OUR ASSURANCE PLAN 2018/19

Transcription

1 OUR ASSURANCE PLAN 2018/19 MARCH Our Assurance Plan 2018/19

2 ABOUT THIS DOCUMENT We publish a range of information about our services and performance, including how we are performing against the commitments we made in our business plan. This helps to provide our customers and stakeholders with assurance that we are delivering what they have told us they need and want from their water and sewerage company. It is important that we have robust assurance arrangements in place to ensure that this information is accurate, clear and transparent. This is essential to building and maintaining a high level of trust and confidence with our customers and stakeholders. Consistent with guidance from our economic regulator, Ofwat, we firstly assess any strengths, risks and weaknesses associated with either meeting our obligations and commitments, or providing information of appropriate quality. We then develop a draft Assurance Plan detailing the checks and balances we intend to put in place to address these risks and make sure we remain on track. We continue to recognise the need to engage with our customers and stakeholders to better understand the issues with regard to the information we publish and to address any concerns that they raise. In November 2017, we published our Consultation on strengths, risks and weaknesses and draft Assurance Plan, in order to seek feedback from our customers and stakeholders. In addition to publishing the main consultation we produced and published on our websites an accessible summary of the consultation. We asked whether our draft Assurance Plan was clear and what, if anything, customers and stakeholders thought was missing. Eighty one percent of respondents thought the draft Assurance Plan was clear and 86% thought that it was complete. Our consultation ended on 12 January 2018 and, our final Assurance Plan reflects feedback we received from almost 4,000 customers and stakeholders, eight times as many customers participated compared to the previous year. This document sets out NWG s Assurance Plan for 2018/19. Our Assurance Plan will be reviewed and updated every year. 2 Our Assurance Plan 2018/19

3 CONTENTS WHO WE ARE 4 OUR ASSURANCE APPROACH 9 ASSURANCE FRAMEWORK 11 OUR STRENGTHS, RISKS AND WEAKNESSES 18 OUR ASSURANCE PLAN FOR 2018/ Our Assurance Plan 2018/19

4 WHO WE ARE NWG is one of ten regulated Water and Sewerage Companies (WASCs) in England and Wales, operating in the North East of England, trading as Northumbrian Water (NW), and in the South East of England, trading as Essex & Suffolk Water (ESW). We supply water and sewerage services to just under 4.5 million people. Water is supplied to 0.8 million properties in ESW, with water and sewerage services provided to 1.3 million properties in NW. Our NW region covers the major population centres of Tyneside, Wearside and Teesside as well as the large rural areas of Northumberland and County Durham. We provide only sewerage services in Hartlepool. Our Essex area includes Chelmsford and Southend, as well as the London Boroughs of Barking, Dagenham, Havering and Redbridge. Our Suffolk area is mainly rural with the largest towns being Great Yarmouth and Lowestoft. Every day we supply 1,100 mega litres (1.1 billion litres) of water. This water is drawn from reservoirs, where it is collected and stored, rivers and groundwater sources. It is treated at our water treatment works before it is delivered by a network of pipes to homes and businesses. In the North East of England, where we also provide sewerage services, wastewater is collected from properties via the sewerage network and treated at our works before it is returned to the environment. Our water and sewerage services in the North East cost an average householder 1 per day and in Essex & Suffolk, 62p a day for a water only service. 4 Our Assurance Plan 2018/19

5 OUR VISION Our vision is to be the national leader in the provision of sustainable water and wastewater services. We continue to deliver value to customers and other stakeholders by focusing on our core competencies of water and wastewater management. OUR STRATEGIC THEMES The way we achieve our vision is determined by five strategic themes: Customer Our customer theme focuses on delivering industry-leading customer service. Our customers are at the heart of our company and we have a clear focus on getting things right first time every time. Competitiveness Competitiveness will drive us to greater efficiency and to be the most efficient water company. It is about driving costs down and using innovation to support the delivery of our activities. Environment Our environment is vitally important to all of us and we acknowledge our responsibilities to protect and enhance the natural environment. People We want to be recognised as a great place to work, where every one of our 3,000 people can feel proud and flourish in a supportive yet challenging environment. Communities Communities are important to us and we want to build strong relationships with the communities we serve. OUR OUTCOMES As part of the engagement we carried out when creating our Business Plan for , our customers and stakeholders told us what they wanted from us and what we would need to deliver to make them happy with the service they receive from us. We developed these customer requirements into statements called Outcomes. We have 12 delivery Outcomes that cover our strategic themes of customer, competitiveness and environment. We also have seven enabling and reputational Outcomes that cover our strategic themes of people and communities. Everything we do is covered by an Outcome and we have clear metrics that demonstrate how we are performing against our Outcomes. These are our measures of success (MoS). Each Outcome can have several MoS and we must, as a minimum, deliver a stable level of service for our customers; this is our performance commitment (PC). For delivering better performance we could earn a financial reward. However, poor performance means we could incur a financial penalty. These are called outcome delivery incentives, or ODIs. 5 Our Assurance Plan 2018/19

