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The use of technology to thwart a risk within an organization, whether it is related to data, the supply chain or electrical systems, is becoming easier to use and more sophisticated.
It's where risk managers choose to apply that technology that reduces a company's exposure to the risk and keeps the business running smoothly, risk consultants say. While technology won't solve every problem, consultants say it can go a long way in detecting and preventing threats that can result in expensive problems.
“The whole idea with the use of technology is to minimize significant loss potential,” said Paul Campbell, Chesterfield, Mo.-based head of the global boiler and machinery practice for Global Risk Consultants Corp. “There have been a lot of improvements in loss-control methods, particularly with machinery, where you have technology available that will warn you about how to prevent or minimize the potential for a loss...but accidents still sometimes happen.”
In early March when a data server caught fire at the University of North Carolina at Greensboro, its effects rippled throughout the institution, knocking out email, voicemail, and wired and wireless networking. While it wasn't a catastrophe, it does serve as a reminder of potential risks that can halt operations.
Electrical and mechanical outages, which can produce big losses for organizations, usually can be detected prior to the event through monitoring technology. Using a “smart sensor” system is one way of doing this, said Bill Doerr, Norwood, Mass.-based assistant vp and director of risk reliability and failure prevention with Factory Mutual Insurance Co., which does business as FM Global.
Smart sensors can be used in everyday equipment to monitor conditions such as temperature, moisture and pressure.
“Embedded sensor devices are usually in everyday use within commercial machinery providing status and diagnostic updates,” said Anand Rao, Chicago-based principal with Pricewaterhouse-Coopers L.L.P.'s Diamond Advisory Services. “They are an ever-evolving technology providing essential functions.”
An overheated server was found to be the cause of the fire at the University of North Carolina, which ultimately blew up its power supply. Using a smart sensor to monitor and report a potential problem such as the one that caused the fire is known as “condition monitoring,” Mr. Doerr said.
“Condition monitoring equipment can detect how the equipment is operating during day-to-day operations as well as emergency situations,” he said. “Condition monitoring is needed anywhere you have high values of equipment or large impacts on people or the environment.”
Another type of monitoring that can be used, particularly for companies with expansive electrical systems, is infrared thermography, which can identify areas with high heat levels and pinpoint fire and overheating risks.
Primarily used by power and utility companies, infrared thermography is gaining popularity among companies with large data centers, said Gordon W. Grail, Birmingham, Ala.-based managing consultant and head of Global Risk Consultants' IR services group.
“This is really technology that can be used by anybody or any company that has an electrical system,” Mr. Grail said. “We serve clients ranging from banks to paper mills and chain restaurants.
“In buildings, you sometimes see a big metal box that says "high voltage' and you don't ever think to look at what's going on inside there, which could be the cause of a major disaster. Through the use of IR, you might find something that doesn't cost very much money to repair, but can cause several thousands of dollars in damage” if it fails, Mr. Grail said.
Power and utility companies, which already have systems in place to prevent service interruptions, also are battling loss of data systems.
Last July, a computer worm called Stuxnet targeted Windows-based industrial software and equipment. It targeted Siemens A.G.'s supervisory control and data acquisition systems that were monitoring and controlling specific industrial processes, rather than just manipulating data like most viruses.
While much of the attack was aimed at Iranian nuclear power plants, it alerted the entire industrial industry to the hackers' abilities said Ryan Kalember, San Francisco-based director of product marketing for ArcSight L.L.C., a Hewlett-Packard Co. subsidiary that provides security compliance and management solutions.
“It was the first time that cyber crime became kinetic,” Mr. Kalember said.
Mr. Kalember said the event has caused risk managers of utility and power companies to focus more on their overall picture of risk, including their data systems, and estimate loss costs associated with a breach, which usually run into the millions of dollars.
“Most utility companies don't buy cyber insurance to protect against threats,” Mr. Kalember said. “Though some insurers have paid claims on cyber policies, utility companies still don't think of it as traditional insurance and write it off as an operating expenditure.”