Risk, resilience and foresight: improved strategic planning for utilities

Transcription

1 Risk, resilience and foresight: improved strategic planning for utilities S.J.T. Pollard, S. Jude, I. Holman and E.K. Weatherhead International Water & Climate Forum, 7-9 December, 2015 San Diego, California

2 Climate change is a disruptive opportunity that should be mainstream to our long term thinking

3 The green economy landscape Pollard, S.J.T. (2015) The business of the environment. FST Journal 21(6): Investment for clean tech Regulatory design Public health & legitimacy Resilience & productivity Jobs, export, scale-up circularity Mainstreaming sustainability Infrastructure resilience & big data Decoupling growth from resource

4 Risk and adaptation challenges Emerging risks Timescales and uncertainties (e.g. extreme events) Barriers and interdependencies Policy and regulatory barriers Supply chain risks Competing business risks Adaptation investment challenges Concerns regarding maladaptation Knowledge and information gaps Behavioural change

5 Changing nature of risk governance: extrinsic, people, accountability, foresight Marsh and McLennan Companies, Water Industry Insurance and Risk Benchmarking Report, Marsh Ltd, UK, 18pp.

6 Pritchard, H. et al. (2009) Extensive dynamic thinning on the margins of the Greenland and Antarctic ice sheets, Nature 461,

7 A basic need exists for decision capabilities that consider slow burn risks IRGC Guidelines: Organisations do not have a clear baseline understanding of how climate and weather affects their operations. Risk thresholds, and the spatial distribution of risks are poorly understood.

8 Adaptive management after HM Treasury and Defra (2009) Accounting for the effects of climate change. Supplementary Green Book Guidance, 28pp.; at: system/uploads/attachment_data/file/191501/ Accounting_for_the_effects_of_climate_change.pdf Indicator value (e.g. sea level rise) Decision point based on best es1mate Recorded values of indicator Threshold value of indicator when interven1on is needed Predicted values based on rate of change (note: assumes a single future) Lead 3me for interven1on Date of review Time

9 If we got better at scenarios and at horizon-scanning, we d take measured risk with fewer regrets, instead of being paralysed by uncertainty

10 Tipping points - land use A change in whether there is sufficient rainfall for reliable crop yield and quality or not could cause sudden, large and localised increases in irriga1on water demand by hor1cultural businesses, threatening supply network capacity, whilst increased demand by upstream water abstractors could threaten resources. Current 2050s, low emissions Projected land use suitability for growing potatoes in England and Wales without irriga1on, and loca1ons of current rainfed crops (blue dots). Daccache, A., et a., (2012). Climate change and land suitability for potato production in England and Wales: impacts and adaptation. Journal of Agricultural Science 150: (2):

11 Aggregate potential vulnerability of European drinking water resources NE SW gradient Highest vulnerability in Mediterranean and NW European basins The importance of socioeconomics (especially by 2050s) and therefore need for adap1ve capacity Aggregate vulnerability score: 50% from water resources (long term & seasonality) 29% from water quality 21% from extreme events Mudgal, S. et al. (2012) Literature review on the potential Climate change effects on drinking water resources across the EU and the identification of priorities among different types of drinking water supplies, for European Commission, DG ENV, 211pp.

12 Summary: how we do business in the 21 st century Environmental governance Beyond compliance, self-regulation, sharing risk and cost Global, sustainable value chains, materials security Risk, resilience, adaptation Single-issue advocates, social media Self reliance for insurance, capital, energy Ethical standards and the well-being agenda Technology, innovation and futures Resource efficiency, material criticality, circularity Sustainability leadership

13 From risk analysis to the creation of strategic value Fraser, J. (2005) Presented at the AwwaRF international workshop Risk analysis strategies for better and more credible decision-making, Banff Centre, 6-8th April, 2005, Banff, Alberta, Canada. A set of risk management processes including risk knowledge management and supply chain risk management benchmarked at different capability levels (1-5). 1 Capabili1es are characteris1c of individuals, not of the organisa1on 2 Process established and repea1ng: reliance on people is reduced 3 Policies, processes and prac1ces defined and formalized across the organisa1on 4 Risks measured, managed and aggregated on an enterprisewide basis 5 Organisa1on focused on RM as a source of compe11ve advantage and con1nuous improvement Ini1al Established Uniform Managed Op1mizing RISK OPPORTUNITY Systema1cally build and improve risk management capabili1es Franlklin, B. (2007) Enterprise risk management: practical implementation, Aon Global Risk Consulting. MacGillivray, B.H. and Pollard, S.J.T. (2008) What can water utilities do to improve risk management within their business functions? An improved tool and application of process benchmarking, Environ. Intl. 34:

14 Sector level appraisal under the Climate Act (2008) adaptation reporting power Drew, G.H., et al. 2010) Evaluating the risk assessments of Reporting Authorities under the Climate Change Act, 2008, Report for Defra, Cranfield University, 37pp. Climate risks alongside other business risks Most organisations had to build capability Majority of reports produced in-house Use of existing corporate risk assessment methods Common failings e.g. likelihood and consequence descriptors Lack of methodological detail e.g. risk prioritisation and use of climate projections Difficulty identifying sector-level key risks

