Risk Mitigation in Modelling

The 2018 Local Government Risk Report for Australian Local Government identified that the highest priority risks that Councils are facing is in relation to infrastructure and financial sustainability and stability. The need for effective risk management is becoming ever-more apparent to ensure that organisations can mitigate their risks in a climate of rate limitations and capping.

When one looks very closely at the impending new Victorian Local Government Act that stipulates the requirement of a Long-Term Financial Plan (LTFP), it is clear that financial sustainability and stability are based on assessing and mitigating future risk.

A LTFP based on last year plus or minus 5% is not a LTFP; a plan that analyses options, assessing future strategies that produce the lowest risk – not just lowest cost – is a genuinely prudent LTFP.

Organisations such as Councils, Rail, Ports, Transport, Housing, Water and Education are subjected to many risk events that can occur at corporate (i.e. financial sustainability and stability, cyber), strategic (i.e. infrastructure) and operational (i.e. human resources, health and safety) levels.  According to Tony Blefari (Assetic Director Asset Management – Product & Consulting, pictured), incorporating risk into predictive strategic asset life-cycle modelling is now the most critical part of an organisation’s risk management process.

“Ninety per cent of our community services rely on assets,” Tony said. “It’s integral we identify, assess and implement risk strategies and opportunities associated with managing these assets. This is in line with ISO best practice, and future-proofs these essential community assets.”

ISO 55002:2014 (Asset Management Standard) and scientific risk modelling combine to ensure an organisation’s risk indicators remain strong whilst being able to assess, mitigate (to acceptable levels) and monitor risks from a strategic infrastructure perspective.

“Given this was the single-most requested feature lately, we are pleased to introduce the Risk Management feature in Assetic Predictor,” Tony continued. “It will help tackle these difficult decisions by allowing organisations to establish an enterprise-wide risk framework that can be incorporated into predictive modelling decisions.”

Assetic Predictor’s Risk Management feature utilises the likelihood and consequence risk management method, which is a qualitative analysis method providing a ranking of risks based on probability and impact. With the introduction of this feature, Assetic Predictor will utilise asset risk during the selection of the project candidates.

This will ensure that selected project candidates keep the asset network at the best possible service state, and also that project candidates selected are the most important to the organisation’s network, thereby mitigating risk. In addition to modelling the future predicted service states of assets, users can now also model the likely risk impacts to their organisation and view these results within pre-defined Assetic Predictor reports to understand how risk is changing over time due to various ‘what-if’ budget scenarios.

“This ability to look at ‘what-if’ for future risk provides the very best basis for a robust LTFP,” Tony concluded.

 

Learn more about Assetic Predictor 5.5 here