6 OUR OUTCOMES 6 Our Assurance Plan 2018/19

7 OUR VALUES As important as what we do is how we do it. Our values describe our main principles, qualities and attributes. They define who we are, what we do and how we do it. We are: Results Driven We take responsibility for achieving excellent business results. Customer Focused We aim to exceed the expectations of our internal and external customers. Ethical We are open and honest and meet our commitments with a responsible approach to the environment and our communities. Creative We continuously strive for innovative and better ways to deliver our business. One Team We work together consistently, promoting co-operation, to achieve our corporate objectives. Our values underpin our approach to delivering assurance and building trust and confidence with our customers and stakeholders. 7 Our Assurance Plan 2018/19

8 REGULATORY EXPECTATIONS Ofwat s company monitoring framework (published in June 2015) sets out how Ofwat oversees assurance arrangements across the industry. It enables Ofwat to assign each water company one of three categories of assurance: Self-Assurance Companies that, apart from the base requirements that apply to all companies, have discretion to deliver self-assurance in relation to the additional assurance arrangements they put in place. Targeted Assurance Companies that have not consistently met the high standards that customers and other stakeholders expect are subject to targeted assurance requirements, to make sure the assurance arrangements they put in place are sufficient to protect customers. Prescribed Assurance Companies that have not provided Ofwat with sufficient confidence about their ability to deliver, monitor and report performance, will have assurance requirements that are prescribed for all information that the company is required to publish, in order to protect customers. On 30 November 2017, Ofwat published the results of their 2017 Company Monitoring Framework. Ofwat stated that For a company to be assessed as self-assurance, they needed to meet expectations in most, if not all, assessments, by a clear margin with evidence of exceeding expectations and good practice to demonstrate leading-edge behaviour. We are delighted that we were assessed self-assurance. In Ofwat s recent guidance to companies in March this year, it reminded companies of their responsibility to ensure the quality of the information they provide and to remind them that they must place a high priority on the provision of accurate and high quality information to them. We assessed Northumbrian Water as self-assurance this year, having been assessed as targeted last year. It met expectations in all of our assessments, and exceeded our expectations and demonstrated good practice in two areas. It had adequately addressed the points for improvement that stakeholders had identified. We saw no evidence of behaviour that would reduce trust and confidence, and we consider that customers can consistently place confidence in the information it provides. Ofwat Company Monitoring Framework, 2017 assessment. Self-assured companies have more flexibility with their approach to providing assurance, and broadly speaking do not have to publish an Assurance Plan. We continue to take our responsibilities very seriously to ensure that our information and robust assurance processes can be relied upon. Whilst, delighted to be self-assured, we think it is important that we continue to publish our final Assurance Plan in order to be transparent and maintain confidence and trust with our customers and stakeholders. 8 Our Assurance Plan 2018/19

9 OUR ASSURANCE APPROACH 9 Our Assurance Plan 2018/19

10 OUR ASSURANCE APPROACH This section describes how our governance and assurance arrangements are used to ensure that information that we provide can be trusted. The diagram on the next page illustrates the tiers of assurance within this framework, including: Board Oversight The Board has ownership of the arrangements for governance and assurance of regulatory submissions and reporting. This is monitored and controlled through the Board s Audit Committee and Risk & Compliance Sub-committee, which report regularly to the Board.. Risk Management We use a data risk assessment, and a risks, strengths and weaknesses review, to determine levels of risk and target assurance activity. This is a robust and mature process and is embedded within the company s mature risk activity. The Board sets the tone for risk management, determines the appropriate risk appetite, monitors the management of fundamental risk and approves major decisions affecting the company s risk profile. Management Assurance Our Leadership Team implements the Board s strategies and closely monitors performance. This includes making sure sufficient and suitable resources (human and financial) are applied to scrutinise performance and identify and manage risk. It also makes sure there is appropriate assignment of responsibilities, corporate structures and reporting lines and accountabilities, supported by annual positive assurances on systems and controls. Business Assurance We have many teams that are separate from the operational activities which monitor, capture and manage the data we report, for example, Information Systems Security, and Health, Safety, Environment and Quality. Specifically this includes our Internal Audit Team. Accountable directly to the Audit Committee, the team provides strong, independent assurance. As such their remit sits across this tier and the following one. Independent Assurance Our business assurance teams are supplemented with external specialist providers where we require technical and/or external assurance. 10 Our Assurance Plan 2018/19

