In a rapidly-evolving and uncertain risk and environment, many are asking whether their critical infrastructure assets are safe enough and resilient enough. Public awareness and interest in these issues has never been so high.
Recent events suggest that they might have good reason to worry. In Australia, bushfires and floods have affected infrastructure like electricity and roads, driving infrastructure owners, managers, operators and delivery agencies to consider how to make infrastructure more resilient to service disruption. The requirement to manage availability of public services while ensuring public and workforce safety is critical, especially during high impact low probability events.
Responsible parties can become more resilient, ready and agile by taking an asset management approach to better predict when infrastructure may become more vulnerable under different events and consider strategic, operational, people, process, information and technology trade-offs. This can include defining asset health indices to monitor when undertaking service design alongside scenario planning to understand possible outcomes under different simulations.
From new asset management standards at the local level to global initiatives such as the Coalition for Climate Resilient Investment announced at the most recent UN Climate Action Summit, asset owners are feeling pressure from the public for improved resilience.
Resilience, at its core, is the ability to reduce the likelihood and impact of 'extreme' events. These 'extreme' events represent 'disruptive risk', which is a risk so severe that it threatens the long term survivability of the asset or business. Typically, events that turn into disruptive risks are initially identified as high-consequence risks, but the expected low probability of the risk occurring does not usually precipitate the necessary business planning required for deploying appropriate mitigations.
However, as forces drive the probability of these events higher (i.e. climate change, aging assets, increased urbanisation), a business lacking planning for the extreme event is potentially exposed to the full consequence of the risk. This results in disruptive risk for the business and the need for resilience planning. Because disruptive risks are often ambiguous, complex, and difficult to identify, assessing and responding to them requires enhancing certain capabilities within an organisation.
Becoming resilient starts by aligning the business planning preparations needed with a wider vision that encompasses the business’s strategy, mission, vision and values while addressing vulnerabilities. These preparations can be put in place by developing formal structures such as reporting lines and committees specifically charged with implementing resilience strategies. Leading organisations utilise data to identify and evaluate risks and propose solutions. And ultimately, a resilient business must make risk-informed investment planning decisions that prioritises capital deployments to mitigate disruptive risk in an efficient and timely manner.
Pressure is also being applied by investors, who are becoming increasingly concerned about the growing range of risks they face (see Risk perceptions and realities in infrastructure are changing for more on this). And that, in turn, is forcing asset owners to think much more seriously about how they are identifying, measuring and managing their risks.
This year, expect to see asset owners and investors continue to go beyond traditional asset management approaches to instead think much more holistically about how they ensure ongoing safety and resilience across the asset lifecycle.
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Do you want to know what's trending from a global infrastructure perspective? You can broaden the scope by downloading the Emerging Trends in Infrastructure report or by visiting the KPMG Global website.