Risky Business: Putting Dollars and Cents to Asset Risk

Risk can be defined as a situation involving the potential of gaining or losing something of value. For a public utility, risk is typically associated with whether the organization meets regulatory, customer, and internally established levels of service. Therefore, to develop a holistic approach to managing a public utility’s infrastructure, risk evaluation and management should play a key role in the strategy. This paper will present an approach to risk management which deviates from the status quo. The approach to risk evaluation discussed herein will consider both the probability and consequence of failure. Probability of failure estimates the actual probability an asset is to fail thereby great increasing the value of the analysis for planning and decision making. Consequence of failure establishes the social, economic and environmental impacts should an asset fail. The product of the probability and consequence of failure establishes the asset risk. The risk results from the analysis provides a monetized risk cost to address a specific asset failure as well as an asset prioritization associated with the monetized risk.