11 ASSURANCE FRAMEWORK BUSINESS ASSURANCE TEAMS Health, Safety, Environment and Quality Performance and Information Economic Regulation Wastewater Compliance Water Quality Business Continuity Scientific Services Accreditation Team Information Systems Security Internal Audit INDEPENDENT ASSURANCE Numerous external assurance providers including the likes of: Deloitte (financial auditor) AFNOR (external accreditation KPMG (internal audit co-source partner) External technical auditor (Business Continuity and Regulatory reporting) PA Consulting INDEPENDENT ASSURANCE BUSINESS ASSURANCE TEAMS MANAGEMENT ASSURANCE RISK MANAGEMENT RISK MANAGEMENT BOARD OVERSIGHT ACTIVITIES BOARD OVERSIGHT Board Remuneration Committee Risk and Compliance Committee Audit Committee RISK MANAGEMENT Strategic Risk Model Corporate Risk Model (supported by a strong risk management framework) Detailed Risk Model Data Risk Model Risk Champions Assurance Forum MANAGEMENT ASSURANCE Departmental Compliance Programmes Leadership Team and its sub-groups Systems Controls 11 Our Assurance Plan 2018/19

12 This assurance framework was applied to our business plan and enabled our Board to satisfy itself that the information associated with the development of our performance commitments was robust. The same framework applies to the information needed to report our performance against these commitments. A critical part of this framework is our approach to risk and includes the following steps: Understanding how data for each measure of success is managed, from the point at which it is collected in the field, through to the way it is collated, in order to appear on a final report. Applying a formal risk assessment to each measure of success. This reviews: The likelihood of a reporting error due to the complexity of a performance measure and the manner in which the data is collected. The impact should an error occur, particularly with regard to customers trust and confidence, financial incentives and our reputation. Checks and balances, in the form of data quality controls are used to mitigate risks. These controls may be procedural, audit based, or built into our IT systems. We review the effectiveness of these controls as part of our risk assessment and they are rated as good, acceptable or ineffective. 12 Our Assurance Plan 2018/19

13 OUR APPROACH TO IDENTIFYING STRENGTHS, RISKS AND WEAKNESSES Our approach to identifying strengths, risks and weaknesses is based on an internal review and external customer and stakeholder engagement. INTERNAL REVIEW We conduct an internal review to identify any risks associated with the provision and quality of information or meeting our performance commitments. The results of previous assurance and audit activities are a valuable input into this exercise. We have robust processes to track progress against the delivery of our performance commitments that highlight the need to make further interventions as and when required. This is further strengthened by the Board and Audit Committee Assurance Sub-Group, which have reviewed our assessment of risks, strengths and weaknesses and draft Assurance Plan. Our external partner, PA Consulting, has provided independent input to this review to make sure our approach is consistent with best practice. Feedback from all these parties has been reflected in this document. As a regulated business, we have a duty to operate within a framework that aligns the interests of our customers, stakeholders and shareholders with statutory duties. Through Acts of Parliament and European Directives, legislation is in place covering all areas of our business including water supply, sewerage services, drinking water quality, environmental standards, customer service, flood and drought protection as well as the welfare of our employees and customers. We review and monitor performance on a regular basis and report each year in our Annual Performance Report that the company has a full understanding of, and is meeting, its obligations and commitments. This requires our Board to confirm that it has satisfied itself that the company has sufficient processes and internal systems of control to fully meet those obligations. EXTERNAL REVIEW CONTINUOUS CUSTOMER AND STAKEHOLDER ENGAGEMENT AND PARTICIPATION The relationships we have with our customers and key stakeholders are very important. We actively engage with customers and stakeholders to provide assurance that we are meeting expectations and to maintain trust and confidence. Our key stakeholders in this context are: Our Customers. Our Water Forums (Customer Challenge Groups). The Consumer Council for Water (CCWater). Ofwat. The Drinking Water Inspectorate (DWI). The Environment Agency (EA). Local Authorities. Engagement is achieved through regular conversations and performance review meetings with all our stakeholders, understanding their expectations relating to performance, data reporting and communications, whilst being open to constructive feedback. 13 Our Assurance Plan 2018/19

14 Our customers are at the heart of everything that we do - the services we provide are essential for life and wellbeing, and our customers should always have trust and confidence in what we do. Assurance that we are delivering the services that our customers and stakeholders need and want begins with an extensive programme of customer research and engagement to gain insights about their views and priorities. During 2017, we have engaged with our customers inviting them to HaveYourSay and help us shape our PR19 Business Plan (PR19) for the period We have been doing this through a variety of creative approaches to reach out to customers and make it easy for everybody to contribute. An example of one of the approaches we have taken is through using Flo, our customer engagement vehicle, which travels throughout our operating regions, with our Customer Heroes. They gather valuable feedback through meaningful conversations with customers, on their turf, about priorities and expectations. Our HaveYourSay online forums are another channel we use for gathering insights from customers. We are also working with our customers in a variety of ways to make sure that they are actively participating in the design and delivery of the services and information we provide. For example, we worked with a group of our customers to co-create Our Finances Explained. Our customer research and engagement programme for PR19 has three phases for gathering customer insights: Phase 1 Phase 2 Phase 3 Exploring what we know, what we need to know and gathering insights to complement our existing evidence. Exploring customers priorities, service valuations and appetite for Outcome Delivery Incentives, and carrying out Cost Benefit Analysis. Acceptability of our PR19 Business Plan. This phase is scheduled to take place in Spring The insight and valuable feedback we are receiving through our engagement is helping us formulate our PR19 business plan, so that it is high quality, ambitious and innovative. Having multiple communication channels open for our customers is important, in order to make it easy for customers to talk to us. Supporting this is our website, which provides information on our performance in a customer friendly way, telling our stories alongside facts and figures on performance. 14 Our Assurance Plan 2018/19

