Abstract:
Risk management plays a key role in water utilities. Although tools are well
established at operational and tactical levels of management, existing methods
at strategic level lack a holistic treatment and a long-term perspective. In fact,
risks are analysed per se, despite being interconnected; and long-term
scenarios are commonly used for strategic planning, rather than for risk
management, most of the time being related to one single issue (for example:
climate change).
In order to overcome the limitations identified in the existing methodologies, a
novel approach for water utilities to manage risk at strategic level was
developed and tested in EPAL - the largest and oldest water utility in Portugal. It
consists of (i) setting a baseline risks comparison founded on a systemic model
developed ‗bottom-up‘ through the business; (ii) the construction of future
scenarios and an observation of how baseline risks may change with time.
Major contributions of this research are the linkage between operational and
strategic risks, capturing the interdependencies between strategic risks; the
ability to look at long term risk, allowing the visualizing of the way strategic risks
may change under a possible future scenario; and the novel coupling of risks
and futures research.
For the water sector, this approach constitutes a useful tool for strategic
planning, which may be presented to the Board of Directors in a simple and
intuitive way, despite the solid foundations of the underlying analysis. It also
builds on in-house expertise, promoting the dissemination and pervasiveness of
risk management within the companies and, on the other hand, allowing
unveiling of existing knowledge, making it explicit and more useful for the
organization.
