Here Chris Lewin of the IFoA’s Infrastructure Working Party aims to stimulate strategic thinking about resilience by those who plan infrastructure and those who run it once in operation.
‘Resilience’ here means the capability of the infrastructure to continue to provide its services at a standard its users consider acceptable
A framework is necessary, discussed below, that plans for steps to maintain or restore the service, when performance deteriorates to an unacceptable degree, either suddenly or gradually. This may be economic or physical performance, or it may be environmental performance, that is, the extent to which the infrastructure continues to meet society’s environmental expectations about such matters as pollution.
Recovery plans must be worked out in advance for possible adverse future events occurring suddenly. Not every eventuality can be foreseen, so some of the recovery plans must envisage the possible consequences of unknown future events, including extreme consequences. The recovery plans must consider not only the physical recovery of the infrastructure but also the maintenance of good communication with users throughout the incident and afterwards. The recovery plans must be practised regularly, and a crisis committee kept in place to manage the recovery if a disastrous situation occurs.
Recovery plans must also be established for scenarios where performance has gradually deteriorated to an unacceptable extent. To know when this has occurred, a good data flow measuring performance continuously is essential, and trigger points should be set in advance to stimulate action when performance reaches a predetermined low point. The nature of this action will be determined once the need arises and may sometimes be significant enough to set the infrastructure off on a new pathway.
In setting trigger points, account must be taken of the minimum standard of service expected by users, not a higher standard. While there will naturally be aspirations for performance to be better than the minimum, this may not always be achievable. The ongoing relevance and appropriateness of the trigger points should be monitored, especially where, for example, performance is below a trigger point but in line with competitor performance.
One of the key questions when planning the building of new infrastructure is the standard of physical robustness to which it should be constructed to withstand the storms, heat waves, floods, and other weather events resulting from climate change, given the uncertainties about the extent, timing, and impacts of climate changes for the relevant geographical area. Several different scenarios will need to be developed for climate changes of various extents occurring at different times in the future. Discounted cash-flow techniques will be applied to analyse whether the maximum degree of physical protection should be built in straight away or whether it will be better to save up-front costs by building in a lower standard of protection initially and being prepared to enhance the degree of protection later, if this appears necessary. A modular construction approach might provide some useful flexibility.
Central government should ‘think big’ about the nation’s resilience, identify where improvements are needed, and take or stimulate necessary precautions. It very often happens that a particular infrastructure system depends upon the inputs from one or more feeder infrastructure systems, and if a feeder system stops working or its performance drastically reduces, the performance of the system it feeds may also be badly affected. Governments need to identify these ‘chains of resilience’ and try to influence remedial actions and recovery plans before incidents occur. For example, it may be that bigger stocks of key materials should be held, to enable an infrastructure service to be maintained while recovery of its feeder system is taking place after an incident. Alternative sources of supply should be investigated, and contracts put in place in advance to ensure that key materials or services will be delivered when required.
Many buildings and other infrastructure assets owned by investors like insurance companies and pension funds may provide vital services to the wider community. It is therefore important that these investors take the same kinds of resilience precautions as in the public sector. For example, an investor might require firms managing its investments to practice emergency drills and recovery plans each year.
Now that cyber systems are starting to control the operation of infrastructure, it is vitally important that great care is taken in the design and maintenance of these cyber systems, just like systems for financial institutions. Designing a system on a modular basis with firewalls between the modules will ensure that any infection will extend to part of the system only. Stringent precautions will be necessary to prevent a system from being corrupted by staff or hackers. Despite precautions it is likely that a cyber system will go down at some point, so there must be a recovery plan that enables the infrastructure’s operations to continue, possibly by using older non-cyber methods with disused equipment kept in reserve.
Actuarial techniques combining risk and financial analysis will be needed when considering the complex possibilities faced by infrastructure in the light of climate change and rapid technological developments. Individual actuaries may be seconded to project teams or advice taken from firms of consulting actuaries when required.
Along with 3 other members of the Infrastructure Working Party, I’ve written a longer article discussing these principles with examples. Please see: Managing infrastructure resilience and adaptation
Thanks are due to the IFoA for enabling the article to be made available free to everyone on an open access basis.