15 We also require assurance that we are providing great customer service in line with our unrivalled customer experience strategy. Benchmarking ourselves against others is a key part of assuring that we are delivering the right services, in particular helping to identify any areas where we may need to improve, or to adopt any best practices from elsewhere in the industry, or beyond. Effective benchmarking is only possible if robust comparative information is available. We have taken an active and leading role in the development of the industry s strategic dashboard, which makes it easy for customers and stakeholders to view industry comparative performance information. We signpost our customers and stakeholders to the strategic dashboard from We make full use of this comparative information as part of our engagement activities, enabling our customers and stakeholders to provide a more informed view of their requirements. Feedback from our customer and stakeholder research and engagement, alongside other insight, is provided to our Leadership Team and Water Forums on a regular basis. It is also shared with the Board. SPECIFIC ENGAGEMENT FINDINGS FOR THIS ASSURANCE PLAN Our Customers Our consultation on strengths, risks and weaknesses and draft Assurance Plan was published on 30 November 2017 and closed on 12 January We also published a summarised version on our websites. Following this publication, we ed 150,000 customers whose addresses we hold, inviting them to complete a short survey about our consultation and comment on it. We were absolutely delighted to receive almost 4,000 responses from our customers, eight times as many responses as in the previous year. 81% of our customers who responded said our draft Assurance Plan was clear 86% of our customers who responded thought that there was nothing missing from our draft Assurance Plan 86% Where customers thought that there was of our customers who something missing from our draft Assurance responded said our Plan, we asked them what was missing. draft Assurance Plan Similarly, where customers said that our draft gave them confidence Assurance Plan did not give them confidence and trust in NW/ESW and trust in NW/ESW, we asked them why. We have used this customer feedback to strengthen our Assurance Plan, improve operational procedures and provide information to our teams who are developing our Business Plan. The main feedback from customers was not about specific areas for assurance but around their lack of awareness that it existed and their desire to know about actual performance. 15 Our Assurance Plan 2018/19

16 A number of customers made suggestions around our role in improving the environment, particularly in relation to reducing plastic waste and encouraging customers to drink more tap water, a topic that was already high on our agenda. Partnering with City to Sea in December 2017, we brought an initiative called Refill to our supply areas. Refill aims to reduce single use plastic water bottle pollution by promoting free tap-water refill points ( Refill Stations ) in cafes, shops, businesses and transport hubs. Businesses agree to be added to the free Refill app as a Refill Station, and display a small Refill window sticker to alert passers-by that they re welcome to come and fill up their water bottle for free. The comments that we received from customers that related to operational matters have been shared within the company so that we can improve service. Our Stakeholders The majority of our engagement with key stakeholders is carried out on an ongoing basis, through regular and ongoing conversations and performance reviews. In addition to this we actively consulted with our key stakeholders to seek feedback on our consultation of strengths, risks and weaknesses and draft Assurance Plan. The feedback that we received was welcomed, with 100% of respondents saying that they thought our draft Assurance Plan was clear. The main areas of feedback from stakeholders were around sewer flooding, pollution and data sharing. Our Water Forums have once again reviewed our consultation on strengths, risks and weaknesses and draft Assurance Plan in detail. In their feedback, they noted that the number of consultation responses from customers, at almost 4,000 in a 6-week period, was impressive. The Water Forums full response can be found here. In it, they detail that during the past year, NWG has continued to engage them in its thinking on the important issues covered in the consultation document; and has listened to and taken action in a number of areas where the Water Forums have challenged their thinking. They added that the company has often shown a willingness to listen, act and learn from the challenges put to them. They are impressed by the way the company has clearly listened, not just to the Water Forums but, critically, to its customers and stakeholders; and has included their proposals and suggestions in the current and new assurance plans. To conclude, the Water Forums overall feel very supported by NWG in their work. At all levels, the company takes external scrutiny seriously; it learns and it engages with stakeholders generally and with the Forums specifically. REGULATORY GUIDANCE AND FEEDBACK We have considered the latest regulatory guidance and feedback when developing our final Assurance Plan. Despite our self assured status, meaning Ofwat does not require us to publish an Assurance Plan, we have chosen to do so. This shows openness and transparency, helping maintain trust and confidence with our customers and stakeholders. 16 Our Assurance Plan 2018/19

