Risk Management
In 2009, MSD began to develop a comprehensive Risk Management Strategy. This ongoing process defines our organizational risk tolerances, identifies MSD’s leading risks, and establishes the framework for planning mitigation measures. Managing our top risks provides a sound basis for driving MSD decisions, such as budgeting and capital project selection. Just as importantly, MSD will use risk management as an effective way to communicate our activities and decisions to key external stakeholders, including the county, city, customers, and media, thus helping us to achieve our overall objectives.
The figure below summarizes MSD’s four categories of risks for consideration in the Risk Management Strategy.
MSD Risk Categories
Corporate Risks | Operational Risks | Asset Risks | Capital Project Risks |
---|---|---|---|
These are high level, complex challenges that could prevent MSD from meeting its obligations to customers, regulators, and the environment. | Operational risks affect the day-to- day activities of MSD, which include collecting and treating wastewater, as well as constructing capital programs. | Infrastructure failures, such as sewer pipes, pumps, generators, and electrical systems, can have severe consequences to the public and the environment. | Risks that can occur during the construction of a sewer or facility are considered and mitigation strategies are put in place during the planning and design phases. |
Quarterly reporting is the key to MSD’s implementation of the comprehensive risk management strategy. This regular review of identified risks and mitigation measures will allow us to reduce risks over the long term as well as the associated costs and liabilities they impose on MSD and our customers.
Managing Assets for Equipment Reliability
Because wastewater treatment is a round-the-clock activity with major consequences in the event of failures, reliability is a key goal for MSD. Accordingly, MSD focuses significant effort on a proactive asset management program, such as being diligent in equipment maintenance. For example, for each piece of equipment, we track its condition using a real-time registry. The registry documents the function and importance of an asset (resulting in a “consequence of failure” score) and its age and overall condition (resulting in an overall probability of failure score). Multiplying these two scores results in a relative risk score.
Risk = Consequence of Failure X Probability of Failure
MSD uses the risk scores to establish priorities for spending and to optimize the usable life of equipment. This risk-based approach helps us determine when it is best to repair or replace a piece of equipment and to prevent failures. From a sustainability perspective, asset management makes efficient use of resources and eliminates waste. Ultimately, this promotes worker and community health and safety, and it protects the environment.
MSD's Leading Risks
In a series of workshops during March 2010, MSD identified the organization’s leading risks, listed below. Beginning in 2011, quarterly risk reports will document risk mitigation strategies, progress made, and newly identified risks when necessary.
The diagram at right and table below show MSD’s risk management process and the priority risks in our risk register.
Note: Click image for larger view.
MSD Priority Risk Register
Risk Name | Description | Category | |
---|---|---|---|
1 | Maintaining public trust | Building trust through common understanding of MSD value to the community. | Corporate |
2 | Maintaining attractive bond rating | Reflects confidence by financial markets and allows borrowing at a reasonable rate. | Corporate |
3 | Insufficient funding to meet obligations | Increasing obligations due to implementation of Project Groundwork will push bounds of MSD’s debt ceiling. | Corporate |
4 | Sustainable corporate investment | MSD wants today’s decisions to be tomorrow’s value, not tomorrow’s liability. | Corporate |
5 | Customer base/customer usage | For the past several years, the number of customer accounts, as well as the usage per account, is decreasing. | Corporate |
6 | Material lawsuits | Could serve to undermine credibility and diminish financial performance. | Corporate |
7 | Adapting and responding to the general economy | Largely uncontrollable by the utility but can heighten or more likely threaten the financial viability of MSD. | Corporate |
8 | Conflicting governance structure | MSD is County-governed and City-managed within the 1968 Agreement. | Corporate |
9 | Limitations of WWIP strictly based on hydraulic model | Wet weather effects are complex and are not completely encompassed by the traditional hydraulic model used commonly in the industry. | Operational |
10 | Pleasant Run pump station and force main system | Currently this system does not meet current capacity demands during wet weather events. | Asset |
11 | Performance of WEDECO UV systems | WEDCO brand of UV systems have not performed well at MSD facilities (since the evaluation in March 2010, this risk has been mitigated satisfactorily). | Asset |
12 | Inadequate real time flow monitoring interface | MSD currently lacks an interface system that collects and presents the data in a useful way for efficient and responsive operations. | Operational |
13 | Turnover of key staff/Organizational stability | More than 20 percent of the MSD staff is eligible in the next 3 years. | Operational |
14 | Risk management for construction projects | Risk management at the project level will be incorporated into the process. | Operational |
15 | Man-made disasters | Severe asset damage and human safety issues can be precipitated by disasters due to vandalism, worker negligence, or lack of proper maintenance. | Corporate |
16 | New regulatory mandates | New regulatory requirements can be sweeping in scope and extremely costly. | Corporate |
17 | Sycamore raw pump stations | This pump station is essential to the operation of the Sycamore treatment facility and does not currently meet established levels of service. | Asset |
18 | Winton Woods aerial sewers | Aerial sewers are at a higher risk, in general, due to their exposure to the elements, excessive vibrations and vulnerability to security hazards. | Asset |
19 | Power supply to Mill Creek treatment facilities | Parts of the electrical system date back to the 1950s and are in need of upgrading. | Asset |
20 | Barrier Dam four pack bulkheads and crane system | These primary components are critical to the operation of the Barrier Dam, which prevents the Ohio River from inundating the Mill Creek Valley during flooding events. | Asset |
21 | Natural disasters | Tornados, floods and earthquakes can have a devastating effect on the operations of the treatment facilities. | Corporate |
22 | SCADA infrastructure | This system is used to send operational data from remote locations and locations within a facility; older equipment is difficult to operate and maintain. | Asset |
23 | Four Mile pump station | The current equipment does not provide the reliability needed to protect and maintain the pump station that brings influent wastewater to the Little Miami facility. | Asset |