically occur in this phase, the decisions made here affect acquisition (20-30%), operations
and maintenance (60-70%), and disposal (10%) costs through the life of the asset.

3.1.1 Requirement Definition
The desired service capabilities required of the asset shall be defined by the analysis of:
i. The businesss Business Plan;
ii. Technical standards;
iii. Legal and Regulatory requirements;
iv. Design capabilities; and
v. Customer requirements (both stated and implied).

Because this phase tends to greatly limit the variability of many of the costs included in operations
and maintenance considerations, it is necessary to include representatives involved in the later
phases of the life cycle at this design phase.

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3.1.2 Asset Planning
Asset Planning involves confirming the service required from the customer(s) and ensuring that the
most effective solution is found to meet that need in a commercially viable manner. Asset planning
begins to define the Asset Management Strategy and Operational and Maintenance Planning and
should be purposefully considered for all AES business development plans.
Financial modeling or costbenefit analysis should be undertaken to understand the impact various
designs have on the components of life cycle costs. Also, this phase should include sustainability
considerations, such as environmental and safety, as well as asset disposal costs. Disposal costs are
tending to increase as a percentage of life cycle costs due to the increasing focus on environmental
impacts.

3.2 Asset Creation / Acquisition
Once a business has decided to acquire an asset(s) in order to achieve its strategic plan, choices must
be made to determine how the plan will be delivered. The most common delivery strategies chosen,
either singularly or in combination are:
i. Replacement of existing assets at the end of their service or economic life;
ii. Acquisition of existing assets from another organization;
iii. Building new assets either on green field sites or add-ons to existing facilities; and/or
iv. Refurbishment of existing assets to extend their service life.

At this early phase, the business should also begin to consider resourcing strategies for staffing,
equipment and supplies. As defined by the Asset Supply Chain Management Standard (STD0006), all
AES businesses should have a long-term Asset Sourcing Plan which will require coordination with life
cycle activities.

3.3 Asset Operations and Maintenance
3.3.1 Routine Operations and Maintenance
The overall objective of maintenance is to ensure that the assets are prepared to operate and deliver
their optimal service commitments in line with the stakeholder expectations. The service
commitments shall include the following aspects:
i. Provision of a safe work environment;
ii. Ensured compliance with legal obligations;
iii. Optimal asset financial performance;
iv. Extended asset life in accordance with the stakeholder expectations;
v. Improved investment predictability; and
vi. Asset performance aligned with expectations of productivity and service delivery.

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The Asset Operation and Maintenance Standard (STD0005) helps to ensure the efficient planning for
asset operation and maintenance.

Optimization of the life cycle value of the asset requires detailed analysis to determine the
appropriate operational conditions, maintenance and inspection practices, overhaul process and
performance regimes required to achieve these objectives. This analysis includes the activities
described below:
i. Effective risk management;
ii. Balancing proactive and reactive maintenance;
iii. Review and application of AES Best Practice Guidelines;
iv. Optimization of operational costs, maintenance costs, and capital expenditures;
v. Optimization of performance of asset systems; and
vi. Total cost of ownership.

3.3.2 Renewal / Rehabilitation
When analysis of alternatives suggests renewal or replacement of the asset is an appropriate
strategy, the renew/replace plan should be well designed to ensure asset management objectives
are achieved and provide adequate information and time to allow for optimized sourcing, according
to the Asset Supply Chain Management standard (STD0006) for critical assets. The asset renewal or
replacement should deliver increased value through improved performance, lower cost, remaining
asset life, reliability or a combination of several of these benefits when cost/benefit evaluation
warrants the improvement.

3.4 Disposal
All AES businesses should evaluate realistic future scenarios to determine an appropriate time and
plan for the end of an asset service life and an appropriate asset retirement plan. This evaluation and
determination should be completed based on the ability to create future value. Typically, an asset
reaches the end of its useful life for one of the following reasons:
i. Changes to environmental, health or safety standards rendering the assets unsuitable for the
latest requirements;
ii. Inability to continue delivering the required level of technical service requirements, such as
efficiency of energy conversion, or a pressure, temperature or perhaps an impurity removal
rate which may be because of changes in asset capability or changes in requirements;
iii. Changes to market pricing;
iv. Ageing asset becomes obsolete or unsupportable; and
v. Implications based upon the outputs of environmental impact assessments or risk
assessments.

Asset disposal plans shall meet all regulatory requirements, contractual obligations and shall mitigate
future liabilities.

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4. References
Reference materials can be found under the Docushare folder:

118

Training Awareness and Competence

STD0008

119
Contents

1. Introduction ......................................................................................................................... 120
2. Roles and Responsibilities ...................................................................................................... 121
3. Process .................................................................................................................................. 122
4. References127

120
1. Introduction
The AES businesses shall establish and maintain training and development arrangements to ensure
that people are competent in their roles; particularly roles related to asset management. These
training and development activities enable people in various positions related to asset management
to deliver on their asset management responsibilities. These activities include everything from
analyzing the risk and likely reliability of a major piece of equipment to making correct repairs and
properly documenting a work order.
The training and competency framework shall be aligned with the Asset Management System
(STD0001) to best ensure that the business can deliver on the integrated elements of asset
management. The framework ensures this by assessing needed skills, assigning these skills to certain
roles and ensuring planning or hiring of staff fills all gaps. The training and competency arrangements
should recognize and be capable of adapting to accommodate internal and external changes, such as
changes in markets or regulations.

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The process is not intended to change the business structure or create additional headcount. These
roles can be assigned to the existing resources based on the individuals knowledge and skill set.
Individuals can also assume multiple roles.
The management of training and competency requires interaction between various levels and
positions in a business. The table below lists the typical responsibilities of the different parties, but is
not intended to be definitive.
Businesses shall assign responsibilities based on their Asset Management system and their business
conditions. See the example RACI chart below. This is by far not a complete list of roles or activities,
but it can serve as a starting point when developing local business practices. It is important that all
areas contribute as needed to provide for the optimized and sustainable management of assets.

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3. Process
A planned and systematic training process is an important contribution in helping a business to
improve its collective competency and to accomplish its strategic plan. If the training and
development process is to be complete, it must accomplish several purposes. It must:
i. Identify and document key roles and responsibilities;
ii. Identify and document competency requirements for these key roles;
iii. Include a step to evaluate individual capabilities as compared to competency requirements
for their respective positions;
iv. Document action plans to include modes for closing training gaps, with a schedule; and
v. Include a process for periodic review.
The flowchart pictured below illustrates a training process for assessing capability gaps, developing
the training requirements and documenting various aspects of the program. It is important to note
that sometimes, when competency requirements are not available in existing staff or business
structures, the business may need to hire, retrain, or outsource to obtain these skills. Recognizing
staffing considerations is a factor in asset management decisions. The total systemic requirements
and costs must be considered and optimized when creating training and development programs and
plans.

Adapted from The Institute of Asset Management, 2012, IAM Competences Requirements

Training and
development

Competence
Requirement
Recruit or
select staff
Assess
existing staff
Records of
competence

Corporate
strategy and
objectives

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3.1 Businesss Needs
The business strategic plan shall be considered when designing a training process and plans. Because
the factors influencing strategy change over time, reviewing this strategic alignment will ensure that
the training and development program provides for the business asset management needs in the
short and long term. In addition, the program shall consider operations and maintenance skills, as
well as the unique requirements of asset management analytical and planning roles. By establishing
key roles in the context of current and desired future capabilities, the training process will support
the business in achieving its strategic plan.
Examples of specific asset management skills each business should include in its training and
competency framework are as follows:
i. Analysis and development of policies;
ii. Analysis of future requirements and development of strategies;
iii. Planning and implementation of strategic objectives;
iv. Financial evaluation and financial modeling;
v. Contingency planning;
vi. Application of whole life costing;
vii. Communication and cultural change;
viii. Implementation of asset management plans;
ix. Development and execution of Operational and Maintenance plans;
x. Management of risk;
xi. Compliance with legal, regulatory, ethical and social requirements; and
xii. Management of asset information processes

3.2 Competence Requirements
To expand further on the business needs assessment, competence requirements must be developed
with a clear alignment to the business strategy, goals and objectives, and the requirements should
reflect a clear understanding of how each role in the business is expected to contribute to the asset
management program. These requirements must be documented. This documentation can take the
form of a competency framework table as demonstrated in the simple chart below.

Subject Role 1 Role 2 Role 3 Role 4
1 Understand Understand Develop Evaluate
2 Develop Evaluate Understand Apply
3 Evaluate Develop Understand NA
4 Understand Evaluate Evaluate Apply

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5 Understand Evaluate Understand Evaluate
6 Evaluate Develop Understand Understand
7 Apply Evaluate Evaluate Understand
8 Evaluate Apply NA NA

As the strategic goals and objectives of the business change, the required competence of its
personnel may need to change, so the competency framework should be flexible and easily
demonstrate how the various roles and capabilities fit together. The type of format illustrated
requires that all roles are identified, that individual tasks or subjects are identified, and that for each
role, a level of competence is identified. Grouping of similar competencies can help with
understanding of how the framework functions to meet all requirements. The subjects or tasks can
also be prioritized based the implied risk to business objectives.
The levels of competence in the table above (apply, understand, evaluate, and develop) serve as an
example. The levels of competence shall be determined by the business. There can be more or fewer
levels than those above, but they should be logical and discrete. The business should also include
considerations for succession and support Business Continuity Management (STD0014) when
defining competency requirements. By documenting all training and developmental requirements in
this or a similar manner, the business can easily make changes to roles and determine how other
roles may need to be adjusted to ensure all training needs are met.