17 HOW OUR CONSULTATION CHANGED OUR ASSURANCE PLAN We have welcomed our customers and stakeholders views on whether our plan adequately addresses areas of risk identified through our assessment. In our consultation on strengths, risks, and weaknesses in 2016, there were specific additional areas of risk identified by customers and stakeholders that we included in our final Assurance Plan last year. They were data protection/security, leakage (including water conservation), and resilience. We kept these areas in our draft Assurance Plan for 2018/19 and will continue to include them in our Final Plan. The feedback that we have received this year has not identified any new areas of risk to include in our Final Plan. It has been valuable, though, in identifying areas to strengthen in our plan. For example, customers told us that they wanted more information on performance so we have made sure that in this document, our Final Assurance Plan for 2018/19, there are clear sign posts to performance and other information. (See Our Strengths, Risk and Weaknesses Transparency of Information on page 21.) Feedback from our stakeholders has allowed us to strengthen our position statements on areas of performance risk such as sewer flooding and pollution, including how we will work in partnership with other stakeholders to facilitate improvements in performance. 17 Our Assurance Plan 2018/19

18 OUR RISKS, STRENGTHS AND WEAKNESSES 18 Our Assurance Plan 2018/19

19 OUR RISKS, STRENGTHS AND WEAKNESSES The diagram below illustrates how our assessment of strengths, risks and weaknesses are identified from our initial internal review through to our consultation with customers and stakeholders. EXTERNAL ENGAGEMENT AREAS OF RISK INTERNAL REVIEW Continuous customer and stakeholder engagement Consultation on strengths, risks and weaknesses Regulatory guidance and feedback Comparative performance / benchmarking Our Performance Challenges: Drinking water quality performance Pollution incident performance Leakage performance Essex & Suffolk (ESW) Satisfaction with taste and odour of tap water Our Priorities for Assurance: Quality of data relating to Measures of Success and Performance Commitments Delivery of new consolidated customer billing system (ONCE) Guaranteed Standards Scheme (GSS) Price Review 2019 (PR19) Licence Obligations Data Protection / Security Resilience Quality of financial data Identification of risks associated with: Quality of information Achievement of our performance commitments New and existing obligations 19 Our Assurance Plan 2018/19

20 SUMMARY OF STRENGTHS, RISKS AND WEAKNESSES This section details the outcome of the review described in the previous section. STRENGTHS GOVERNANCE AND ASSURANCE In July 2017 we published our Annual Performance Report (APR) for the year ended March Performance against each commitment was appropriately assured, in line with our published 2017/18 assurance plan and following an assessment of risk, by our independent external assurer or our internal audit team. Alongside the Annual Performance Report we also submitted our cost assessment tables to Ofwat. This submission consisted of a set of data tables to allow Ofwat to develop cost assessment tools for the Periodic Review In its assurance statement report, our external auditor, Atkins, stated: Based upon our assessment of selected components of Northumbrian Water s APR and the supporting information we saw over a structured and selective programme of review meetings from March to June 2017, we conclude that, for the areas we covered, other than where indicated otherwise in our report: At a component level the various teams compiling the documents and information had an understanding of and were meeting their obligations. The Company has sufficient processes and internal systems of control to fully meet its obligations. The Company has sufficient processes and internal systems in place to identify, manage and review its risks. The Company s explanations of how it will manage and/or mitigate material or potentially material risks are soundly based. Our Governance and Assurance framework also builds upon our integrated management system and commitment to quality assurance. We have companywide accreditation to the following standards: ISO A quality management system ISO An environmental management system OHSAS An occupational health & safety management system ISO Asset Management In addition our sampling and laboratory analysis are accredited to the demanding ISO standard. 20 Our Assurance Plan 2018/19

21 OUR WATER FORUMS Our Water Forums are our Customer Challenge Groups. They are led by an independent Chair, Jim Dixon, and are made up of a mixture of statutory members (such as the Environment Agency, Natural England and the Consumer Council for Water) and other members who represent important stakeholder groups (such as The National Farmers Union, Citizens Advice, Changing Lives and the Confederation of British Industry). Their work will help to provide confidence and build trust with our customers and stakeholders. Part of their role is to provide independent assurance, on the quality of our research and engagement with customers, and how well the findings of this work are reflected in our business plan for Their diverse expertise allows them to bring a broad perspective to expertly challenge us on our customer engagement and performance. They do this in several ways: Members and independent Non Executive Directors attend local meetings, workshops and other events that we hold. In the past 12 months, for example, they have played an active role in areas such as the development of our customer vulnerability strategy, examining our customer research activities, and reviewing our company performance. Every three months members meet with our Executive Leadership Team and independent Non Executive Directors. These meetings give members the chance to discuss and challenge us on our performance, engagement activities and other issues. By speaking to their own professional networks to gain a broad insight into the issues facing our customers, environments, communities and the economy, the Water Forum members give us broad and deep challenge. Details of our Water Forum members and their activities are available at (Click here to view) TRANSPARENCY OF INFORMATION We publish a range of information about our services and performance, including how we are performing against the commitments we made in our business plan. This helps to provide our customers and stakeholders with assurance that we are delivering what they have told us they need and want from their water and sewerage company. There follows a summary of the documents available online: 21 Our Assurance Plan 2018/19

