1. Level of Service and Risk: What’s the Connection?
Leanne Brannigan
Advisor, Asset Management, Region of Peel
CNAM 2014 Conference
Toronto, Ontario
May 20-23, 2014

2. Outline Peel’s Corporate Asset Management Program Risk Framework
Connecting Risk and LOS
Applications: a mini case study
Advantages
Conclusions 2

3. The Region of Peel • 1.3 million people
• Over $19B (2012 values) in capital assets:
Water & Wastewater vertical & linear assets
Roads infrastructure
Waste Management Processing
Long Term Care Centre’s
Paramedic stations
Heritage museum
Affordable Housing
Regional administration offices
Works yards
Shelters
Child Care Centre's
Fleet

4. Enterprise AM Strategy
Objective:
Transparent reporting of asset requirements & priorities for strategic decision making
Investing the right amounts in the right areas 4

5. Peel’s Management Framework
Strategic Direction
Corporate priorities
Council & Executive Management
Recommend
asset reinvestments
& priorities
Capital Plan Instructions
Capital & Operating Plans
Service Objectives
Strategic AM
AM Policy & Standards
Corporate Asset Management
Asset Information
Peel has a 2-tiered asset management structure
CAM is positioned between upper management decision makers and the frontline program asset managers.
CAM is not full asset management. Decision enablers
The CAM team receives data and asset criteria from the programs and assesses the infrastructure on a common platform to measure the needs in a consistent fashion across the organization
CAM makes recommendations on the infrastructure to senior management who then issue the capital and operating planning directions to the Programs and service areas to develop their Capital and operating budgets and forecasts.
The detailed asset management remains with the programs where the expertise on asset conditions and requirements exists.
Challenge the information, make recommendations
Operational AM
“Frontline” AM
Programs & Service Areas

6. Role of CAM Ensure consistency of organizational AM practices
Maintain AM policy
Life cycle strategies
Asset levels of service
Asset Risk management
Strategic evaluation of infrastructure needs & priorities
Investment needs
Infrastructure priorities & risks
Reporting
Corporate “challenge” function
Are Programs investing in the right areas/right levels?
Appropriate levels of service/risks?
Appropriate asset management planning?
Is the data is sufficient/accurate?
In short, CAM’s role is to ensure consistent organizational practices for consistency of reporting and better, more informed and object decision making. 6

7. How Does It Work? Critical assets are not always the highest priority
Risk to services dictates asset need & priorities
Asset need & priority is measured by whether the amount of risk is present to the service in acceptable or unacceptable
Risk can be defined in a number of ways:
Health & safety risks eg ensuring bridges & buildings are structurally sound – usually have highest priority
Loss of service risk – not having standby power for a widespread power loss or not having adequate system capacity to continue providing water during break of a major feedermain
Poor service quality or efficiency – inadequate parking & signage, poor HVAC or lack of accessibility at public buildings
All of these risk impact the organization’s reputation and finances
Critical assets are not always the highest priority
– weighted higher, but if risk OK, no action required

8. Corporate Asset Management Framework
Projects
Technology
Outputs
Infrastructure
Investment
Report
Risk
Management
Strategy
Level of
Service
Strategy
Lifecycle
Management
Strategy
Infrastructure
Sustainability
Strategy
State of
Reserves
ODM
(Optimized
Decision
Modeling)
State of
Infrastructure
Strategic
Asset
Plan

9. Levels of Service Foundation for understanding the state of the assets
Customer Level of Service (CLOS)
How Customers expect to receive the service
Non-technical
Technical Level of Service (TLOS)
Sets the standards for assets to meet the CLOS

10. The Asset Management Challenge
Develop a way to ID & prioritize asset needs across the organization
How to determine asset priorities?:
Dissimilar asset types across Peel
Serving different programs & CLOS
Function to differing TLOS
Differing criticalities
Solution: Risk

11. Risk Framework
Used the Australian & New Zealand frameworks (AS/NZS 4360) to start
Consistent with ISO 55000
Customized impact & likelihood measurement tools to Peel business environment
Triple Bottom Line risk assessment (Social, Environmental & Financial)
“Other risk frameworks could be applied within the RMS developed at Peel”

12. What’s Missing? Gaps in current methodologies to meet all of the needs
Highest Risk Score = Funding Priority
Peel developed a methodology that:
Determines level of additional risk that an asset class is imparting on the organization
Indicates where the most cost effective risk reductions can be made
ID’s the amount of risk can be mitigated

13. Goals of Peel’s RMS Risk is measured relative to the end services;
An organizational context on the level of risk;
Correlation between the asset LOS needs & risk it imparts on the services;
A dynamic comparative basis for prioritization across diverse assets;
A connection between comparative risk & funding.