3.2.1 Reviewing Competence and Identifying Gaps
A periodic review of the competency framework shall be conducted to identify gaps between the
defined competency needs in the framework and existing staff competence. This comparison shall be
completed at least annually and should be made any time a performance gap is identified or the
organizations competency needs change. In completing the review, the existing competencies for
various roles shall be compared with those required by the business to identify and record the
competence gaps.

3.2.2 Closing Competence Gaps

When conducting annual competency reviews, the business shall develop action plans to close any
identified gaps. The actions plan to close the competence gaps can include training existing staff,
process redesign, recruitment of fully trained personnel, outsourcing, job rotation, or a combination
of these methods.
When training is selected as a method to close a competence gap, the need shall be specific and
documented. The documentation should include the training objectives and the expected outcomes

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of the training. This document should become part of the training plan. It should include a record of
the related business objectives which will be considered as inputs for designing and planning training
and for measuring the training process results.
If outsourcing is selected as the best means to bridge a competency gap, the competency framework
should be used as a guide to ensure that asset management competency requirements are met by
the contracted resources.

3.3 Training
It is beyond the scope of this document to specify a detailed training program. The business training
program, with a documentation system, should be used to support asset management objectives.
The training program should be consulted and existing methods should be employed as needed to
ensure effective training is accomplished. The training aspects discussed in this standard refer to
minimum requirements that should be present in whatever training system is used. Training plans
should consider both near term training and medium to longer term needs.

3.3.1 Training Methods
Appropriate training methods to meet the training needs should be identified. In general, training
methods can include:
i. Courses and workshops;
ii. On-the-job coaching;
iii. Self-study; and
iv. Distance learning (e.g., e-learning).

The appropriate form of training will depend on available resources, constraints and objectives.

3.3.2 Training Plan
A training plan shall be used to clearly document training requirements and the training objectives.
It will define what the trainees will be able to achieve as a result of the training. Training plan
objectives should be based on the desired competence level documented in the specification of
training needs. The plan should clearly explain the focus for training session(s) and the methods to be
used.

3.3.3 Provide Training
The training provider is responsible to deliver the training according to the training plan specification.
Additionally, the training business, as part of its responsibility to provide the training, shall:

126
i. Support both the trainer and the trainee throughout the training process;
ii. Ensure adequate facilities and resources are present; and
iii. Monitor the quality of the training delivered.

3.4 Evaluate the Training
Specific training courses shall be evaluated to determine the effectiveness of the process and
prescribe corrective actions.
Inputs for the evaluation of training outcomes are:
i. Specifications for training needs;
ii. Specifications for the training plan;
iii. Training records;
iv. Evaluations carried out on both a short-term and long-term basis:
a. In the short term, trainee feedback should be obtained regarding the training methods,
resources used, and knowledge and skills gained as a result of the training. The feedback
should be used to improve the training program.
b. In the long term, trainee job performance and productivity improvement should be
assessed. The evaluation should be conducted on the basis of established criteria and the
results of the analysis should be used to improve the content and techniques selected to
close training gaps.
v. Pre and post testing;
vi. Process evaluation template; and
vii. Lessons learned from Root Cause Analysis (STD0009) or as a result of Recovery Planning
(STD0011).

3.5 Evaluate the Program
The overall training and development program shall be validated periodically to determine if it is
meeting business requirements. These reviews should be conducted along with any changes of the
business strategy and objectives or when significant changes in the business structure or external
influences occur.
Each business shall set triggers that will initiate an evaluation of the framework to determine if there
is a need for modifications. The types of changes that should be considered as triggers include:
i. Business or technology changes that affect work processes;
ii. A change in the customer requirements or the nature of products supplied by the business;,
iii. Changes in legislation, regulations, standards and directives affecting the business its
activities and resources;
iv. Process improvements; and
v. Significant changes in markets.

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4. References
Reference materials can be found on Docushare at:

129

Root Cause Analysis

STD0009

130
Contents

1. Introduction .......................................................................................................................... 131
3. Process .................................................................................................................................. 133
4. References.136

1. Introduction
Root cause analysis (RCA) is a method to identify and address the underlying causes of why an
incident or non-conformance occurred, so the most effective solutions can be identified and
implemented. Root cause analysis requires the investigator(s) to look beyond the immediate causes
of the problem or apparent solutions and understand the fundamental cause or causes, thereby
preventing re-occurrence of the same issue. Within Asset Management (AM), problem solving,
incident or non-conformance investigation and root cause analysis are all similar in seeking to
improve performance effectively and sustainably.

The AES RCA Process defines three types of Root Causes; Physical, Human and Latent.
i. Physical Failure of physical components;
ii. Human Failures resulting from decisions made by people; and
iii. Latent Deficiencies in management systems and restraining cultural norms that allow
failures to occur.

132
Roles and responsibilities are described in detail in the Global Root Cause Analysis Process document.
This standard and the process are not intended to change the organizational structure or create
additional headcount. These roles can be assigned to the existing resources based on the individuals
knowledge and skill set. Individuals can also assume multiple roles.

Responsibilities required for successful asset management implementations should be assigned to
the appropriate people within the organization. The roles and responsibilities include assigning
leaders and contributors to accomplish the roles listed below in addition to those roles and
responsibilities included in the Global RCA Process:
i. Deploy and sustain the AES Global Root Cause Analysis Process within the AES business; and
ii. Periodically review and improve RCA practices as needed.

The assignment of this role and the roles included in the AES Global Root Cause Analysis Process and
other asset management roles and responsibilities defined by the business can be ideally tracked
using a Responsible, Accountable, Consulted and Informed (RACI) chart or a similar accountability
tracking tool to the one illustrated below.

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3. Process
The AES Global Root Cause Analysis Process, first published in May 2011, has been developed as a
comprehensive RCA process guide and sets expectations for the application of RCA. For the sake of
not creating conflicting requirements, this document will be brief, address only minimal
requirements and identify how RCA fits within the Asset Management Standards.

RCA has an important part to play within AM to support the organization in achieving optimal and
sustainable results from the assets. The following are examples of how the RCA standard supports
other AM standards:
i. Developing appropriate operating and maintenance plans in support of the Asset Operation
and Maintenance Standard (STD0005);
ii. Supporting the Recovery Plan Standard (STD0011); and
iii. Developing corrective action plans resulting from Peer Reviews (STD0015) or external audits.

The illustration below depicts the RCA process as a cycle at a high level. Notice that the process
includes both recognizing the performance shortfall and monitoring after the implementation of
corrective actions. This scope is key to a successful RCA investigation.

Recognize
the need
Preserve
Evidence
Form RCA
Team
Execute
RCA
Report
Findings
Take
Corrective
Actions &
Monitor

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3.1 Recognizing the Need (Triggers)
Businesses shall set triggers according to the Recovery Plan Standard (STD0011) and the Global Root
Cause Analysis Process. The Recovery Plan Standard and RCA Process both require a business to
specify triggers that will be used to initiate the RCA Process. In addition to asset failures, triggers are
required by the RCA Process for some safety and environmental incidents, as specified in the Global
RCA Process.

3.2 Preserve Evidence
Businesses shall preserve evidence of failures when a failure occurs that impacts the site, once the
area is safe. Businesses with a mature AM and RCA program will have made preparations for
preserving evidence such as samples, photographs, records, and interviews.

3.3 Form the RCA Team
The business shall follow the Global RCA Process in forming the RCA Team. The Global RCA Process
defines an RCA team as having an Executive Sponsor, a Leader, a Core Team and Advisors.

3.4 Execute the RCA
The Global RCA Process defines three levels of RCA with guidance for what tools are appropriate for
the levels. The process also allows for the business to request a waiver when a different level of
analysis is logical. The business shall follow the Global RCA Process and the Recovery Plan Standard
to determine the type of RCA to use.

When executing an RCA, businesses are expected to identify the three types of Root Causes; Physical,
Human and Latent.
i. Physical Failure of physical components.
ii. Human Failures resulting from decisions made by people.
iii. Latent Deficiencies in management systems and restraining cultural norms that allow
failures to occur.

Examples of RCA techniques are included in the Global RCA Process.

3.5 Report RCA Findings
Businesses are expected to follow RCA reporting requirements as identified by the Global RCA
Process, the Recovery Plan Standard, and any other SBU Leader or Corporate requirements.

135
Completed RCA reports shall also be managed according to the requirements in the Information
Management Standard (STD0012).

3.6 Take Corrective Action and Monitor the System
Businesses shall establish accountability for the implementation of corrective actions to include
setting due dates, tracking progress of the implementation and continuing to track results until
satisfied that the corrective actions are succesful.

In situations where the problem returns at an unacceptable rate or magnitude, it may be necessary
to re-visit the root cause analysis and identify additional causes and appropriate controls. Therefore,
after implementing the action plan the process must to be monitored to validate the effectiveness of
the corrective actions.

136
4. References
Reference materials can be found on Docushare at:

138

Performance Monitoring

STD0010

139
Contents

1. Introduction .......................................................................................................................... 140
2. Roles and responsibilities....................................................................................................... 141
3. Process .................................................................................................................................. 142
4. References.....145

140
1. Introduction
AES businesses shall establish, implement and maintain process(es) and/or procedure(s) to
monitor and measure the performance of the asset management system and the
performance and/or condition of assets and/or asset systems throughout their life cycle.

