Using Risk to Help Define Your Capital Plan CNAM Working Group February 2, 2016 Using Risk to Help Define Your Capital Plan Troy Mander & Leanne Brannigan Corporate Asset Management Region of Peel

Agenda Asset Management at Peel Using Asset Levels of Service & Risk Management for Asset Planning Reporting Take-aways

Asset Management at Peel

Peel’s Asset Management Status Asset management is a way of business in Peel: Asset Management Policy Approved asset levels of service Enterprise Asset Management Strategy Enterprise Asset Management Plan The annual Infrastructure Status & Outlook Report A public report on the state & direction of Peel’s infrastructure Enterprise Data Management Plan Regular reporting to Executive Management: State of the infrastructure Infrastructure investment needs Updates on key infrastructure issues & risks Regular risk assessments for all assets Program asset management plans in progress

Corporate Asset Management Strategic Direction Priorities & Risk Tolerances Strategic AM Analysis, Corporate Policy & Standards Detailed AM & Capital Planning “Frontline” asset management Capital & Operating Plans Corporate Asset Management Programs & Service Areas Council & Executive Management Asset Data, Criteria & Costs Service Objectives Capital Planning Directions Needs, Priorities & investments Challenge Assumptions

Modelling & Reporting Flow Corporate Reporting Program Data Corporate Analysis

Using Asset Levels of Service & Risk Management for Asset Planning

The Risk Management Advantage: Making better asset management decisions!

? The Challenge: What are the organization’s asset priorities? Water ? Affordable Housing Long Term Care Waste Management Roads Shelters Waste Water What are the organization’s asset priorities? Need a consistent systematic approach across very different asset types

Risk Management ? Risk #1 #2 #3 #4 A consistent measure to assess & prioritize asset needs across very different asset classes Risk #1 #2 #3 #4

Risk The chance of something happening that will impact the achievement of an organization’s objectives Can be an opportunity or threat Cannot be eliminated – only managed

Risk Management Processes & structures directed towards the effective management of potential opportunities & threats Continuous, proactive & systematic Includes policies, procedures & practices to ID, prioritize, respond to, & monitor risks

Risk Management Advantages/Considerations Provides a strategic, objective measure of organizational priorities Powerful reporting capabilities Initial assessments can be done with little data (improves as data matures) Does not need to be overly precise for strategic decision-making Rely on the expert judgement of staff Factor in the data gaps as part of the risks Can be modelled with simple tools (e.g. Excel) Requires some knowledge of risk management & asset subject matter Developing consequence & likelihood measures Facilitating the risk assessment sessions – asking the right questions

Asset LOS Dictate Risk & Needs Meeting Asset Levels of Service Less risk to services Fewer asset needs Not Meeting Asset Levels of Service More risk to services More asset needs

Assessing the Priorities

Asset Levels of Service Condition, performance & maintenance targets/requirements to: Maintain state of good repair Ensure adequate quality & quantity of service Enhance service delivery Control external risks to assets, services, public health & safety Measure the state of the assets Meet regulatory requirements (non-discretionary) ALOS should describe targets to achieve/connect to a desired service outcome Asset Level of Service Service Outcome Structurally sound bridges Safe services Adequate pipe capacity Sufficient quantity of service Adequate HVAC capacity Sufficient quality of service Back-up Power Supply Service reliability

Tips for Developing ALOS Start with the services What are the service objectives? What are the levels of service the customers expect to receive? What are the regulatory requirements? Define relevant ALOS for each asset class Each asset class should be governed/defined by the same ALOS requirements e.g.: allowable # of watermain breaks may differ between less critical local mains vs. more critical feedermains Should be focused on what is necessary to control/manage the various risks to services The ALOS targets should be practical & achievable to manage the risks to services at acceptable/reasonable levels Do they satisfy applicable regulations?

Tips for Developing ALOS Keep the ALOS simple Objective based/focused Minimize the number of ALOS Only enough to determine whether the asset fully meeting the service need Avoids the collection of too much data Continually question “Why do we need this ALOS?” ALOS targets & status are clearly measurable Data to support the measures are or will be readily obtainable Avoid using design criteria Too detailed, prescriptive & numerous A factor that contributes to the ALOS 17

Making the Connections: Customer Services Assets Risk Asset Levels of Service

Making the Connection: Customer Services Assets Risk Asset Levels of Service Strategic Service Objective CLOS Major Assets Affected Threats Inherent (Maximum) Risk Level Residual (Target) Risk Level ALOS Targets Current State of Assets Current Risk Priority A safe, reliable road network Safe Roads Pavement & Base Bridges & Major Culverts Retaining Walls Storm Sewers Storage Facilities Pavement structure failure Falling earth Structural failure Pipe/road collapse Major roof leaks High Medium Medium Low PCI = 70 Condition = B (Good) Condition = C (Fair) FCI = 10% (Fair) PCI = 55 Condition = D (poor) Condition = C (Fair) FCI = 12% (Fair) High Medium Low #3 #5 #4 #1 #2 19

Reporting

Current Asset Needs & $’s Measuring the Risk Current Asset Needs & $’s Asset Class Total Risk Mitigation over given time period (e.g. 10 years) Inherent (Unmitigated) Risk – Highest Estimated level of risk. No ALOS controls. Target Risk – Desired risk after implementing all practical ALOS controls. Current Risk – Estimated level of risk under present infrastructure conditions. Projected Risk (over given time period) assuming no investments in the infrastructure Estimated Risk assuming recommended capital investments are implemented over the given time period

Risk Profile

Risk Mitigation Remaining Risk 10-year Mitigated Risk $38.3M $218.2M $332.5M $682.7M Waste Management Wastewater Transportation Water 10-Year Asset Management Investment Plan Recommendations $20.5M $263.2M $339.1M $729.6M Proposed 10-Year Capital Plan

Take-aways: Developing ALOS & Risk Assessments Don’t expect perfection the first time It’s a learning journey Start with something & ID opportunities for later improvements Manage expectations Keep it simple Clear, meaningful measures & reporting Process before software Adapt software to the processes Communicate, Communicate Maintain open channels & an open mind A mix of art & science Combine expert judgement with facts & stats

Questions Contact: Troy Mander, Manager, Corporate Asset Management (905) 791-7800 X4483 troy.mander@peelregion.ca