FeatureRisk Management in Rail Industry

Network Rail, the manager and operator of the UK's rail infrastructure, was informed in June this year that it would have to find savings of over £2 billion over the next five years, whilst simultaneously improving punctuality.

The Office of Rail Regulation (ORR) declared that the cost cuts must not come at the expense of safety; the ORR has also outlined that at least nine out of ten trains must run on time on all routes by 2019.

The plans for 2014 -19 were set out post-examination of Network Rail's five-year business plan, which was published in January. During the period between 2014 and 2019, the ORR said the cost of running the rail network should be £21.4 billion - nearly £2.4 billion lower than proposed by Network Rail. The ORR outlined that savings would be achieved through the use of new technologies, better management and more efficient ways of working. Also provided will be additional funding to improve the condition of structures; an increased number of level crossings will be upgraded or abolished.

The ORR outlined that savings would be achieved through the use of new technologies, better management and more efficient ways of working.

Feedback from the rail industry was mixed, however train operators welcomed the announcement in principle. Rail unions have claimed that safety will be at risk due to the budget reduction. In their response, Network Rail have stated that whilst they welcome the opportunity to build on the progress and success of the last decade they believe the ORR’s proposals for this next five years are ‘unbalanced and, therefore, unrealistic’.

In their response (published on 4th September) Network Rail asked the ORR to restore £1.4 billion of the £2.4 billion savings to their budget. Outgoing Chief Executive, Sir David Higgins, said "It would be irresponsible for us not to be open and honest about the scale of the challenge that it would pose for us as an organisation".

Even if some of the regulator’s savings are relaxed they will still undoubtedly be tough to meet, illustrating the increasing pressure to instil efficiency throughout the rail sector. As a former Network Rail risk & value manager, I have become well versed with these pressures. In my new role as Risk Manager for Faithful+Gould in Scotland, my work will be informed and influenced by my experience, which has provided me with first-hand knowledge of the culture, issues and drivers in the rail industry.

The funding issue for Network Rail is just one example of a very much cost constrained industry struggling with uncertainties and operating under considerable pressure. The High Speed Two project is up against challenges, facing a shortfall of an estimated £3.3 billion which the government has yet to establish how to pay for, based on a report by the National Audit Office published in May of this year.

It is a time of uncertainty as the rail industry drives to meet increasing demand, modernise its infrastructure and operations and plan for the future, all of which have to be achieved within a tight budget. Operators are targeting improved journey times, frequency of services, disruption and less time/cost over-run of engineering works.

It is a time of uncertainty as the rail industry drives to meet increasing demand, modernise its infrastructure and operations and plan for the future, all of which have to be achieved within a tight budget.

Risk management plays an important role in meeting such challenges by driving efficiency through the following:

  • Efficiency in supply chain

  • Innovation in construction methodology

  • Combining projects to achieve resourcing synergies/efficiencies

  • Most efficient way of undertaking and managing engineering works

  • Best practice management of access to operational railways for maintenance and construction works

In summary, Faithful+Gould’s risk management services support rail clients in identifying and analysing risks associated with the delivery of engineering works, at strategic or operational level. We operate a stand-alone service, or in support of a project/programme management or cost management commission. Our in-depth knowledge of the industry enables us to supports clients' in-house teams, offer suitable staff for secondment or bespoke consultancy services as well as draw on our complimenting relationship with our parent company Atkins.

Author

Mark Warner Associate DirectorContact me

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