The process(es) and/or procedure(s) should provide for the consideration of:
i. Reactive monitoring to identify past or existing nonconformities in the asset
management system, and any asset-related deterioration, failures or incidents;
ii. Proactive monitoring to seek assurance that the asset management system and
assets and/or asset systems are operating as intended. This shall include monitoring
to ascertain that the asset management policy, strategy and objectives are met, the
asset management plan(s) are implemented, and that the process(es), procedure(s)
or other arrangements to control asset life cycle activities are effective;
iii. Leading performance indicators to provide warning of potential non-compliance with
the performance requirements of the asset management system and/or the assets
and/or asset systems;
iv. Lagging performance indicators to enable detection of, and to provide data about,
incidents and failures of the asset management system, and for incidents, failures or
deficient performance of assets and/or asset systems;
v. Both qualitative and quantitative measures, appropriate to the needs of AES;
vi. Monitoring the overall effectiveness and efficiency of the asset management system;
and
vii. Recording of monitoring and measurement data and results to facilitate subsequent
analysis of problem causes to assist in determining corrective or preventive actions
and/or to facilitate continual improvement.

When setting the frequency of performance monitoring and the parameters for
measurement AES businesses shall consider, at a minimum, the costs of monitoring, the risks
of failure or nonconformity, and potential deterioration mechanisms and deterioration
rates.

141
Roles and responsibilities are described below. The process is not intended to change the
organizational structure or create additional headcount. These roles can be assigned to the
existing resources based on the individuals knowledge and skill set. Individuals can also
assume multiple roles.

Level 1: Chief Operating Officer/Corporate Performance Director
Level 2: SBU Presidents/SBU Asset Management Performance Leaders
Level 3: Plant Managers/Plant Asset Management Champions
Level 4: Plant Teams - Leaders/Operators/Maintenance/Support Services

Although Performance Monitoring occurs at all levels of an organization, this standard
specifically addresses the expectations for operating businesses (Level 3).

142
3. Process
3.1 Selecting Performance Measurements
Performance measures are specific numerical measurements to track progress toward
particular goals and objectives. The central function of any performance measurement
process is to provide regular, valid data on indicators of performance.

An effective performance measurement system shall:
i. Flow directly out of AES strategic plan, mission and objectives;
ii. Provide a balanced picture of financial and non-financial measures, internal and
external measures, and efficiency and effectiveness measures;
iii. Have a few and well-defined measures that are tied to a handful of clear goals to be
achieved within a specific timeframe;
iv. Be periodically evaluated in an iterative process;
v. Use good and available data that the business can easily and reasonably collect
without straining their capacity;
vi. Maintain clear and easy to understand reporting and communication; and
vii. Ensure customer satisfaction.

3.2 Selecting Performance Targets
AES businesses shall consider the strategic life cycle plan as well as financial, policy, technical
and economic factors when setting performance targets.

The establishment of targets may follow seven logical steps as follows:
i. Define contexts and time horizons;
ii. Select scope of measures for targets;
iii. Develop goals;
iv. Consider funding availability;
v. Analyze resource allocation scenarios and tradeoffs;
vi. Consider policy and external input; and
vii. Establish targets and track progress.

3.3 Performance Framework
AES businesses shall periodically use a documented process to re-evaluate selected
measures and weightings in order to keep them current with business goals and objectives,

143
customer expectations and other internal and external factors. The Balanced Scorecard
framework is an example of a process that can be used for performance measurement.

The Balanced Scorecard framework provides a strategic and balanced approach to
measuring performance from four perspectives: 1) financial, 2) the customer, 3) business
process and 4) learning and growth. It reflects that the structure used in developing
performance measures can influence the overall effectiveness as well as efficiency of the
business.

Fig1: The Balanced Scorecard Framework

3.4 Variance Analysis and Action plan
With an appropriate frequency, KPIs and other metrics should be calculated, reviewed and
communicated to all relevant stakeholders. The relative importance of each Corporate KPI at
the business level shall be weighed according to established AES guidelines. These
weightings will be used in order to calculate the overall performance of the business and to
consolidate KPIs for both SBU and global performance metrics.

Variance analysis shall be performed when the KPI target variations are larger than the set
tolerances. Monitoring should be performed for team level, business level and SBU level KPIs
with the necessary consolidation stage in order to achieve the correct visibility of

144
performance. The root causes for significant variances are to be investigated with an
objective to plan and execute the corrective action to eliminate or mitigate the causes as per
the Recovery Plan Standard (STD0011). Through corrective action based on variance
analysis, budget commitments are more often achieved, and over time, KPIs become more
accurate, and planning improves.

145
4. References
4.1 Level 4 KPI relationship

4.2 Other References
References documents such as the list and formulae of Global Performance Indicators can be found
in the following Docushare folder:

147

Recovery Plan

STD0011

148
Contents

1. Introduction .......................................................................................................................... 149
3. Process .................................................................................................................................. 162
4 References.............................................................................................................................154
4.1 Recovery Plan Flowchart......154
4.2 Recovery Plan Trigger Criteria Template......155
4.3 Other References155

1. Introduction
A Recovery Plan is a group of activities designed to address and correct, or mitigate, a current or
anticipated unfavorable variance in operational and/or financial performance.
Each business has performance targets, which it is expected to achieve. At times, performance
results are, or will be, unfavorable as compared to the target. If performance results deviate, or are
expected to, deviate sufficiently from an established target, the business will initiate and execute a
Recovery Plan to return to targeted performance levels, if possible. To ensure the effective
implementation of a Recovery Plan, it should meet the minimum requirements of this standard.
The use of Recovery Plans has several benefits:
i. Formalizes the process of analyzing an unacceptable condition and documents the action
plan developed to deal with it; and
ii. Provides feedback to the SBU Asset Management Program Leader in order to learn and
improve in subsequent budget cycles, by evaluating below-target performance and related
improvement opportunities against the respective implementation costs in order to achieve
the best cost/performance balance, within acceptable risk parameters.

The Recovery Planning process employs the use of Root Cause Analysis (STD0009) methods and tools
to identify and address the issues driving the unfavorable results.

150
resources based on the individuals knowledge and skill set. Individuals can also assume multiple
roles.

The assignment of these and other asset management roles and responsibilities can be ideally
tracked using a Responsible, Accountable, Consulted and Informed (RACI) chart or a similar
accountability tracking tool to the one illustrated below. The chart pictured is an example and
should be changed to suit the local business.

2.1 Leadership Teams
Each business shall have a Leadership Team comprised of, at a minimum, the Business Leader (Plant
Manager) and Team Leaders. The Leadership Team will determine, at least monthly, if any Recovery
Plan Trigger Criteria have been met. If so, they will follow the Recovery Plan process, including the
formation of a Recovery Plan Team and Team Leader. One member of the Leadership Team will be

151
designated by the Business Leader to collect monthly updates of all active Recovery Plans and report
their status in the business monthly report.

2.2 Recovery Plan Team
A Recovery Plan Team shall be formed to conduct the RCA for every Recovery Plan as identified via
Recovery Plan Trigger Criteria. Recovery Plan Team members should have been provided at least
two hours of awareness training for the particular RCA methodology utilized. The composition of
Recovery Plan Teams will depend on the nature of the condition. Team members shall be selected
based on relevant experience, diversity of views and objectivity. Selection of the team members is
the responsibility of the Leadership Team.

2.3 Recovery Plan Team Leader
The Recovery Plan Team Leader shall assume the normal duties and responsibilities of any RCA Team
Leader. The RCA Team Leader shall report status of the Recovery Plan process to the Leadership
Team at least monthly.

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3. Process
3.1 Minimum Requirements
The business shall establish and maintain arrangements to ensure the effective implementation of
Recovery Plans, as follows:
i. The Recovery Plan shall address negative deviations to Financial and/or Operational
Performance Targets as determined by pre-established Trigger Criteria;
ii. Businesses shall have established and communicated Recovery Plan Trigger Criteria;
iii. When triggering conditions currently exist or are expected to occur, a business shall initiate
its Recovery Plan process;
iv. Recovery Plan solutions, implementation plans and results-tracking techniques should be
developed using formal Root Cause Analysis (RCA) methods;
v. Recovery plans shall be evaluated and modified as necessary following business
Management of Change processes, prior to implementation, to ensure that all aspects of any
contemplated change are considered, such as, but not limited to, safety, environmental,
reliability, training, operational, commercial, and legal; and
vi. Recovery Plan information shall be documented, reported and maintained in a data base for
future reference and learning opportunities.

3.2 Triggering Conditions
Conditions that are significant enough to warrant initiating the Recovery Plan process are referred to
as Recovery Plan Trigger Criteria. These criteria address negative variances to Financial and/or
Operational performance deemed excessive. Businesses shall establish and communicate to their
staff all Recovery Plan Trigger Criteria. These criteria will meet or exceed the minimum criteria
established by the SBU.

3.3 Initiation of Recovery Plan
Business Leadership Teams will meet at least monthly to assess variances and determine if any
Recovery Plan criteria have been triggered or are expected to be triggered. If so, the Leadership
Team will determine if an RCA is required to address the condition.

The results of the Recovery Plan assessment meeting shall be communicated to the SBU AM Program
Leader. A business should initiate its Recovery Plan process proactively when conditions exist or are
expected to occur that will lead to a deviation beyond a Trigger Criteria.

153
3.4 Recovery Plan Team Formation
If an RCA is required, the Leadership Team shall identify a Recovery Plan Team and Recovery Plan
Team Leader. The methodology used to perform the RCA shall follow the requirements of the RCA
Standard (STD0009). Team Members shall be selected based on their respective knowledge and
experience related to the triggered condition and their teamwork skills. Each member should have
adequate training in the RCA methodology utilized, before the RCA is launched.

3.5 Recovery Plan Execution
The methodology used to conduct the RCA and the execution of all subsequent action items shall
follow the requirements of the RCA Standard (STD0009), including an action plan sufficiently
comprehensive to mitigate or eliminate the root cause(s). The tools employed in the execution of
the RCA should vary in robustness and scope in relation to the complexity of the triggering event or
condition.

3.6 Recovery Plan Status Reporting
Status reports throughout the Recovery Plan process shall be prepared, updated monthly and
included in the monthly report that the business submits to the SBU AM Program Leader.