14. Where Do You Start? Methodologies exist to assess current Risk
Organizations can define their current LOS
BUT… How do they connect?
How do changes in one affect the other?
It starts with assessing the assets risk profile

15. Key Enabler #1 Current Asset Needs & $’s
Inherent (Unmitigated) Risk – Highest Estimated level of risk. No controls.
Target Risk – Desired risk after implementing all practical controls.
Current Risk – Estimated level of risk under present controls.

16. Connecting LOS and Risk Gaps

17. Key Enabler #2 LOS Value = % of Assets Meeting LOS +
EQUALIZING LOS MEASURES
To enable the plotting of the current LOS of diverse assets along the LOS range.
Assessment of where the asset class as a whole falls along the LOS range.
LOS Value =
% of Assets Meeting LOS +
% Assets Not Meeting LOS x
Avg. Condition Assets Not Meeting LOS

18. Key Enabler #3 DEFINING LOS TO RISK RELATIONSHIP
Determined the LOS Gap
Determined how to Calculate LOS Value
Determined the Risk Gap
How does this relate to the Risk Value?

19. Determining Current Risk from LOS

20. The Complete Connection
LOS to risk relationship:
Key Enabler #1 – identifies the risk and LOS ranges & how they connect;
Key Enabler #2 – facilitates the placement of the current LOS value along the LOS range;
Key Enabler #3 – defines the LOS to risk range relationship enabling the placement of the current risk value along the risk range.

21. Practical Applications
Enhanced Risk Reporting
Organizational Prioritization
Corporate Budgeting & Reserve Planning
Program Decision Making
Mini case study

22. Risk Reporting Current Asset Needs & $’s
Total Risk Mitigation per 10 Year AMP
Inherent (Unmitigated) Risk – Highest Estimated level of risk. No controls.
Target Risk – Desired risk after implementing all practical controls.
Current Risk – Estimated level of risk under present controls.
Projected 10-Year Risk (No Funding)
Risk per 10-Yr Capital Recommendation

23. Risk Profiling
Lining up all of the bars together gives a perspective on the highest variances from targets and the costs to close the gaps
This view also gives a perspective on where the best returns on investments are in terms of lowering the municipality’s risk profile.
At the bottom of the graph we have roads that require an investment of $147 m to achieve the target risk levels. As you can see the net affect of reducing risk is very low as indicated by the sliver of grey bar.
However, for $6.7 m over the same 10 year period there is a much greater potential of risk reduction in the housing portfolio. Given limited funds, an organization could defer investments in roads and redirect the financing to social housing and significantly reduce the organization’s overall risk profile

24. Long Term Expenditure Forecast

25. Program Level Decision Making
Peel’s high level Corporate Asset Management application at program level:
To highlight detailed asset priorities
To support budget asks for program improvements
To support asset Repair/Replace/Dispose decisions
To assess Level of Service Changes

26. Example: LOS Change Review
Wanted to determine if the LOS for Distribution Mains could be increased
Current Target LOS: 7 Breaks per km of pipe
Proposed Target LOS: 5 Breaks per km of pipe
Questions:
What would this cost now and into the future?
How does it affect our risk and infrastructure scores?
Can we handle the extra near-term workload?

27. The Analysis and Recommendation
Workload increase 93% majority up front
Costs increase 63% or nearly $300 Million over next 10 years
Little Risk reduction for large infrastructure investment
Recommendation: Keep LOS at 7 Breaks per km

28. Advantages…
The establishment of a link between an asset’s current LOS and current risk,
Allows dynamic and current performance monitoring of assets across the organization
If you can forward model LOS, you can forward model Risk accordingly
The Risk gaps can be used to prioritize asset needs across many classes.
Applying cost to LOS needs enables a direct relationship between Risk and $. Dollars can be optimized for Risk Reduction.

29. Advantages…
Performance measures can be established to track improvements in LOS and risk over time.
Boundary risk scores can be adjusted at any time, as programs & the environments in which they operate change.
This holistic view of the asset infrastructure enables the establishment of risk tolerances & changes to LOS.
Proven beneficial at a portfolio basis as evidence to support program level decision making.

30. Conclusions
Peel’s risk-centric approach aids strategic decision-making
It optimizes funding across all asset groups
i.e. How do we best “stretch” the citizens’ tax dollar?
Helps prioritize asset needs
Is an integral piece of Optimized Decision Modeling at Peel

31. Questions? Contact Me: Leanne Brannigan Advisor, Asset Management
Region of Peel