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Risk management in water and wastewater utilities Prof. Simon Pollard Centre for Water Science Cranfield University, UK Presented.

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Presentation on theme: "Risk management in water and wastewater utilities Prof. Simon Pollard Centre for Water Science Cranfield University, UK Presented."— Presentation transcript:

1 Risk management in water and wastewater utilities Prof. Simon Pollard Centre for Water Science Cranfield University, UK Presented at the LNEC Risk Management in Civil Engineering Advanced Course, November, 2008

2 Context Growth in enterprise risk management since 1990’s Paradox of ‘putting assets at risk to protect public health’ Nagging prevalence of water quality incidents Stakeholder society has meant a re-interpretation of the ‘licence to operate’ (confidence) Risk, innovation and opportunity Rediscover our sector’s ‘basic assumption’ (why we are in business) – the Bonn Charter

3 Safe drinking water - a public health service © United Water (Suez), Hoboken water service, US

4 log 10 removal for particles (>3  m) frequency 1.96-log 1.78-log  log 2.7-log Distribution of particle removals by 67 surface water treatment plants Bad days and by-pass (after LeChevallier & Norton 1995; Gale 2001)

5 Values turn out to be critical

6 Capital investment A 2 stage investment process Shareholders (and others) invest in company Company invests in portfolio of projects In a perfectly competitive market the portfolio of projects achieves exactly the return demanded by shareholders and other sources of finance; i.e. no value is created (adapted from Srikanthan, 2007)

7 Business reality Reduced risk more than return Shareholder’s risk/return line Increase return more than risk Any strategy that moves below the line, reduces shareholder value Risk Return  X Start point 

8 Time Condition Inspect Assessment of residual life (t r ) Remaining useful life (t U ) Inspection interval (t I ) depends on: Current condition – condition assessment Rate of deterioration – time to failure Condition threshold - criticality Projected Good Poor Observed ‘Condition threshold’ varies depends on criticality The ‘well-being’ of assets

9 marginal Healthy (assets, organisations, teams, individuals) failed Retain organisation redundancy if moving to ‘lean’ Reduce costs, more efficient The danger is one of becoming failure tolerant. This not only increases failures, but makes them acceptable. Before you go here, have you shared your appetite for risk?

10 20-30% Metrics for managerial resilience Safety ‘climate surveys’ Upward appraisal on safety Situational judgement interviews Accident causation Human factors Safety culture Operator error Technical factors += 80-70% ~ 80%~ 20% Accidents and safety culture (after Flin, 2005)

11 Well #5 Farm  Manure contamination (i.e. chlorine demand) overwhelmed chlorine dose, eliminating any effective disinfection  Chlorine residual was the only “real time” measure in place to detect organic contamination chlorine residual = chlorine dose – chlorine demand  Heavy rains washed manure from barnyard into Well by penetration of the shallow soil cover  Well 5 was being operated with a chlorine dose below 0.5 mg/L, despite a requirement to keep chlorine residual above 0.5 mg/L What Happened at Well 5, Walkerton, Ontario? (Hrudey, 2006)

12 Widespread illness began to emerge on May 18, with ~20 children absent from school and 2 children admitted to Owen Sound Hospital, ~65 km away, with bloody diarrhea On May 19 a GI outbreak was evident in a retirement home, the Walkerton Hospital was overwhelmed with sick people and an investigation was launched by the local health unit suspecting a foodborne outbreak May 2000 Walkerton, Ontario (Hrudey, 2006)

13 7 people died from this outbreak Mary Rose Raymond, a 2.5 year old, died on Tuesday, May 23. She came from a nearby town to Walkerton for Mothers Day and drank only 1 glass of water An estimated 2,300 individuals were ill with gastroenteritis (half the town’s population) 65 patients were hospitalized 27 developed haemolytic uremic syndrome (HUS) 52 % of HUS cases were between 1 and 4 yrs There is continuing illness in Walkerton today Consequences

14 Latent and active flaws lie dormant, or “if you don’t actively manage risk, it doesn’t go away, it just builds up”. (after Reason, 2000) How could this have happened in an affluent country?