The completed RCA shall be preserved at the business, with copies sent to the business RCA
Champion and SBU AM Program Leader.

If the triggered condition does not require a formal RCA, a report outlining the disposition of the
Recovery Plan process will be provided to the SBU AM Program Leader by a designated member of
the Business Leadership Team.

The SBU AM Program Leader will provide Recovery Plan information to the SBU Leadership, as
requested.

154
4. References

4.1 Recovery Plan Flowchart

Leadership Team
initiates Recovery Plan process
Does Rec. Plan
require RCA?
Complete
RCA using
appropriate tools

Implement solutions
Communicate
the report
Monitor
effectiveness
Solutions
Effective?
Final report
update
End
Notify SBU AM
Program Leader
Yes
No
No
Yes
NOTE: APEX methods, tools & facilitation skills
can be applied throughout this process.

Recovery Plan Flowchart
Has a Triggering
Event occurred?
Yes
No
End
Communicate
the report

End
Actual results compared to Performance
Targets

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4.2 Recovery Plan Trigger Criteria Template
NOTE: Answer "Yes" if condition has existed at least three consecutive months or is expected to last
at least three consecutive months
Step Condition Action/Response
1 Review the following triggers (a. through e. below) If any of the conditions exist, go
to Step 2; otherwise, stop.
a. Actual YTD EBITDA is unfavorable to Budgeted YTD
EBITDA by the greater of $ X million or X % of Annual
Budgeted EBITDA
YES/NO
b. Actual YTD Commercial Availability is less than
Budgeted YTD Commercial Availability by more than X %
YES/NO
c. Actual YTD NFOM is more than XXX % of Budgeted YTD
NFOM, on an annualized basis
YES/NO
d. Actual YTD Net Heat Rate is greater than Budgeted YTD
Net Heat Rate by more than xxx BTU/KWh
YES/NO
e. Actual YTD EFOF is more than xxx % of Budgeted YTD
EFOF
YES/NO
2 For any Triggers to which you answered "YES", is it clear
that the condition is self-correcting (e.g. timing)?
If answer is "NO", go to Step 3;
otherwise, stop.
3 For any Triggers to which you answered "YES", is an RCA
already being conducted to address it?
If answer is "NO", go to Step 4;
otherwise, stop.
4 Initiate a Recovery Plan to address the cause of the
Trigger

Other reference materials can be found on Docushare at:

157

Information Management

STD0012

158
Contents

1. Introduction .......................................................................................................................... 159
2. Roles and responsibilities....................................................................................................... 160
3. Process .................................................................................................................................. 161
4. Appendix.............................163

1. Introduction
Information Management is defined as the organized collection, storage and use of information,
including asset information, for the benefit of a business. It is the process of moving pieces of
recorded Information from creation to consumption to retirement. Information includes all forms of
preserved communication that businesses care to produce, store, distribute and use.

Information Managers make sure that recorded communication can be amassed and distributed in a
way that benefits their businesses, so that persons working on any information-related project have
the appropriate access to complete their responsibility as quickly and accurately as possible.

A well-integrated system for the management of asset information is essential to help businesses
effectively, efficiently and sustainably monitor and control asset performance over the asset life
cycle.

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roles.

Information Management
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Identify AM Information needed to meet AM Strategy, Objectives
and Plan(s)
C/I R/A C C C
Assure quality of Information supports AM activities and decisions C/I A R I R
Design and implement an AM Information System I A R I C
Maintain the AM Information System C R/A I C
Provide appropriate level of Information System access to
employees and other stakeholders, including contractors
C R/A I C
Ensure consistency of Information in Information systems, to the
extent more than one system exists
A R/A I C
Establish, implement and maintain all appropriate control
procedures for identified AM Information (Document Control
System)
C A R/A I I
Assure ease of access to Information for employees and other
stakeholders, including contractors (appropriate to their roles)
underall conditions, including emergencies
C R/A I C
Maintain Information stored electronically in a form that is
independent of the storage technology, is secure and backed up
C/I R/A I I
Dispose of obsolete Information or ensure against its unintended
use
C/I R/A I I
Maintain strategies and practices to transition AM Information into
Knowledge
C R/A C I C
Utilize the information in the AM Information System for all asset
management decisions
C/I R/A R/A R/A R/A
R: Who is Responsible? The person who is assigned to do the work
A: Who is Accountable? The person who makes the final decision and has ultimate ownership
C: Who is Consulted? The person who must be consulted before a decision or action is taken
I: Who is Informed? The person who must be informed that a decision or action has been taken
SBU level staff
Plant/Business staff
Other Business staff

161
3. Process
3.1 Identification
Businesses shall identify the asset management information they need to meet the requirements of
their Asset Management Strategy, Objectives and Plan(s), considering all phases of the asset life
cycle. The information shall be of a quality appropriate to the asset management decisions and
activities they support, including the continuous improvement process.

3.2 System
Businesses shall design, implement and maintain a system or systems for managing asset
management information used to support operational, EH&S, legal and regulatory requirements.
Employees and other stakeholders, including contract service providers, shall have access to system
information relevant to their asset management activities or responsibilities. If separate asset
information systems exist, the business shall ensure that the information provided by these systems
is consistent.

3.3 Control
Businesses shall establish, implement and maintain procedures for controlling all identified
information throughout the life cycle of assets and asset systems utilizing a Document Control
System. The Document Control System shall ensure:
i. The adequacy of the information is approved by authorized personnel prior to use;
ii. Information is maintained and adequacy and confidentiality are assured, through periodic
review and revision (including version control, security/cyber-security and legal review);
iii. Appropriate roles, responsibilities and authorities are identified, regarding the origination,
generation, capture, maintenance, assurance, transmission, rights of access, retention,
archiving and disposal of items;
iv. Obsolete information is promptly removed from all points of issue and release, or otherwise
assured against unintended use;
v. Archival information retained for legal or knowledge preservation is identified;
vi. Information is safe and secure (if applicable) and, if in electronic form, is backed up and can
be recovered in an emergency;
vii. Identified information gaps are addressed and corrected promptly;
viii. Subject indexing schemes, subject headings, thesauri, taxonomies and other forms of
knowledge organization systems are developed; and
ix. Security and confidentiality requirements are considered prior to transmission of
information.

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3.4 Information Types/Systems
Information covered under this Standard shall include all types of information needed to effectively
optimize current and future asset management decisions. Information Systems shall be selected that
safely and effectively handle asset information. Examples of the types of information and systems
are listed in the Appendix.

3.5 Accessibility
The system(s) for storing and accessing information shall be easily available to all employees and
other stakeholders (appropriate to their roles) under all conditions, including emergencies.

3.6 Continuity
The business shall maintain electronic information in such a way that the information will continue to
be available, as needed, despite changes in digital storage technology.

3.7 Knowledge Management
The business shall maintain strategies and practices used to identify, create, represent, distribute,
and enable transition of information into knowledge.

3.8 Utilization
All employees and other stakeholders, including contract service providers, involved in some function
of the management of assets at the business, shall utilize the System to access, input, update and/or
dispose of all asset-related information. All information-related decisions made regarding asset
management shall be based on information contained in the information management system.

163
4. Appendix
4.1 Information types
Examples of the types of information contained in an Information Management System(s):
i. Standards, Plans, Strategies, Objectives, Processes, Policies and Procedures;
ii. Asset descriptions, such as function, drawings, ID numbers, physical location, and criticality
level;
iii. Condition and Performance targets or standards;
iv. Asset condition data;
v. Performance reports;
vi. Reliability assessments;
vii. FMEA or MTA reports;
viii. RCA reports;
ix. Recovery Plan reports;
x. Risk Assessment reports;
xi. Peer Review/Audit reports;
xii. MOC reports;
xiii. Capital project reports,
xiv. Operating and Maintenance manuals; Technical instructions;
xv. Regulatory and Statutory information;
xvi. Training records;
xvii. Contracts and Licenses;
xviii. EH&S procedures; and
xix. MSDS.

4.2 Information Management Systems
Examples of the types of systems utilized for the management of Information:
i. Asset Registers (SAP, Oracle or other CMMS);
ii. Document Management Systems (Docushare, SharePoint, Box, Hard-copy);
iii. Work/Program planning and scheduling (SAP, Oracle, Excel, Project, e-Mesa, Prometheus,
etc.);
iv. Purchasing/Spares/Inventory systems (SAP, Oracle, SAGE);
v. Asset Utilization (Meridium, Ivara, SAP);
vi. Performance Reporting (SAP, Oracle, BW, OSI PI, MGads, Comshare, OurAES);
vii. Geographical (GIS);
viii. SCADA;
ix. Condition Monitoring (SKF, Ivara, Local tools);
x. Automation systems Workflow tools (SAP, Meridium, Ivara, e-Mesa); and
xi. Knowledge Management (Box, Yammer, e-mail groups (HR, CFB)).

164
4.3 Best Practices
Reference documents and best practices (such as AES Tamuin Integrated Management System and
AES Tiete Information Management System) can be found in Docushare at:

166

Continuous Improvement

STD0013

167
Contents

1. Introduction .......................................................................................................................... 168
3. Process .................................................................................................................................. 170
4. Appendix....174

168
1. Introduction
Continuous Improvement is the use of a structured problem solving process and associated
techniques to address asset-related problems and performance gaps, by finding the root cause,
selecting appropriate solutions, monitoring them and if successful, rolling them out to other similar
areas.
This process applies to both day-to-day problem solving and more substantial improvement projects.

169
roles.

170
3. Process
Businesses shall establish, implement and maintain process(es) and/or procedure(s) for identifying
opportunities and assessing, prioritizing and implementing actions to achieve continuous
improvement in:
i. The optimal combination of costs, asset-related risks and the performance and condition of
assets and asset systems across the entire life cycle; and
ii. The performance of the Asset Management System.