22 ANNUAL PERFORMANCE REPORT Our Annual Performance Report details the progress we have made towards becoming the national leader in the provision of sustainable water and wastewater services. We have included case studies that demonstrate real innovation used to deliver this performance. (Click here to view) ANNUAL PERFORMANCE REPORT SUMMARY This is an accessible overview of the Annual Performance Report. (Click here to view) FINANCIAL STATEMENTS Our Financial Statements confirm how our Board set the Company s aspirations for customers, structure management rewards to incentivise delivery of these aspirations, and make sure that we are transparent and accountable to customers when reporting on financial performance. (Click here to view) 22 Our Assurance Plan 2018/19

23 DATA ASSURANCE SUMMARY Our Data Assurance Summary (published every July) provides us with the opportunity to highlight any changes to our strengths, risks and weaknesses since the publication of our Assurance Plan each March. It confirms that we have carried out the activities in our Assurance Plan and highlights any specific findings. (Click here to view) OUR CONTRIBUTION REPORT This report looks beyond our annual finance and performance reporting, and covers our influence and impact in the wider economy, the environment and society. (Click here to view) YOU TOLD US We want our customers to consider the services they receive from us to be good value for money. Our customers have told us that sometimes it is difficult to know what good value is, because they do not have another water company to compare us with. DiscoverWater.co.uk is a dashboard that contains information about water companies in England and Wales in one place. The latest version of our Discover Water report shows how we have performed compared to other water companies and what steps we are taking to keep our performance on track. The document provides information on the measures where we are able to compare our performance to other water and sewerage companies. (Click here to view) 23 Our Assurance Plan 2018/19

24 RISKS (OUR PERFORMANCE CHALLENGES) DRINKING WATER QUALITY PERFORMANCE The water we supply must meet strict national standards set by the Drinking Water Inspectorate, to make sure that it is safe to drink and the quality is acceptable to customers. This measure reflects the extent to which our water complied with these standards, based on the results of around 70,000 tests carried out in the year. The figures show our annual performance in 2016 was %. This is a slight reduction from our 2015 achievement of %. Of the tests carried out there were 57 failures in 2016 compared to 29 in None of the failures represented a risk to health and our performance represents a very high level of compliance. While we do expect some variation in performance levels due to the fact that samples are taken on a random basis, if our 2017 performance does not return to 2015 levels then this could result in us failing to meet our Performance Commitment. For assessing performance, the Drinking Water Inspectorate (DWI) has introduced a new measure this year called the Compliance Risk Index (CRI). This new measure is aimed at giving a better indication of risks to meeting water quality standards. We are working to understand the new measure and put in place plans to improve our CRI score. We are on track to deliver our investment commitments outlined in our business plan for These included additional processing at our Water Treatment Works, better management of the water network through extending automated control systems and replacing more iron pipes in the distribution system. We continue to monitor performance carefully and take action when required. For example, we have responded to turbidity performance issues and plan to install new filters at six water treatment works by Our Assurance Plan 2018/19

25 POLLUTION INCIDENT PERFORMANCE While every effort is made to reduce the risk of untreated sewage escaping from our sewers and causing environmental damage, a small number of these pollution incidents occur. Incidents are categorised by the Environment Agency (EA), with Category 1 incidents being the most serious. Category 2 incidents have a significant environmental impact and Category 3 incidents have minor or minimal environmental impact. The number of more serious Category 1 and 2 pollution incidents increased to nine in 2016 from five in We are working closely with the EA to identify lessons that can be learnt to ensure that serious incidents are not repeated. Our aim is to have zero serious incidents by To mitigate the risk associated in this area, we have enhanced our Pollution Management Programme with a continued focus on prevention and response. We are also working with the Environment Agency to share good practice and gain common understanding of each other s processes and procedures, and lessons learned. LEAKAGE ESSEX & SUFFOLK (ESW) Our leakage performance in ESW for 2016/17 averaged Megalitres per day, which exceeds our Performance Commitment target of 66 Ml/d. Dry weather conditions throughout the summer and autumn in 2016, in the South East of England had a big impact on the clay soils found in most of our supply area. When the clay dries out it moves and this often results in fractured pipes, meaning we experienced higher leakage than usual. Despite additional resources and investment in repairing and replacing pipes as quickly as possible, the extreme ground conditions resulted in a significant increase in the number of bursts and leaks on both our pipes and our customers pipes. Weather conditions continue to be problematic for leakage in the ESW area and our leakage position continues to be a challenge. As a result of this position, the company has implemented a recovery plan which involves: Increasing the number of leakage technicians actively carrying out leak detection. Introducing new technology, combined with industry best practice procedures, to make sure we maximise the effectiveness of our operational teams. 25 Our Assurance Plan 2018/19

