Using Risk Management Processes and Tools for Strategic Planning
To manage risk or not...that’s a big question. Another is simply how do you manage risk? The reality is, every business and organization has risk exposure that they can choose to manage, or not.
Businesses face risks every day. Water and wastewater utilities are no different. Simply put, risk is the likelihood of an event occurring and the possible consequences that could result. Risk management is the practice of utilizing processes, methods and tools to identify and manage these risks. By understanding what could go wrong and having strategies in place to mitigate harmful effects, utilities can better prepare and have a cost-effective plan in place to deal with risks that arise.
Over the past decade, we’ve seen deliberate and objective risk management practices become commonplace for water and wastewater utilities. Most water utilities currently practicing asset management consider risk assessment to be a crucial activity in strategic and tactical decision making related to investing scarce resources in both existing and new assets. For example, utilities may determine a “risk score” of an asset, which involves estimating the likelihood that the asset will fail, and the consequence, often estimated in monetary terms, if it does. By developing risk scores for assets within each class of critical assets (e.g. pumps or meters), utilities can more accurately allocate maintenance and capital investment resources based on data-driven decisions. The risk assessment data additionally drives tailored maintenance, repair and replacement strategies appropriate to each asset and asset class.
While this type of risk management is focused heavily on utilities’ infrastructure assets, best practice organizations tend to manage risk in four different categories:
- Asset risk – managed with advanced asset management practices
- Project and program risk – managed using project management techniques
- Operations risk (safety, field and other day-to-day risks) – managed by line management
- Corporate risk (actions, non-actions and events that concern executives) – managed by executives
Working in partnership with Jacobs, Portland Water Bureau (PWB), one of North America's leading practitioners of asset management practices, also applies a risk management approach to develop its strategic priorities and improvement initiatives. This advanced management approach compliments PWB's successful use of risk management principles for asset funding decision-making – taking it a step further to look beyond physical assets while also managing corporate risk.
PWB identified corporate risk management as a priority strategy as part of its involvement in the Water Services Association of Australia Asset Management Benchmarking participation, which was delivered in North America by Jacobs. In establishing its corporate risk management processes, PWB studied other similar organizations to learn best practices for enlisting staff and management to identify, assess and manage corporate risks. PWB’s approach includes an extensive staff engagement process to ensure broad risk identification, as well as capacity building among staff regarding risk management. In addition, PWB has an advanced view of its social equity obligations and has incorporated equity into its risk scoring process.
Interested in learning more about how utilities like PWB are using risk management tools? Jacobs’ industry leading strategic consultants will share their knowledge and a variety of other case studies from leading utilities at the in Nashville, TN, March 5-8, 2019.
- Scott Haskins and Janeane Giarrusso will present at the workshop, “Utility Analysis and Improvement Methodology” on March 5.
- JD Solomon will present “Shaking it up: Leveraging an Innovative Board Retreat to Unify the Vision and Gain Support “on March 6.
- Liz Kelly will moderate the session, “Corporate Risk as a Mechanism for Strategic Planning” on March 7.
- Scott Haskins will share, “Other International Use of Corporate Risk for Strategic Planning” during the “Corporate Risk as a Mechanism for Strategic Planning” presentation on March 7.
- David Stejskal and Doug Cote will present, “Utility Master Planning in Historic Coastal City” on March 8.
Liz Kelly serves as Jacobs Strategic Consulting Regional Solutions Lead for Americas West. As a Senior Consultant she advises infrastructure intensive organizations on a wide range of optimization topics including asset management, risk management, project and program management, corporate culture change and leadership development. Ms. Kelly has more than 25 years of experience as a public sector leader and she is currently a member of the Council of Advisors for the Center for Sustainable Infrastructure in Washington State.
Scott Haskins is a global strategic consulting leader and consultant at Jacobs. Previously, he worked at CH2M as Director of Strategic Consulting, and before served with the City of Seattle as Deputy Director of Seattle Public Utilities. He was responsible for directing drinking water, surface water, wastewater and solid waste functions. He is active in leadership roles with water sector associations; served on the EPA’s Environmental Finance Advisory Board; and has been engaged in numerous finance, asset management, benchmarking and utility management water research projects. Mr. Haskins also is the co-author of three books and has published numerous papers and journal articles related to asset management.