Businesses shall actively seek and acquire knowledge about new AM-related technology and
practices, including new tools and techniques, through innovation, technical excellence and
development of sustainable practices. These initiatives shall be evaluated to establish their potential
benefit to the business and the ability to leverage the benefits at other businesses.

3.1 Activities
Improvement activities focus on the Asset Management Strategy and KPIs. Cross-functional meetings
review daily performance, make plans and trigger corrective actions. Improvement projects are
launched with feedback to Asset Management stakeholders. Data, knowledge and history are used to
guide root cause analysis. Improvement actions are followed up and results verified.

3.2 Areas of Focus
Businesses shall focus all improvement activities to ensure alignment with their overall asset
management objectives and concentrate efforts where they will have the biggest effect. The Asset
Management Policy, Strategy, Objectives/Plans are used to define focus areas:
i. Operations and AM Staff organizations have common Asset Management objectives and
KPIs;
ii. Asset-related losses are understood and broadly quantified;
iii. Short and medium term improvement focus areas and initiatives are defined; and
iv. Agreed-to focus areas are used to prioritize daily problem solving activities.

3.3 Routine Management Systems
Businesses holding daily cross-functional meetings shall review asset performance over the past 24
hours with front line personnel.
Regular meetings shall be held to plan maintenance activities that solve both strategic and tactical
operational problems.

171
Performance threshold levels shall be used to trigger further investigation and problem solving, if
required.

3.4 Improvement Projects
Businesses shall create formal teams to drive Asset Management project improvement initiatives:
i. Improvement projects are identified in the Asset Management Strategy;
ii. Responsibility is given to an appropriate leader and cross-functional team;
iii. A specific scope, improvement targets and deadlines exist for each project; and
iv. Project Team Leaders report progress regularly to the Business Leader.

3.5 Solving Problems
Businesses shall employ the structured use of formal methods and tools and, whenever possible,
data and facts (e.g. APEX) during the problem solving process, rather than relying solely on opinions,
intuition, tribal knowledge or perceptions.
Think APEX Connect. Create. Commit. Innovate

172

3.6 Root Cause Analysis
Businesses shall utilize a suite of different analytical techniques to find the root causes of problems,
based on the complexity and threshold level of the triggering event or condition, before proposing
any solutions or jumping to conclusions.
All business persons engaged in formal problem solving, including technicians, should be trained in
Root Cause Analysis techniques.
For more detailed process information, refer to the Root Cause Analysis Standard (STD0009) and the
APEX website:
(https://www.ouraes.com/AES/index?page=organization&channel=GROUPS_AND_PROGRAMS&type
=companywide_programs&cat=DC_APEX

3.7 Improvement Actions
Improvement actions:
i. shall be evaluated based on costs vs. benefits, risks and strategy alignment;
ii. shall be formally monitored to completion; and
iii. if successful, shall be built into SOPs, plans and training.

173

3.8 Results and Benefits
Businesses shall identify and monitor key performance indicators to confirm that problem solving
exercises were successful and achieved the desired results.
Benefits shall be monitored by teams at operational, tactical and strategic levels, based on a wide set
of KPIs that align vertically from the team level to the corporate level.
KPI performance against targets shall be routinely monitored to confirm sustainability.

174
4. Appendices
4.1 Best Practices
Improvement activities are pro-active and anticipate problems, rather than react to them,
based on techniques like FMECA. Work teams suggest improvements, which are supported
by management. Statistical techniques like correlation analysis and standard deviation are
used where appropriate. Improvements are justified by a cost-benefit analysis and successful
solutions are rolled out to other areas. Performance is sustainable and exceeds industry
norms.

Focus areas are dynamically defined in line with the AM Strategy and current performance
measures:
o The AM strategy is dynamic to guide focus areas.
o Performance measures define current performance gaps.
o The organization is flexible enough to respond to changing priorities.

The daily management system is efficient and pro-active:
o Frontline teams deal with most of the problems,
o They promptly escalate solutions with cost or wider impact to management,
o Management support frontline teams with quick responses and
o Operational Performance AM Staff provide strategic direction and guidance.

Innovation projects are allocated to cross-functional teams:
o A system exists to identify potential innovation projects (e.g. automation or use of
new technology in asset care),
o Projects are selected in line with AM Policy and potential benefits,
o Cross-functional, multi-level teams are allocated to investigate these options and
o Teams report results back to top management.

Statistical techniques are used to analyze data and find correlations:
o Correlation analysis is used to link input parameters to problems,
o Statistical process control and capability studies are used to optimize process and
o Standard deviations are plotted to identify sources of variability.

FMECA is used proactively to anticipate and prevent problems:
o FMECA forms the basis of asset care plan development (e.g. RCM),
o FMECA is used for risk assessment,
o PM Analysis is used on complex and chronic problems with multiple causes and
o Root Cause Analysis with verification is cultural across the organization.

A detailed cost-benefit analysis is used to justify improvement actions:
o Improvement actions are selected based on a full cost-benefit analysis,

175
o Improvement activities are monitored during daily meetings,
o Successful solutions are rolled out to similar areas across organization and
o Formal performance improvement methods (e.g. PDCA, DMAIC) are embedded in
the organizational culture.

The benefits of improvement actions are monitored long enough to verify success:
o An AM Scorecard of improvement projects is used to measure cumulative benefits,
o Improvement actions are clearly linked to the AM Strategy and Scorecard and
o Benefits are fully sustainable and performance exceeds industry norms.

4.2 APEX Toolkit
https://www.ouraes.com/docushare/dsweb/View/Collection-419774/Document-1696098

Other reference materials can be found on Docushare at:


177

Business Continuity
Management

STD0014

178
Table of Contents

Document Overview .................................................................................................................. 179
Version Control History .............................................................................................................. 179
Purpose and Scope ................................................................................................................... 179
Framework Overview ................................................................................................................ 180
Objectives 180
High Level Approach ................................................................................................................. 180
Phase 1: Form Business Continuity Management Team .............................................................. 181
Executive Sponsor ..................................................................................................................... 181
Business Continuity Manager .................................................................................................... 181
Department Team Leaders........................................................................................................ 181
Response Coordinators ............................................................................................................. 181
Safety and Physical Security Committee .................................................................................. 182
Phase 2: Gather Basic Information ............................................................................................. 182
Phase 3: Define Business Level Strategies ................................................................................... 182
BCM Planning Scenarios ........................................................................................................... 182
Recovery Time Objectives......................................................................................................... 183
Relocation Strategy ................................................................................................................... 184
Emergency Notification Strategy ............................................................................................... 185
Ongoing Communication Strategy ............................................................................................ 185
Plan Activation and Action Plan Development Strategies ......................................................... 185
Business Level Planning Assumptions ...................................................................................... 186
Phase 4: Document Department Level Plans .............................................................................. 187
Plan Purpose, Scope, and Objectives ....................................................................................... 187
Department Level Relocation Strategy ...................................................................................... 187
Department Level Strategies ..................................................................................................... 188
Department Level Procedures ................................................................................................... 188
Department Level Planning Assumptions ................................................................................. 189
Department Level Vital Records Strategy ................................................................................. 189
Phase 5: Ongoing BCM Activities ................................................................................................ 190
Plan Maintenance ...................................................................................................................... 190
Plan Validation ........................................................................................................................... 190
Awareness Education ................................................................................................................ 191
Vendor Services ........................................................................................................................ 191

179
1. Purpose and Scope
The purpose of this document is to provide a global framework for the implementation of the AES
Business Continuity Management (BCM) program. The BCM program is designed to support the AES
mission by enhancing our global state of readiness for a disruption to business operations. The BCM
global framework was created to ensure consistency and accuracy in the development and
implementation of a readiness initiative organization-wide. All Business Continuity Plan (BCP)
documents are required to meet the readiness expectations and planning standards contained in this
document.

The scope of the AES BCM program entails critical functions within three major business categories,
as displayed in Figure 1 below:

Figure 1: BCM Business Categories

i. Generation (fuel supply, contract management, emergency response, safety, etc.)
ii. Transmission & Distribution (operation plans, energy control, fleet management, energy
coordination, environmental affairs, engineering, service dispatch, etc.)
iii. Administrative or Support Services (Information Technology, Finance, Legal, Human
Resources, etc.)

Each business category is only in-scope for an AES Business if it is relevant to the business. For
example, only the Administrative category is relevant to the AES Corporate Office, whereas all three
business categories are relevant for IPL and Sonel.

Planning that is performed as part of the BCM program should address scenarios that affect AES
capacity to operate our businesses under normal conditions. The BCM program is not intended to
address incidents that commonly occur in the course of day-to-day operations, such as storm
planning or outage management.

180
2. Framework Overview
The BCM global framework is based on a number of industry-wide recommended professional
practices and standards. The framework includes a number of standards designed to help AES
Businesses develop an appropriate organization-wide planning program to ensure that critical
operations can be continued and that AES assets are protected when significant disruptions occur.
These standards must be carefully followed during the development, implementation and ongoing
maintenance of all response, recovery, and business continuity documents and planning activities.
2.1 Objectives
The objectives of the global framework and associated standards are to:
i. Provide an organized and consolidated approach for managing response, recovery and
continuity activities following any unplanned disruption that affects AES capacity to operate
our businesses under normal conditions;
ii. Ensure the safety of our people during disruptions;
iii. Provide a prompt and appropriate response to any unplanned disruption, thereby reducing
the overall impact to AES Businesses;
iv. Recover critical business operations in a timely manner with minimal impact to the
organization;
v. Provide a systematic approach to activating and executing response, recovery, and continuity
activities; and
vi. Facilitate compliance with regulatory requirements for Business Continuity Planning,
including Disaster Recovery.
2.2 High Level Approach
The global BCM framework provides a simple approach for managing BCM program activities at AES
Businesses. Phases 1 through 4 focus on building a firm foundation for a BCM program that
continuously improves over time. Phase 5 focuses on ongoing BCM activities that will occur after
these foundational elements are in place.

