Rediscovering Risk Management

Content Table

• Risk Management for Water and Wastewater Utilities
• Risk Management Initiatives
• Conclusion
• Resources
• References
• Links
• Related Articles

Risk Management for Water and Wastewater Utilities

Managing risk is the central imperative for water and wastewater service providers, because their business is at heart a public health and environmental protection service. The key operational paradox is that in delivering this goal, we operate and therefore put at risk physical assets in order to deliver effective water and wastewater treatment.

Utility managers must manage the reliability of their asset base without compromising risks to public and environmental health. Given this overriding public health imperative, this requires maintaining effective margins of safety within treatment and distributions systems in an operational context of asset maintenance and replacement.

Private sector utilities must also raise money from the capital markets for onward investment and be able to demonstrate solid returns on investment. This need to balance risk-based asset management with the delivery of safe drinking water and the protection of utility ‘licences to operate’, both in a regulatory and reputational sense, has prompted a redefinition of the utility manager’s primary role – better risk management.

The recent move, since 2000, from implicit to overt risk management within the sector is also being driven by modern risk-based regulation, investor requirements on corporate governance, by a reaffirmed commitment to the safe drinking water and sanitation agendas and by the hard lessons of recent water quality incidents and tragedies. The biosecurity agenda and with it, issues of business recovery and organisational resilience are providing additional impetus.

Whilst numerous tools and techniques for assessing risk are forever at hand, managing risk is, at heart, an issue of organisational and individual competence, coupled with clear accountability and active vigilance on the ground. Credible, risk-based decisions demand a wide understanding of the corporate objectives of an organisation by all employees and an ingrained commitment to managing non-negotiable risks alongside business opportunities.

The evidence for this rediscovery of risk management is present in the risk training programmes of the leading utilities, in the water safety and river basin management plans of others and an increased focus on risk-centred asset maintenance, capital prioritisation and the in-house organisation of corporate risk governance.

The leading utilities are integrating risk management across their business functions and benchmarking their implementation of risk management against ‘best in class’ competitors within and beyond the water sector. For water suppliers at the forefront of good practice, a visible corporate commitment to risk and opportunity management is critical.

There is a substantive research literature on risk analysis tools for the water and wastewater utility sector, but also a gulf between the over-sophisticated design of some tools and the institutional capacity to utilise them. For practitioners, risk tools need to be straightforward, easily communicated, integrated with other business and information technology processes, supported by skills-development and rooted in a positive organisational culture.

Further, given the extensive asset networks of the larger utilities and the tremendous volume of risk data produced by even modest asset bases, the issue of how this knowledge is managed for maximum decision-making benefit is becoming evident as utilities seek to implement and integrate their risk management processes.

Having both sectoral and ‘in house’ organisational capacity for all this activity is important, because risk and opportunity management – a core business function – cannot

be outsourced. The water and wastewater utility sector is therefore progressing a number of initiatives on risk management that include the overhaul of international guidance, undertaking practical management research and the delivery of risk tools and techniques for utility professionals.

World Health Organisation

Revision (2004) of its drinking water guidelines

Australian Drinking Water

Building on rolling revisions (1996 onwards) to the guidelines and other contributions

The WHO

In the guidelines they place explicit emphasis on catchment to tap risk management and promote ‘water safety plans’ as a basis for preventative risk management in water supply systems – in both affluent and less developed countries.

The International Water Association

Their Bonn Charter (2004) is a  universal framework that assists water suppliers in their delivery of good safe drinking water that has the trust of customers. Adoption of the Bonn Charter represents a visible commitment to risk management of water supplies and IWA, partnering with a number of first adopters, has formed a best practice network (Bonn Network, 2007) aimed at coordinating the rapidly growing portfolio of risk management tools for practitioners.

UKWIR

With respect to managing water and wastewater assets, the Common framework for capital maintenance planning (2002) is seeing wide application, alongside a growing adoption of the publicly available standard (PAS 55) on optimising the management of infrastructure assets (British Standards Institution, 2004). This is proving a valuable tool for integrating asset performance, process reliability and investment planning.

The American Water Works Association Research Foundation, The Australian Cooperative Research Centre for Water Quality and Treatment & UKWIR

Each have each published influential practical research on water quality risk management.

Cranfield University’s Centre for Water Science

The centre has been reviewing, and making recommendations on the risk analysis strategies adopted by the international water sector, in benchmarking utility risk management capabilities and advising on how water suppliers can better implement risk management.

Conclusion

The practice of risk management needs to move beyond the conceptualisation of business processes to targeted, preventative activity on the ground. Delivery will be enhanced if we avoid the failure tolerance inherent to overly ‘lean’ asset management, if we challenge the dismissal of risk management as a ‘cottage industry’ and train operational staff in risk principles and practice. In our view, it is entirely possible to balance opportunity and risk – to secure good returns on investment without compromising the central mandate of the sector, which is to proactively manage risks to public health and the environment.

About the Authors

Professor Simon Pollard (s.pollard@cranfield.ac.uk) is head of the Department of Sustainable Systems at Cranfield University, editor of Risk management for water and wastewater utilities (IWA Publishing) and principal investigator for two AwwaRF projects in water utility risk management. Roland Bradshaw is an AwwaRF-funded research engineer reviewing the asset management-public health interface and Dr Jen Smith is a RCUK Academic Fellow working in the field of water safety and international development.

Web: www.cranfield.ac.uk/sas/water/

Resources

The issues in this text are addressed in the distance learning text, Risk Management for the Water Utility Sector, published by IWA Publishing.

The text is a postgraduate primer for water professionals seeking an introduction to risk management. It includes chapters on corporate risk management, process risk analysis, risk and regulation and organisational risk management and is aimed at risk managers, process engineers, contractors and regulatory scientists.

References

Links

Simon Pollard, Risk Management for the Water Utility Sector, IWA Publishing; 2007, ISBN: 1843391376

Cranfield University’s Centre for Water Science 

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