Resilience is currently one of the buzzwords of the water sector in England and Wales. With Ofwat’s methodology consultation due to be issued on 11 July, the regulator’s confirmed resilience will be one of the four key themes for the next price review (PR19) – the others being innovation, customer service and affordable bills.
This means water companies are going to have to take resilience seriously and consider more extensive approaches to delivering robust business planning, risk management and resistance across all areas of their organisation. Welcome ‘resilience in the round’.
Resilience is more than just keeping the water running
As a water company, you’ll quite rightly point out resilience is an integral part of being a service provider to millions of water and wastewater customers. Without resilient services, you wouldn’t be able to continue to meet customers’ expectations in terms of keeping the taps on. But the shape and significance of resilience has increased markedly in recent years, and this is where the industry needs to take notice of what will be different about PR19 and Ofwat’s expectations going forward.
What is ‘resilience in the round’?
To answer the resilience question, you will need to understand what resilience means to you, the customers you serve and to Ofwat. In recent guidance, Ofwat reasserted its view that resilience is now broader than just infrastructure and environmental resilience – it’s ‘resilience in the round’ – and referenced the various challenges you face:
Ofwat also confirmed 10 principles it expects you to follow to make sure you’re working effectively to ensure the resilience of services for your customers. These principles follow Ofwat’s approach to resilience in the round and focus on risk analysis and mitigation, the importance of resilience to companies and customers, and the need to approach resilience in a different way than before.
The fundamental thrust of resilience in the round is to take a holistic and strategic view of resilience in multiple areas of your organisation – far beyond the traditional infrastructure-based approach. From finance to your supply chain, and upstream to biosolids services, resilience must be reviewed, mitigated and developed for the future. The challenge is to first accept current resilience practices may not be up to scratch. And then to interpret the new approach with an open mind.
Why the water sector needs to prepare for the customer-led revolution
So what should you be doing?
There have been several high-profile speeches by Ofwat’s chair, chief executive and senior team in recent months where different aspects of the resilience challenge have been discussed. And there’s already a lot of information already available which points to how to improve resilience and deliver in line with Ofwat’s expectations. So this shouldn’t come as a huge shock.
The first step however, is to ensure you’re are taking heed of these early warning signs fired from Ofwat’s regulatory cannon. At the very least, you will have to recognise the regulator is getting serious about resilience. At best, you should start reviewing your current resilience approach and establishing how best to meet the challenges Ofwat has set down – even prior to next week’s consultation. This will ensure good preparation for what we anticipate as a clear and action-oriented series of recommendations around strengthening resilience within the water sector.
Keep an eye out for my next blog which will discuss the key themes on resilience that have emerged from Ofwat. And I’ll look ahead to the PR19 consultation methodology and how it may shape your approach to resilience.