1. Phase 1: Form Business Continuity Management Team
2. Phase 2: Gather Basic Information
3. Phase 3: Define Business Level Strategies
4. Phase 4: Document Department Level Plans
5. Phase 5: Ongoing BCM Activities

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3. Phase 1: Form Business Continuity Management Team
In order to manage readiness prior to, during, and after a business disruption, a BCM Team should be
formed for each AES Strategic Business Unit (SBU). At a minimum, each AES Business should assign
the following key roles and responsibilities to specific team members on their BCM Team:
3.1 Executive Sponsor
As Executive Sponsor, each SBU President supports the internal planning initiative from a
management perspective and coordinates with AES Corporate planning team members to ensure
that all planning activities are aligned with AES strategic goals and expectations.

3.2 Business Continuity Manager
The Business Continuity (BC) Manager is responsible for managing all pre-disruption activities
including working with the BCM Team to set readiness expectations and annual planning activities
for the organization.

During a disruption, the BC Manger orchestrates response and recovery activities and manages
communication and action plan recommendations with the BCM Team.

Post disruption, the BC Manager orchestrates return to normal activities including facilitating post
disruption meetings to document lessons learned to ensure the organization is returned to a ready
state.

3.3 Department Team Leaders
Department Team Leaders (DTLs) fill a similar role to the BC Manager, however within their assigned
department. They ensure that a Department Response Team is assigned and that plans are created
and maintained based on the standards included in this document. DTLs sometimes have dual roles
to play as both a Department Team Leader and on the BCMT as an advisor, providing planning
activity recommendations from their departments perspective.

3.4 Sourcing Lead
Business Sourcing Lead is involved in preparing for emergency and /or procuring
materials/PPE/services in case of event. Business Sourcing Team should also have a formal
Contingency Plan as per business requirements.

3.5 Response Coordinators

182
Response Coordinators (RCs) are individuals assigned to a Department Response Team who are
responsible for creating and executing response, recovery and business (or more specifically
department) continuity for their assigned core functions.

3.6 Safety and Physical Security Committee
A Safety and Physical Security Committee must be established so that published safety and security
procedures for building emergencies are kept current and relevant. Regular drills must be performed
and results documented.

4. Phase 2: Gather Basic Information
In order to ensure that basic information is available in the event of a business disruption, each AES
Business should gather and document the following information:
i. Facility addresses and departments;
ii. Employee contact information;
iii. Vendor contact information;
iv. Key documentation (electronic and hard copy); and
v. Minimum recovery resources (computers, phones, fax machines, printers, furniture, etc.)
needed to operate at an alternate location.

5. Phase 3: Define Business Level Strategies
Business level strategies, which apply across an AES Business and are not specific to any one
department or function, will vary based on the severity level of a specific business disruption or
scenario.
5.1 BCM Planning Scenarios
The BCM planning scenarios displayed in Table 1 will affect AES capacity to operate our businesses
under normal conditions.

# Scenario Description
1 Critical work location is open, but AES people are unable to physically
get there (due to weather-related road closures)

2 Critical work location is inaccessible (due to fire or local disaster)
For 5-30 working days
For up to 6 months

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# Scenario Description
3 Critical work location is destroyed permanently (including the AES
people) or over 90% of the AES people do not have power or access
to the Internet (due to natural disaster)

4 Control system is compromised in a cyber attack
** This scenario only applies to AES Businesses with Generation or
T&D operations. **

Table 1: BCM Planning Scenarios

Each of these scenarios will require a different level of response, recovery, and business continuity
activities in order to ensure a successful recovery effort. AES Businesses should use these planning
scenarios as the basis for defining business level strategies for disruptions of varying severity levels.
Since it is impossible to predict the specific circumstances surrounding a potential business
disruption, these planning scenarios are designed to be thought-provoking and useful for
brainstorming purposes. The scenarios will foster discussions that will enable the each Business to
respond to a large number of possible disruptions without creating a separate plan for each risk
issue.

These four planning scenarios should serve as the basis for defining the following business level
strategies, each of which is described in additional detail in the sections that follow:
i. Recovery Time Objectives (RTOs);
ii. Relocation Strategy;
iii. Emergency Notification Strategy;
iv. Ongoing Communication Strategy; and
v. Plan Activation and Action Plan Development Strategies.

5.2 Recovery Time Objectives
An RTO is a duration of time within which an operation or function must be restored (after a
disruption) to avoid unacceptable consequences associated with the disruption. RTOs are the
primary measure of plan effectiveness. RTOs allow us to manage activities in an organized manner to
increase the safety of our people while reducing the impacts to the Business and thus our customers.
In addition, when plans are tested, the RTO provides a tangible measure of how effective a plans
strategies and procedures are likely to be when the plan is activated.

Each AES Business should define a general RTO for each key operation for each of the above planning
scenarios. Department level teams will then work to create their own strategies for their assigned
functions, using these general timeframes as a minimum requirement. To determine an appropriate
RTO, the following factors should be considered:

184
i. Regulatory or industry requirements for readiness;
ii. Distinguishing between what can be done versus what should be done; and
iii. Downtime tolerances (amount of time the Business can tolerate having no access to a
facility, function, or support service).

5.3 Relocation Strategy
Each AES Business should document a business level strategy for designating a Temporary Work
Location and an Alternate Work Location.
5.3.1 Temporary Work Location
Identify a location that can be used to organize recovery activities, develop action plans, and perform
critical functions for as few as five days and up to six months. The Temporary Work Location may
also be used as an Emergency Operating Center (EOC) to orchestrate and monitor recovery activities
(damage assessment, collaborating with emergency responders, etc.). Members of Senior
Management can also use this location to meet and manage the organizations action plan when a
significant crisis (such as planning scenario 3) occurs.
5.3.2 Alternate Work Location
This part of the relocation strategy is focused on replacing facilities that have been permanently
destroyed. This may include leasing office space in another area of a city or rebuilding the damaged
location.

Additionally, the following topics should be addressed when defining the business level relocation
strategy:

i. Rally Points Designated rally points where Response Team members can meet immediately
to organize activities until either work location is ready for occupation. Consider how you will
mobilize team members and account for all personnel including guests that may be on-site
when a disruption occurs.
ii. First Responders Individuals who are expected to move to the Temporary Work Location
when notified by their BC Manager or Department Team Leader.
iii. Moving Personnel How to move personnel to a Temporary Work Location.
iv. Minimum Recovery Resource Requirements A list of required resources needed to operate
at a Temporary Work Location. Determine whether these resources can be procured quickly
or whether they should be held in inventory.
v. Returning-to-Normal Moving personnel back to a permanent location and ensuring that
operations have returned to a ready state.
vi. Readiness of Temporary Work Location Determination of whether Temporary Work
Location is ready for immediate occupation or some downtime is allowable for setup
purposes.

185
5.4 Emergency Notification Strategy
Notification of the need to activate BCPs can come at any time. Each AES Business should consider
how they will notify both members of their Business and other parties within AES. Whether a
disruption occurs during normal operating hours or at any other time, the method you choose should
be independent of existing resources such as email, cell phone, etc. Include the creation of
predefined messages that provide clear instructions on what will be communicated and at what
intervals.

5.5 On-going Communication Strategy
Not getting the right information at the right time is cited often as the most significant failure point
of a response and recovery effort. With a method for immediately notifying personnel established,
the next strategy to consider is how information will flow into, through, and out of the Business until
a normal status has been returned. For example, who will handle external communications with the
media, regulatory agencies, or the surrounding community? Who will manage the flow of
information internally based on who needs to know what and when? At the business level, the
ongoing communications strategy should focus on the boundaries of communication including what
can or cannot be said and who has authority to define the content of important information.
Consider what tools can be used for ongoing communications and include more than one form to
allow for alternate communication methods, when necessary.

5.6 Plan Activation and Action Plan Development Strategies
5.6.1 Plan Activation
A Plan Activation Strategy defines who has authority and responsibility for activating appropriate
procedures in response to a business disruption. For most Businesses, this would be the BC Manager
and his/her designated successors. This ensures a safer and more organized response. Plan
activation should function in a cascading manner so that when Department Team Members are
notified to activate their department level plans, they are able to mobilize their own personnel
ensuring a quicker response. When developing the business level strategy for plan activation,
consider the following:
i. Who has authority to activate the plan?
ii. Are there things that need to happen before plans can be activated such as moving resources
to the Temporary Work Location or conferencing with management to determine an
appropriate course of action based on the nature of the scenario?
iii. How should it be executed (i.e., what happens first, second, etc.?)
iv. Succession planning should be included to ensure that someone is always on alert including
the ability to transfer authority, especially for Senior Management, should key team
members become unavailable for any reason.

186
5.6.2 Action Plan Development
An important part of any Plan Activation Strategy is the method or way in which an appropriate
course of action is determined. There is no way to predict when a disruption will occur or the
specific nature of the scenario. Therefore each Business should consider how the right personnel will
work quickly together to reach consensus on how to respond immediately and orchestrate recovery
and continuity activities.