15 ClassProcesses CoreStrategic risk planning (SRP) Establishing risk acceptance criteria (ERAC) Risk analysis (RA) Risk based decision making and review (RBDM) Risk response (RR) Risk monitoring (RM) Integrating risk management (IRM) SupportingSupply chain risk management (SCRM) Change risk management (CRM) Long-termEducation and training in risk management (E&T) Risk knowledge management (RKM) Risk knowledge management and supply chain risk management Improving How good are we, really, at preventatively managing risk? (MacGillivray et al., 2007a, b)

16 DataEvidence Information Knowledg e simulations/ analyses experiments tests & observations monitoring operations benchmarking Decision making Observation, reflection, and analysis Justification of decisions Organisational learning ‘Lessons Learnt’ knowledge base input The learning organisation

17 Symbols Risk management logo Management involvement in incident response Cleanliness of assets Management performance measured Power structure Reporting to a CEO led steering group Decisions not solely cost- based Dissenting voices heard and deference to expertise Rituals & routines High quality staff released to the project Promotions on return to main business Risk becomes ‘business as usual’ Organisational structure Specialist risk team Group risk manager ‘Getting started’ on the risk management journey Control systems Training programme for operational staff Awareness programme or company wide IT system No blame attributed to reported incidents or near misses Risk culture Open risk reporting Proactive approach to risk Risk taking and its rewards ‘7 habits’ of good risk management Explaining ‘why’ manage risk Stories Cataloguing major incidents from the past Demonstrating the value of risk management Graphics/pictures Risks taken that paid off (after Johnson, 1992; Content, 2005) ‘Cultural items’ Getting the risk culture, Getting the culture right

18 Opportunities Loss ( € ) Implementation (years) Safety culture: factor of 5-10 improvement demonstrated Risk management culture: additional factor of 3-5 believed € € € ☺ ☺ ☺ Risk mature, self learning organisations

19 Lessons from safety cultures Contributory preconditions: - A combination of factors, each of which would be unlikely, singly, to defeat the system. Incubation period: - A period of time between the first fault initiation and the failure during which time communication problems and noise can blend with signals to mask warnings. - Concealed faults, incidents or partially understood events build up in a way at odds with existing beliefs and norms. Precipitating event - A catalyst without which the event would not occur at that time and location.

20 Four key themes: (i)preventing harm to people, property or the environment; (ii)operating core processes at the required capacity - this time, next time and every time; (iii) minimizing the number of errors per unit of activity; (iv) consistently meeting social and political demands for performance – leadership and committment. Can the water sector become a high reliability sector?

21 Risk management process Strategic risk planning Establishing risk acceptance criteria Risk analysis Risk based decision making and review Risk response Risk monitoring and feedback Integrating risk management Supply chain risk management Change management Education and training in risk management Risk knowledge management Risk capability maturity level Future focus

22 Summary Risk – integrated, holistic and concerned with opportunities, whilst not losing sight of the ‘basic assumption’ – public health protection Vigilance is a key ‘cultural item’ Managing risk knowledge is critical to becoming a learning, high reliability organisation The new IWA Bonn Network as one vehicle to assist this – a one-stop shop, focused on better risk management for safe drinking water

23 “Risk analysis tools, risk management frameworks, risk champions, risk matrices and risk committees are important organisational commitments … … but alone, they are not enough to secure a risk management culture within an organisation”. Conclusion

24 References Pollard, S., et al. (2007) Risk analysis strategies for credible and defensible utility decisions, Awwa Research Foundation Research Report 91168, Denver, CO, Ref 1P-3.25C /07-NH, 88pp. B.H. MacGillivray, J.V. Sharp, J.E. Strutt, P.D. Hamilton and S.J.T Pollard (2007) Benchmarking risk management within the international water utility sector. Part II: a survey of eight water utilities, J. Risk Research 10(1): Pollard, S.J.T. (ed.) (2008) Risk management for water and wastewater utilities, IWA Publishing, London, 175pp.


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