26 SATISFACTION WITH TASTE AND ODOUR OF TAP WATER Our drinking water is of a very high quality but occasionally our customers become aware of a different taste or smell. This could be due to a number of reasons. For example, the use of chlorine to maintain good hygiene in our water supply network, a change in where a customer s water comes from, or issues with a customer s own plumbing inside their house. This measure reflects the number of times we have been contacted by customers to discuss the taste or smell of their water. Despite our performance being upper quartile when compared to other water companies, we have put in place an action plan for this measure because our performance commitment is very challenging. To try and meet our performance commitment we are: Optimising treatment processes at our treatment works. Updating our websites to provide better and more up to date information about the taste and odour of tap water. Improving our plumbing knowledge so that when troubleshooting at a customer s property the issues can be found and resolved quickly. RISKS (OUR PRIORITIES FOR ASSURANCE) QUALITY OF DATA RELATING TO MEASURES OF SUCCESS AND PERFORMANCE COMMITMENTS Many of our performance commitments have financial incentives associated with them in the form of penalties and rewards. For delivering better performance we could earn a financial reward and poor performance means that we could incur a financial penalty. Failure to report performance accurately could result in an incorrectly calculated reward or penalty which could significantly undermine our reputation, along with customer and stakeholder confidence. To mitigate this risk, data associated with each of our measures of success will receive risk based assurance as detailed in our draft assurance plan. Any penalties or rewards will be calculated using the methodology stated in our Final Determination from the Periodic Review 2014 (PR14). This is subject to robust assurance, involving internal and external audit review, including our Water Forums. DELIVERY OF NEW CONSOLIDATED CUSTOMER BILLING SYSTEM As we continue our journey to becoming national leader and to provide unrivalled customer service, we are making some big investments in our customer systems. We are progressing well through our programme to meet our go-live date of April Our assessment of risk for this area has identified that a failure to deliver a replacement customer care and billing system on time and to the required specification would result in: Retaining an ageing billing, collection and customer contact system and inability to deliver unrivalled customer service. Adverse impact on performance reporting. Financial penalty. Reputational damage. Disruption of services to our customers. 26 Our Assurance Plan 2018/19

27 To mitigate the risk associated with this complex project and to retain a strong focus on data quality we have the following in place: An assurance programme to ensure data quality is maintained during and after implementation of the new system. A detailed plan with regular reporting against key milestones. External assurance, by Ernst & Young, to assure the financial information of the bill is correct when moving from one system to the new one, along with additional wider migration of key and sensitive data. Deloitte will continue to provide external assurance on the programme and will review our readiness to go-live. GUARANTEED STANDARDS SCHEME (GSS) Customers of water and sewerage companies are entitled to guaranteed minimum standards of service as set out by the Government. Where we fail to meet a standard then we are required to make a specified payment to the affected customer. This is an area of high importance for the company and one which attracts a regular focus of attention in our Internal Audit team s assurance programme. Our processes for identifying, reporting and issuing failure payments to customers are well established. Our GSS Compliance group (a sub group of the Executive Leadership Team) regularly meets to discuss issues from audit findings and we now have a full time GSS Compliance Auditor to focus on this specific area. Any miscalculation of GSS payments would have a significant impact, and this area remains a priority for assurance. PRICE REVIEW 2019 (PR19) The outcome of PR19 will be important to customers, stakeholders and shareholders. The requirements of the business planning process are extensive, reaching into all areas of our business. We will extend our established and mature governance and assurance framework to cover PR19 activity. We have also appointed strategic partners to support our assurance processes throughout the review. We have a number of assurance arrangements in place to help make sure that PR19 is delivered effectively. These include: Programme Assurance We have appointed PA Consulting to provide support during the lifecycle of the programme to assure the robustness of the processes we follow and the content of our business plan. Data Assurance High quality information is vital for building trust and confidence and will underpin the 2019 price review (PR19). As part of our business plan submission to our regulator Ofwat, we are required to submit a large number of data tables. These data tables cover all aspects of our business activities and are used to help Ofwat set price controls. This will include independent assurance from our technical assurance provider PWC who have taken the time to review the whole business process for their areas of responsibility rather than reviewing only the reported number. We will use our data risk assessment methodology to determine the level of assurance activity. 27 Our Assurance Plan 2018/19

28 Technical Assurance Aspects of our business plan will require technical assurance and, in particular, our enhancement schemes business cases. Enhancement schemes are those that are required to provide enhanced levels of service including meeting new environmental standards, water quality requirements or resilience work. PWC carries out assurance to provide confidence in our non-financial data, Customer Challenge Group (CCG) Our Water Forums will challenge and provide independent assurance to Ofwat on the quality of our customer engagement. The degree to which the results of this engagement are driving decision making and that these are reflected in our business plan will be scrutinised by our Water Forums. We will actively engage with our Water Forums, sharing with them the outcome of our customer engagement activities and will demonstrate to our customers and stakeholders how they have helped us shape our plan. Overall, our approach has robust assurance embedded into our PR19 programme with Board led governance supported by management, business and independent assurance. We also have a dedicated Board Sub-group monthly meeting. Regular feedback on our plan will be provided through material submitted to our Periodic Review Steering Group (PRSG) and through assessment of our quality dashboard. LICENCE OBLIGATIONS This area of risk is based on our need to comply with our licence obligations including those introduced following the opening of the retail market. All companies in the water sector are required to comply with their licence conditions. In referring to obligations, we mean those covered by the Water Industry Act 1991 and our Instrument of Appointment (the Licence). To make sure that we comply with these obligations we will undertake an annual review of: The duties and obligations covered by the relevant legislation. The business owners and sponsors for each of the obligations. A risk assessment of each duty / obligation. Documentation of the policies and procedures which we rely on to ensure compliance. The effectiveness of the governance of these policies and procedures. We will obtain sign off for each obligation to indicate that it has appropriate assurance. DATA PROTECTION / SECURITY Customers have indicated that they would like greater awareness of how we protect personal data and prevent cyber-attacks on our I.T. systems. We take data protection and security extremely seriously and we are committed to making sure we handle the personal data of our customers and employees in a responsible and secure way. We work with national agencies regarding cyber attacks and have a responsibility for ensuring that the personal data of our customers is processed in accordance with the Data Protection Act This extends to include circumstances where our third party providers process personal data on our behalf. 28 Our Assurance Plan 2018/19