5.7 Business Level Planning Assumptions
All strategies for response, recovery, and business continuity have built-in assumptions. Assumptions
are statements about issues that relate to or are outside the control of the Business. This is also true
at the Department level. For example, at the Business level, senior managers will assume that each
Department has created a plan that is designed to address their assigned functions. At the
Department level, personnel will need to assume that an Emergency Notification System has been
implemented and tested at the Business level. These assumptions help define the boundaries of
responsibility. They also serve as a useful planning checklist to ensure that the organization can work
together to achieve a successful result. The following sample business level assumptions should be
considered as each AES Business documents their own assumptions:
i. Off-site storage locations for critical backup files and information are intact and accessible.
ii. A sufficient number of qualified personnel are available to perform business continuity and
recovery responsibilities.
iii. Team members are trained and have basic skills to continue performing core functions, as
documented in Business Continuity Plan procedures.
iv. IT backups are performed in accordance with documented policies.
v. Telecommunications backup and continuity strategies are fully implemented and tested.
vi. External organizations, including customers, vendors, regulatory bodies, and government
agencies, will be reasonably cooperative during a business disruption.
vii. Plan review and maintenance activities are performed.
viii. All employees are aware of their Departments response, recovery, and business continuity
strategies and procedures and will comply as directed.
ix. All team members have considered succession replacements for their position should they
become unavailable for any reason.
x. Only one company facility will be affected during a single business disruption (this may not
be a valid assumption for all AES Businesses).
xi. All documented strategies and procedures have been accepted and approved by senior
management.

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6. Phase 4: Document Department Level Plans
Using the documented Business Level Strategies as guidance, each department will identify its critical
functions (functions that must be available versus functions that can tolerate longer downtimes) and
then document a plan using the following plan development guidelines.
6.1 Plan Purpose, Scope, and Objectives
Each plan document will include a clear description of its purpose, scope, and objectives.
6.1.1 Purpose
Describe the purpose of the individual plan; for example, is it a Business Continuity Plan or an IT
Systems Recovery Plan? The goal here is to tell the reader what it is and why it has been created.
6.1.2 Scope
Define clearly what is included within the plan and what is not. For example, if the plan is a Business
Continuity Plan for the Accounting Department, the scope statement should list all critical
department functions and those functions that may be deferred until a normal status has been
declared. The document should identify any aspect of the department that may be outside the
scope of the individual document and planning effort. The goal here is to define what has and has
not been addressed in the plan.
6.1.3 Objectives
Most objectives for readiness planning are common among all plans. However, each department
plan will have its own set of specific objectives that define how its team will meet the business level
requirements for response, recovery, and business continuity. Document those objectives that are
specific to the individual department and functions.

6.2 Department Level Relocation Strategy
After reviewing the Relocation Strategy defined at the business level (including a Temporary Work
Location and an Alternate Work Location), each department should document elements of the
relocation strategy that are specific to their department, including:
i. Rally Points Designated rally points where department personnel can meet immediately to
organize activities until the temporary or alternate work location is ready for occupation.
Consider how you will mobilize team members and account for all personnel including guests
that may be on-site when a disruption occurs.
ii. First Responders Department level team members who are expected to move to the
Temporary Work Location when notified by their BC Manager or Department Team Leader.
iii. Moving Personnel How to move personnel to a Temporary Work Location.

188
iv. Minimum Recovery Resource Requirements A list of required resources needed to operate
at a Temporary Work Location. Determine whether these resources can be procured quickly
or whether they should be held in inventory.
v. Returning-to-Normal Moving personnel back to a permanent location and ensuring that
operations have returned to a ready state.

Each department level relocation strategy should operate in concert with the business level
relocation strategy.

6.3 Department Level Strategies
Strategies are the departments statements or high-level game plan for executing its objectives.
Each department should use the four BCM planning scenarios above as the basis for defining
department level strategies for disruptions of varying severity levels. Since it is impossible to predict
the specific circumstances surrounding a potential business disruption, these planning scenarios are
designed to be thought-provoking and useful for brainstorming purposes. The scenarios will foster
discussions that will enable the each department to respond to a large number of possible
disruptions without creating a separate plan for each risk issue.
6.3.1 Components of a Strategy
There are three components to an effective department level strategy, including response, recovery,
and business (or more specifically department) continuity.
i. Response strategies describe how each department will respond immediately upon
notification that a disruption has occurred. The Emergency Notification Strategy and
designated rally points defined at the business level will likely serve as guidance for the
department level response strategies.
ii. Recovery strategies focus on replacing or recreating what has been impacted. For example, if
the data in a database is corrupted, how will it be recreated or recovered? These strategies
define whether something is replaced or restored. They can also describe how something
which cannot be lost is protected, such as having a redundant data center or a backup check
printer.
iii. Continuity strategies focus on how to keep something (usually a function or process) going
while recovery occurs. For example, if IT services go down for more than 24 hours on a
payroll day, how would payroll alternatively be executed?

Each DTL will work with their assigned planning team to create, document, and validate their
response, recovery, and continuity strategies for each of their assigned critical functions.

6.4 Department Level Procedures

189
Once the department level strategies are defined, the next step is to document how the team will
execute them. These procedures are the step-by-step instructions or checklists that must be followed
when plans are activated.

This does not mean documenting job functions or day-to-day tasks. When documenting detailed
procedures, each department should consider that personnel will likely be operating differently than
normal (i.e., at an alternate location, tracking information manually for a period, only performing
critical functions, etc.). Documenting the steps that are different or outside the normal operating
status in advance will prevent the need to teach team members these steps when the plan is
activated. Documented procedures reduce the time it takes for the team to begin operating
efficiently and therefore decrease the overall impact of a business disruption.

A common assumption most department teams use when documenting their procedures is that the
people performing the response, recovery, or continuity activities are skilled at their assigned tasks.
This eliminates the need to document every task in a process or function and instead focuses on how
skilled personnel will perform the process or function in a different location and even without some
key resources.

6.5 Department Level Planning Assumptions
After reviewing the Planning Assumptions defined at the business level, each department should
document assumptions that are specific to their department, such as:
i. IT services will be restored based on the established RTOs and Recovery Point Objectives
(RPOs);
ii. The departments minimum recovery resource requirements have been approved and will be
available at the Temporary and/or Alternate Work Locations; and
iii. Department personnel will follow strategies and procedures as documented.

The department level assumptions should operate in concert with the business level assumptions.

6.6 Department Level Vital Records Strategy
A strategy for protecting and recreating vital record information identified as unrecoverable must be
included in each Business Continuity Plan. Each department should first identify all vital records in
their areas and then determine whether they are easily recoverable or required in order to perform
critical functions. Examples of vital records include:
i. Manuals;
ii. Original signature documents;
iii. Archived records stored in file cabinets;
iv. Contracts; and
v. Insurance information.

190

7. Phase 5: On-going BCM Activities
The first four phases of the BCM Global Framework focus on building foundational elements of a
BCM program at AES Businesses. Phase 5 focuses on ongoing BCM activities that will occur after
these foundational elements are in place.
7.1 Plan Maintenance
Each AES Business will review and update, at least annually, their BCP documents. DTLs are
responsible for updating their plan documents and gaining approval from the BC Manager. In
addition, each DTL is responsible for ensuring that all personnel within their department are aware of
and understand newly approved strategies and procedures.
7.1.1 Document Storage
Each AES Business should carefully consider where to store plan documents for easy access both on-
and off-site. A combination of electronic storage and hard copies of the plan documents should be
considered to account for a variety of potential business disruptions.
7.1.2 Document Quality Control
All planning documents should have a method or identifier for determining current versions of their
plan documents, such as the Version Control History section in this document.
7.1.3 Planning Deviation and Compliance
In order to ensure a successful recovery and the ability to continue operating with the least impact to
the organization, it is critical that all AES Businesses comply with the standards set forth in this
document. Deviation from the standards should be formally requested by emailing Ramon Eulacio
(ramon.eulacio@aes.com) and Martin Kessler (martin.kessler@aes.com).

7.2 Plan Validation
At least annually, each AES Business will select a period during which all strategies and procedures
contained in their plan documents are validated for quality and effectiveness. Validation is
performed using a variety and combination of exercise and testing methodologies including:
i. Table top exercises;
ii. Simulations;
iii. Tests; and
iv. Full Rehearsal.

Results must be documented and plans updated within a two-week period following the completion
of each exercise and/or test.

191

7.3 Awareness Education
Each AES Business will establish an Awareness Education program to ensure that all employees
understand what to expect when a business disruption occurs and their specific role. For example:

i. New Hires: New hires should be informed of response, recovery, and business continuity
expectations during the orientation process. New employees should receive and review their
departments BCP document.

ii. Existing Employees: Ongoing awareness should be maintained with communications
occurring at regular intervals. For example:
a. News about or changes to requirements for readiness are published on the AES
Businesss Intranet website.
b. During quarterly planning meetings, a variety of topics are discussed to ensure
planning objectives are being met.
c. All department level education is delivered by each Department Team Leader to
their respective employees. Both knowledge checks and signoffs are collected and
retained.

7.4 Vendor Services
The Sourcing Leader is responsible for informing any department-specific vendor or supplier of the
businesss readiness requirements and requesting that each submit a justification that their products
or services will meet these requirements.

193

Peer Review

STD0015

194
Contents

1. Introduction ..................................................................................................................... 195
2. Roles and Responsibilities ................................................................................................ 196
3. Process ............................................................................................................................ 197
3.1 Managing a Peer Review Program ............................................................................................ 197
3.2 Developing a Team Member Candidate List ............................................................................. 197
3.3 Implementing the Peer Review Program ................................................................................... 198
3.4 Initiating the Peer Review .......................................................................................................... 198
3.4.1 Establishing Initial Contact ...................................................................................... 198
3.4.2 Preparing the Peer Review Plan ............................................................................. 199
3.5 Conducting the Peer Review ..................................................................................................... 199
3.5.1 Conducting the Opening Meeting ............................................................................ 199
3.5.2 Performing Document Review ................................................................................ 199
3.5.3 Verifying Information ............................................................................................... 200
3.5.4 Preparing the Peer Review Report ......................................................................... 200
3.5.5 Conducting the Closing Meeting ............................................................................. 201
3.5.6 Communicating the Final Peer Review Report ....................................................... 201
3.5.7 Conducting Peer Review Follow-up ........................................................................ 201
4. References ....................................................................................................................... 202

195
1. Introduction
The intent of the Peer Review is to a) conduct an independent assessment of the maturity level a
business has attained implementing processes to address all Asset Management Standards, and b)
report those results. It is intended to be a true peer process, with the emphasis on sharing
information in a non-defensive way that results in maximum learning for all involved.