15 Resilience in the water sector will come from a fusion of innovation, risk and foresight - so long as we keep some slack in the systems familiar to us

16 Utility-level appraisal for improved strategic planning Luís, A. et al. (2015) Assessing interdependent operational, tactical and strategic risks for improved utility master plans, Water Research 74: Luís, A. et al. (2016) Evolu1on of strategic risks under future scenarios for improved u1lity master plans, Water Research 88: R I S K S & F U T U R E S Integration of two fields (risk and futures): what are the plausible scenarios that provide a wide range of situations to test my risks against? the scale to evaluate consequences, related to the strategic objectives which are set for the long-term; the dynamic evolution of strategic risks forward in time. Under financial scarcity

17 Know your system Pollard, S.J.T. et al. 2013) Risk governance: an implementation guide for water utilities, (TC4363), Water Research Foundation, Denver, Co.

18 Taking stock: adapt, mitigate, evolve Climate change, as a driver of change, is with us Uncertainty ought not be a basis for delayed decisions Knowledge about the direction of change can be a stimulus for foresight Extreme events prompt reflection on robustness, resilience, adaptation, foresight and emerging risks Systems, governance, accountability, cooperation, opportunity, foresight Can you state which of your utility s business risks that climate change will augment?

19 Reputational credit, political capital and competitive advantage The nature of climate change dictates that all businesses take ownership of climate change risks. Those that are most resilient will have an implicit lead over their competitors Confederation of British Industry Individuals, businesses, local authorities and community organisations are responsible for how climate change will affect them Department for Environment, Food and Rural Affairs

20 Acknowledgements Water Research Foundation and participating utilities, Linda Reekie City of Calgary, Rob Pritchard, Paul Fesko Yorkshire Water, David Owen EPAL, Lisbon, Ana Luís Professor Steve E. Hrudey, University of Alberta PhD students: Brian MacGillivray, Roland Bradshaw, Daniel Jalba, Craig Mauelshagen Postdocs: Paul Hamilton, Jeff Charrois, Craig Mauelshagen

21 Managing the risk pyramid in the water sector Decisions about corporate strategy and the direction of the business Tactical decisions transferring strategy into action across the business Risk governance and culture MacGillivray et al. (2007) J. Risk Research 10: 85&105 MacGillivray & Pollard (2008) Environ. Intl. 34: 1120 Summerill et al. (2010) Sci. Tot. Environ. 408: 4319 Mauelshagen et al. (2011) Intl. J. Business ConBnuity & Risk Manage. 2: 305 Summerill et al. (2011) Wat. Sci. Technol.: Water Supply 11(6): 682 Mauelshagen et al. (2013) J. Risk Research 16(9): 1187 Pahl-Wostl et al. (2011) Water Res. Man. 25: 837 Luís et al. (2015) Water. Res. 74: Behavioural & human factors Wu et al. (2009) Wat. Res. 43: 3227 French et al. (2011) Safety Sci. 49: 753 Bradshaw et al. (2011) Wat. Sci. Technol: Water Supply 11: 631 Jalba et al. (2014) Sci. Tot. Environ. 470: 934 Soane et al. (2010) Environment and Planning A 42: Birkholz et al. Science of the Total Environment (in-press) Asset management Yazdani & Jeffrey (2012) Water Res. Research. 48: 1944 Tang et al. (2013) J. Cleaner Prod. 57: 228- Long-term planning and strategy Turner et al. Urban Water (in-press) Policy and regulatory climate Jalba et al. (2010) Environ. Intl. 36: 51 Allan et al. (2013) Water Policy 15: 458 Futures and adapta3on Heath et al. (2012) Env. & UrbanisaBon 24: 619 Water safety plans Hamilton et al. (2006) Environ. Intl. 32: 958 Summerill et al. (2010) J. Water Health 8(2): 387 Parker & Summerill (2013) Waterlines 32: 11 Risk management Hrudey et al. (2006) Environ. Intl. 32: 948 Tang et al. (2013) J. Cleaner Prod. 57: 228 Front line operational decisions for implementing strategy and tactics Tools and techniques Pollard et al. (2004) Process Saf. Environ. Protect., 82: 453 MacGillivray et al. (2006) Crit. Rev. Environ. Sci. Technol. 36: 85 Gearey & Jeffrey (2010) Water & Environment J. 24: 320 Turner et al. Water Res. Research (In-press) Emerging contaminants Eduok et al. (2013) Ecotox. & Env. Safety 95: 1

22 Research solutions for resilient earth and infrastructure systems Real 3me geohazard risk mi3ga3on and response Avoiding systemic failure of cri3cal infrastructure systems Long-term protec3on of geobiophysical systems Improved or new: Observa1on & monitoring. Forecas1ng. CAT models. Evacua1on models. Mi1ga1on strategies. Decision support. Improved or new: Environmental data. Mul1-hazard models. Fragility analysis. Coupled failure modelling. Design and Reanalysis. Finance evalua1on. Improved or new: Biophysical measurement. Climate ensembles. Environmental models. Risk analysis/modelling. Mi1ga1on/policy tes1ng. Cost-benefit analysis.