Resilience: Investment decision-making in a complex

and uncertain worldIan Gray, Global Water Asset Management Lead, Arup

Ann Cousins, Senior Consultant, Arup

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Forward

Overview

1. What is driving change?

2. Why do we need to change our investment decision-making

approach to adapt to this change?

3. Some possible approaches to more resilient decision making

Uncertainty…What if? When? How Deep?

Why do we need to change how we make investment decisions?

Resilience Thinking Challenges

New York

5, 12 and 25 feet sea level rise

Complexity

Why do we need to change how we make investment decisions?

Resilience Thinking challenges

Global Risks Interconnections Map 2018, World Economic Forum

Source: http://thefloods.gloucestershirelive.co.uk

Drivers Change for Resilience: Flooding

Mythe WTW, 2007

Gloucestershire

• Supplies over 350,000

people

• 40,000 homes without

drinking water for 7 days

• 40 critical assets required

repair

Drivers Change for Resilience: Ageing Infrastructure

Drivers Change for Resilience: Demographic Change

Drivers Change for Resilience: Natural Contamination

Franklaw WTW, 2015

Lancashire

• Affected 300,000 households

for 4 weeks

• Residents had to boil water

for this period

• £25m in compensation and

costs

Drivers Change for Resilience: Technological Change

Drivers Change for Resilience: Civil Unrest

Drivers Change for Resilience: Drought

Drivers Change for Resilience: Industrial Dispute

Drivers Change for Resilience: Recession

Drivers Change for Resilience: Regulatory Change

Drivers Change for Resilience: Macro-Industrial Change

Things just too big to fail

Risk or resilience

Can’t we just use our overriding risk approach?

Likelihood/Unavailability ImpactFinancial Economic

compensation,

lossesinvestment to recover

Negligible

Less than 7

days injury

or i l l health

Trivial/MildMinimal impact

on service< 50k <100k

Minor does

not affect

security

Minor reputational

Damage

Marginal

>7 day

RIDDOR

reportable

injury

SignificantModerate impact

on serviceIncrease 50-100k Increase100-500k

Reportable

breach of

security

regulations

Significant Local

reputational

Damage

Significant Major injury Serious/Severe

Significant

impact on

operation

service

100-500k 500k- 2m

Damage to

Security

Equipment

Minornt Regional

Reputational

Damage

ImportantSignificant

loss of Life

Multiple

environmental

breaches

Impact on more

than one

services

500k-1m 2-5m

Undetected

incursion of

secure areas

Significant

Regional

Reputational

Damage

CriticalMultiple loss

of l ife

Long term

environmental

damage

Impact on

several

operational

service areas

>1m >5m

Significant

theft or

breach of

importation

regulations

National

Reputational

Damage

Security ReputationalSafety Environmental OperabilityGeneric

Liklihood

Score1 2 3 4 5

Impact

Score

1

2

3

4

5

Resilience

Investment decision making

Predominant current state =

investing to reduce risk now….

But in silos or with different metrics.

Limited budget? What don’t you do

Reservoir failure

flooding

terrorism,

Demographic

Change

Aging

infrastructure

Investing in what?

Resilience

Comparing bananas, apples and pears isn’t easy for a board, stakeholders,

Government and Regulators

Corporate Financial Operational

So what could we

do differently?

Investing in what

Resilince

Investment decision-making

Design a resilience Business

Aru

p, C

ity R

esil

ien

ce I

nd

ex

Reflective using past experience to inform

future decisions

ResourcefulRecognizing alternative ways

to use resources

Inclusive prioritizing broad consultation

to create a sense of shared

ownership in decision-making

Integratedbring together a range of

distinct systems and

institutions

Redundantusing spare capacity

purposively created to

accommodate disruption

Robustwell-conceived, constructed,

and managed systems

Flexible using willingness, ability to

adopt alternative strategies in

response to changing

circumstances

Resilience

Long-term outcomes-led approach

Outcomes

Starting with challenges and

outcomes, for the long-term:

• For your organisation

• For other stakeholders

• For citizens and customers

IntegratedInclusive

Resilience

Informed by iterative horizon scanning

Based on robust evidence about

plausible futures, updated regularly

based on new learning to develop a

flexible strategy.

RobustFlexibleReflective

Resilience

Adaptive pathways

Delivering through adaptive pathways,

making “just in time” decisions

A

B

C

Trigger point D

E

Trigger point

D

E

From

To

FlexibleReflective Redundant

An eventual imperative

shocked into action

A progressive move to a

resilient future evolving

at key trigger points

Resilience

Decision-making to enable resilience delivery

• Working with others and sharing

resources

• Innovation

• Empowering local decision-

making, for an agile, adaptive

approach

People and cultural change

Process changeAppropriate assets

and technology

FlexibleResourceful Integrated

Information

One example from Welsh Water

where we worked with them to

create an holistic long term

future “Resilience Strategy”

Creating the basis of a 35 year

strategy just launched in the

Senedd – National Assembly

for Wales last week co created

with stakeholders and

customers.

So how do you balance investment

Fully aligned to the

organisational strategies and

context

Welsh Water 2050 copyright Welsh Water

Regulatory thinking is

also developing with

Resilience in the

Round from Ofwat

Regultory resilience thinking

Copyright Arup

Concluding

Resilience: Investment decision-making in a complex

and uncertain worldIan Gray, Global Water Asset Management Lead Director, Arup

Ann Cousins, Senior Consultant, Arup

Bounce

Forward