196
Roles shall be assigned for the responsibilities described throughout this document. The process is
not intended to change organizational structure or create additional headcount. These roles can be
assigned to the existing resources based on the individuals knowledge and skill set. Individuals can
also assume multiple roles.
business conditions. See example of RACI chart below:

197
3. Process
A Peer Review shall :
i. confirm whether the businesss Asset Management system meets the targeted AM maturity
level;
ii. assess whether or not the businesss Asset Management system is aligned with its overall
business policy, strategy, and objectives;
iii. identify any gaps and provide recommendations to achieve compliance with the targeted AM
maturity level;
iv. identify best practices to be shared with the wider AES Organization; and
v. contribute to the continuous improvement of the Asset Management system and its
performance.

3.1 Managing a Peer Review Program
The SBU Asset Management Program Leader shall ensure that the Peer Review program objectives
are established and a competent person manages the Peer Review program. The extent of a Peer
Review program should be based on the size and nature of the organization being assessed, as well
as on the nature, functionality, complexity and the level of maturity of the Asset Management
System to be audited. The SBU Asset Management Program Leader shall identify and assign Peer
Review Team Leader and Team Members whose skills match the AM standards, and shall plan for the
development and sustainability of skills-sets and knowledge within this pool of Peer Review Team
Leader and Team Members.
Priority should be given to allocating the Peer Review program resources to assess those matters of
significance within the Asset Management System.
The implementation of the Peer Review program should be monitored and measured to ensure its
objectives have been achieved. The Peer Review program results should be reviewed in order to
identify possible improvements.

3.2 Developing a Team Member Candidate List
The SBU Asset Management Program Leader shall be responsible for developing a viable list of
volunteer candidates to serve on Peer Review Teams. Candidates selected should be knowledgeable
in at least one, preferably several, of the areas covered under the Asset Management Standards.
Candidates will normally be from businesses or the Operational Performance (AM) group. The Asset
Management Program Leader should also solicit volunteers from the other SBUs to offer the
opportunity for good cross-pollination of ideas.

198
3.3 Implementing the Peer Review Program
The SBU Asset Management Program Leader shall implement the Peer Review program by means of
the following:
i. communicating the pertinent parts of the Peer Review program, including the definition of
objectives, scope and criteria to relevant parties;
ii. communicating progress of the Peer Review program periodically;
iii. coordinating and scheduling assessments and other activities relevant to the Peer Review
program;
iv. ensuring the selection of Peer Review teams with the necessary competence;
v. providing necessary resources to the Peer Review teams;
vi. ensuring the conduct of Peer Reviews in accordance with the Peer Review standard; and
vii. ensuring that Peer Review activities are recorded and records are properly managed and
maintained.

3.4 Initiating the Peer Review
3.4.1 Establishing Initial Contact
The initial contact with the business for the performance of the Peer Review can be informal or
formal and shall be made by the Peer Review Team Leader. The purposes of the initial contact are
the following:
i. establish communications with the business representatives;
ii. confirm the intent to conduct the Peer Review;
iii. provide the Business Leader with a self-assessment protocol to fill out, with due date, if the
business has not completed one in the past six months;
iv. provide information on the Peer Review objectives, scope, methods and Peer Review team
composition, including technical experts and request access to relevant documents and
records for planning purposes;
v. determine applicable legal and contractual requirements and other requirements relevant to
the activities and products of the business;
vi. confirm the agreement with the business regarding the extent of the disclosure and the
treatment of confidential information;
vii. make arrangements for the Peer Review including scheduling the dates;
viii. determine any location-specific requirements for access, security, health and safety or other;
ix. agree on the participation of key individuals at the business, knowledgeable in all the areas
under review; and
x. determine any areas of interest or concern to the business in relation to the specific Peer
Review.

199
3.4.2 Preparing the Peer Review Plan
The Peer Review Team Leader shall prepare a Peer Review plan based on the information contained
in this Peer Review standard, in the self-assessment protocols, and any other relevant
documentation provided by the business. The Peer Review plan shall:
i. identify the Peer Review Team members;
ii. consider the effect of the Peer Review activities on the business;
iii. provide the basis for the agreement between the business and the Peer Review Team
regarding the scope and performance of the Peer Review; and
iv. facilitate the efficient scheduling and coordination of the Peer Review activities in order to
achieve the objectives effectively.

3.5 Conducting the Peer Review
The Peer Review Team members should be afforded relatively unencumbered access to all business
areas. It is desirable that a tour of the facilities be arranged early on the first day of the review.

3.5.1 Conducting the Opening Meeting
The purpose of the opening meeting is to:
i. confirm the agreement of all parties to the Peer Review plan;
ii. introduce the Peer Review Team; and
iii. ensure that all planned Peer Review activities can be performed.
An opening meeting shall be held with the Business Leader and those responsible for the functions or
processes to be assessed. During the meeting, an opportunity to ask questions shall be provided.
The degree of detail should be consistent with the familiarity of the business with the Peer Review
process. In many instances, e.g. Peer Review in a small organization, the opening meeting may simply
consist of communicating that a Peer Review is being conducted and explaining the nature of the
Peer Review.
For other assessment situations, the meeting may be formal and records of attendance should be
kept. The meeting shall be chaired by the Peer Review Team Leader.

3.5.2 Performing Document Review
The Peer Review Team Leader and Peer Review Team members shall review the self-assessment
protocols and any other relevant documentation provided by the business ahead of and during the
Peer Review.

200
The business relevant documentation shall be reviewed to:
i. determine the conformity of the Asset Management System, as far as documented, with the
assessment criteria, and
ii. gather information to support the Peer Review activities.

The document and supporting data review may be combined with the other Peer Review activities
and may continue throughout the Peer Review, providing this is not detrimental to the effectiveness
of the conduct of the Peer Review. In order to effectively manage the duration of the Peer Review,
several coincident sessions may be held, matching Team Members and business people on the
standards within their levels of expertise.

3.5.3 Verifying Information
During the Peer Review, supporting data relevant to the Peer Review objectives, scope and
assessment criteria (including information relating to interfaces between functions, activities and
processes) shall be gathered by means of appropriate sampling, and shall be reviewed with the
business to assess the level of maturity. Only information that is verifiable should be accepted as
supporting data, and such supporting data leading to a Peer Review finding shall be documented. If,
during the collection of supporting data, the Peer Review Team becomes aware of any new or
changed circumstances or risks, these shall be addressed by the Peer Review Team accordingly.

3.5.4 Preparing the Peer Review Report
The Peer Review team shall:
i. Prepare Peer Review findings: Supporting data shall be evaluated against the assessment
criteria in order to determine Peer Review findings. Peer Review findings shall indicate
conformity or nonconformity with assessment criteria, and record supporting data for each.
Individual Peer Review findings should include good practices and opportunities for
improvement;
ii. Prepare Peer Review conclusions: The Peer Review team shall confer prior to the closing
meeting in order to a) review the Peer Review findings, and any other appropriate
information collected during the Peer Review, against the Peer Review objectives, and b)
agree on the Peer Review conclusions, taking into account the uncertainty inherent in the
Peer Review process; and
iii. Prepare recommendations to close identified gaps.

The draft Peer Review report shall include the findings, conclusions and recommendations, and be
presented to the business at the closing meeting.

201
3.5.5 Conducting the Closing Meeting
A closing meeting, facilitated by the Peer Review Team Leader, shall be held to present the Peer
Review findings, conclusions and recommendations, in order to obtain acknowledgement that the
supporting data, findings and conclusions are accurate, and that the nonconformities are
understood. Every attempt should be made to resolve any diverging opinions concerning the Peer
Review findings, and unresolved points should be recorded.
Participants in the closing meeting should include the management of the business and those
responsible for the functions or processes which have been assessed, and may also include other
parties. If applicable, the Peer Review Team Leader should advise the business of situations
encountered during the Peer Review that may decrease the confidence that can be placed in the
relevant Peer Review conclusions. If defined in the Asset Management System or by agreement with
the business, the participants should agree on the time frame for an action plan to address Peer
Review findings.
A final Peer Review report shall be prepared, taking into account the observations and comments of
the business during the closing meeting. The Peer Review Team Leader and Business Leader shall
agree to a deadline for completion of the final Peer Review report.

3.5.6 Communicating the Final Peer Review Report
The final Peer Review report shall be delivered to the Business Leader and SBU Asset Management
Program Leader expeditiously. If it is delayed, the reasons should be communicated. The final Peer
Review report should be dated, reviewed and approved, as appropriate, in accordance with audit
program procedures. The Peer Review report should then be distributed to the recipients as defined
in the Peer Review plan.

3.5.7 Conducting Peer Review Follow-up
The business is expected to implement the recommendations stated in the final Peer Review report.
The SBU Asset Management Program Leader will provide oversight to the business to implement the
recommendations. As appropriate, the business should keep the SBU Asset Management Program
Leader informed of the status of these actions. The completion and effectiveness of these actions
should be verified by the SBU Asset Management Program Leader.
The SBU Asset Management Program Leader shall share better practices, useful information,
documentation and templates to the Asset Management community (possibly via Docushare).

202
4. References
Examples of a Peer Review process document and Peer review Protocol format can be found under
the Docushare folder:

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