Risk management in water and wastewater utilities

Prof. Simon Pollard

Centre for Water ScienceCranfield University, UKs.pollard@cranfield.ac.uk

Presented at the LNECRisk Management in Civil EngineeringAdvanced Course, November, 2008

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

Safe drinking water - a public healthservice

© United Water (Suez), Hoboken water service, US

0

5

10

15

20

25

30

0 1 2 3 4 5 6

log10removal for particles (>3 m)

freq

uen

cy

1.96-log

1.78-log

log 2.7-log

Distribution of particle removals by 67 surface water treatmentplants

Bad daysand by-pass

(after LeChevallier & Norton 1995; Gale 2001)

Values turn out to be critical

Capital investment

A 2 stage investment

process

Shareholders (and others)invest in company

Company invests inportfolio 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)

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

XStart point

Time

Con

dit

ion

Inspect

Assessment of residual life (tr)

Remaining useful life (tU)

Inspection interval (tI) 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

marg

inal

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?

20-30%Metrics for managerial resilience

• Safety ‘climate surveys’• Upward appraisal on safety • Situational judgement interviewsAccident

causation

Human factors

Safety culture

Operator error

Technical factors

+=

80-70%

~ 80% ~ 20%

Accidents and safety culture

(after Flin, 2005)

Well #5

Farm

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)

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)

• 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

INCIDENT OCCURS

inadequate training

poor communication of importance of chlorine residual

absence of near miss reporting

rapid deterioration in raw water quality

loss of chlorine residual

operational procedures absent

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?

1

2

3

4

5 SRP

ERAC

RA

RBDM

RR

RM IRM

SCRM

CRM

E&T

RKM

Class Processes

Core Strategic 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)

Supporting

Supply chain risk management (SCRM)

Change risk management (CRM)

Long-term

Education and training in risk management (E&T)

Risk knowledge management (RKM)

Risk knowledge management andsupply chain risk management

Improving

How good are we, really, at preventatively managing risk?

(MacGillivray et al., 2007a, b)

Data Evidence

Information

Knowledge

simulations/ analysesexperimentstests & observationsmonitoring operationsbenchmarking

Decision making

Observation, reflection,and analysis

Justification

of decision

s

Organisational learning

‘Lessons Learnt’

knowledge base

input

The learningorganisation

Symbols• Risk management logo

•Management involvement inincident 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)

‘Culturalitems’

Getting the risk culture,Getting the culture right

Opportunities

Loss (€)

Implementation (years)

Safety culture: factor of 5-10improvement demonstrated

Risk management culture:additional factor of 3-5 believed

€ € € €

€

☺

☺

0 5 10

☺

Risk mature, self learning organisations

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.

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?

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 level1 2 3 4 5

Future focus

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

“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

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-91168-02/07-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): 105-123

Pollard, S.J.T. (ed.) (2008) Risk management for water and wastewater utilities, IWA Publishing, London, 175pp.