Water Asset Management International 1.1 (2005) 5-8

Risky business: two case studies in asset management

V. Kenneth Harlow

Brown and Caldwell
USA

Risk and the perception of risk permeate asset decision-making. Most decisions on preventive maintenance, refurbishment, and replacement are typically made to avoid the risk of unexpected asset failure. Even decisions regarding expansions, improvements, and new facilities are usually made to reduce risk–risk of not meeting growth in demand, risk of failing to comply with regulatory guidelines, or risk of experiencing incidents with consequences for public health or employee safety.
In other words, risk drives the asset decisions and the results of asset decisions that generate the bulk of all operating and capital expenditures of most water and wastewater utilities.
And yet risk is seldom overtly considered in asset decisions, at least in a quantifiable way. There are probably two reasons for this:

1. The industry lacks a practical framework for dealing with risk; and
2. Without such a framework, the industry doesn’t know what kinds of asset data are required to support it.

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