
Water Infrastructure Due Diligence & Quantifying Financial Risk: Key Takeaways from the Water Finance Conference
Posted on September 9, 2019
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Two weeks ago, we attended the Water Finance Conference in Washington, DC, where I had the privilege to participate in a panel moderated by Greg Baird from the Water Finance Research Foundation. In the panel, we discussed due diligence for water infrastructure and the importance of quantifying financial risk. Below are some key takeaways from our discussion:
Taking steps for due diligence in your utility operations and communicating those steps with transparency can help increase trust between you and your customers.
The Average price of water increased by 59% from 2010 to 2018, mostly to pay for improved infrastructure. Utilities can’t count on higher rates to solve all problems, or to signal that they’re making improvements – it’s important for utilities to think of the ratepayer base as customers and treat them as such. Working to communicate the value of water, whether that’s through utility bill inserts or other forms of communication, is essential to building a strong relationship with those customers (check out our customer touchpoints infographic for communication tips).
Right now, the procurement process is the number one barrier of entry to get new innovations widely accepted and adopted. Long budget cycles and legacy accounting practices are huge roadblocks for adopting technology that can ultimately be money savers in the form of time, resources, and increased efficiency.
Removing these roadblocks isn’t just necessary for shorter term savings and improvements. The water industry as a whole is facing a generation of talent that’s nearing retirement and struggling to fill their employment pipelines. For the industry to find any sort of long-term workforce sustainability, innovation is necessary. New talent can’t be recruited into a status quo environment – younger generations of employees don’t want to work off spreadsheets. Utilities need to adapt their operations to the talent that they’re hoping to attract in order to build a sustainable workforce.
I’ve previously written about the future of the digital transformation in water. As in other industries, applying technology to current practices has the opportunity to make processes more efficient, close gaps, and save money. Not only is there an upside to embracing digital transformations – not embracing innovation opportunities can create risk in itself. The risk of inaction comes when your data isn’t managed efficiently, or when you don’t have central repositories for a holistic approach to managing your utility. Digital transformation can’t happen in silos – you need a full picture of every aspect of your utility to truly understand what actions are needed.
This holistic digital approach is also key to help quantify financial risk. Layering data is key – asset data and water quality data can’t exist separate from each other. Dynamic, real-time dashboards that bring all your data together and tell stories will go far in helping you quantify risk.
Quantifying financial risk isn’t just about your pipes and parts – it’s also necessary to think about quality, water loss, and more… all the aspects that come together to form a cohesive water program.
Legacy diligence and asset management models need to be adapted to meet current industry pains and value drivers in a world in which more and more complicated regulations and risk factors are emerging and evolving. The old way, with a narrow focus on water plants and pipes, needs to be revisited and updated to account for things such as PFAs, Legionella, and other emerging risks.
The panel was an illuminating way to learn about and engage in topics around utility financing, risks, and communication – and shed light on the continuing need to reevaluate these topics to adapt and open the door to innovative solutions and processes.