29 To mitigate the risk associated with this area we have: Software and hardware access controls including daily procedures and recovery plans. Processes to encrypt data. Resilient infrastructure with full back up and robust disaster recovery plans. Regular awareness briefs, and employee training, covering topics such as guidance on security and password controls. Board review and approval of data protection / security processes and procedures. We are currently facing the biggest change in Data Protection Law for a generation. The General Data Protection Regulation (GDPR) is coming into force on 25 May 2018 and we are working hard to ensure we are compliant by this date. RESILIENCE Resilience means having the right skills, the right leadership and the right systems; as well as having a robust infrastructure. This is called resilience in the round. It includes the following: Corporate resilience: the ability of an organisation s governance, accountability and assurance processes to help avoid, cope with, and recover from, disruption; and to anticipate trends and variability in business operations. Financial resilience: an organisation s ability to avoid, cope with, and recover from, disruption to its finances. Operational resilience: the ability of an organisation s infrastructure, and the skills to run that infrastructure, to avoid, cope with, and recover from, disruption in it s performance. While customers have told us that they trust us to manage resilience, they have indicated that they have insufficient visibility of how we do this. We consider resilience to be fundamental to our business and it will play a major role in our business planning at PR19 and beyond. We already have resilience built in to the services we provide for our customers and this needs to be linked to our outcomes in order to deliver real benefits to customers. We are in the process of developing a framework that will detail our approach to managing resilience in the round. We will share this with customers and stakeholders in QUALITY OF FINANCIAL DATA We have a range of areas that procure financial assurance. Some of these financial areas require a mandatory level of assurance. For example, matters relating to our Annual Report and Financial Statements and also Regulatory Financial Statements. We include a number of other financial areas for which we provide an additional level of assurance to make sure that controls are in place. Our financial auditor, Deloitte, reviews and reports on our financial data. WEAKNESSES AREAS FOR IMPROVEMENT IDENTIFIED BY ONGOING ASSURANCE WORK Our assurance work continues to highlight some points of detail which could be addressed to further support the robustness of our data and associated processes. These are covered in more detail in the tables at the end of this document and will be tackled in the spirit of continuous improvement. 29 Our Assurance Plan 2018/19

30 CONSISTENCY OF REPORTING Our regulators, stakeholders and customers are becoming increasingly interested in how our performance compares to other water companies in England and Wales. We are a strong advocate of this approach, as indicated by our support for the Discover Water website, and we always aim to report our performance in a robust and transparent manner. For such comparisons to be meaningful, it is important that all companies report performance in a consistent way. There are some performance metrics, however, where recent industry wide audits have highlighted that different water companies have interpreted some aspects of reporting guidelines in reasonable but slightly different ways. The areas in question are: Interruptions to supply. Leakage. Sewer flooding. We anticipate that additional performance metrics, for example sewer collapses, will be subject to similar scrutiny as companies prepare their business plans for the period Work is ongoing in this area. Following audits, more comprehensive reporting guidelines are being produced. Companies are then expected to make adjustments to their reporting to comply with the latest guidelines. In order to maintain trust and confidence in comparative information, we are not only participating fully in this activity but are also leading on some aspects. 30 Our Assurance Plan 2018/19

31 OUR ASSURANCE PLAN FOR 2018/19 31 Our Assurance Plan 2018/19

32 OUR ASSURANCE PLAN FOR 2018/19 The following tables contain our assurance plan for 2018/19. This details how the outcome from the data risk assessment exercise, and the wider assessment of strength, risks and weaknesses, has been used to target our planned assurance activity. The outputs from our risk assessments are reflected in our Assurance Plan and explain the level of assurance activity required. Mandatory: A financial audit assurance required for either legal or regulatory purposes and carried out in accordance with International Auditing Standards. Priority: A high level of assurance required to make sure all checks and balances are in place and working effectively. Targeted: A similar level of assurance to priority but with a focus on specific checks and balances. Standard: A level of assurance that ensures the controls in place are adequate for the area of risk identified. 32 Our Assurance Plan 2018/19