Residual Risk Exposure

For many infrastructure assets and especially distributed mature networked assets, the cost of service delivery includes carrying a residual risk associated with asset failure or inadequate performance. In some cases this risk can be quite high eg. dam failure in peak maximum flood events to the aggregated impact of multiple numbers of small failures that can have a significant cost on impact eg. bridges, sewers, gas and electricity transmission systems etc. In optimizing capital and maintenance investments, it is vital that infrastructure managers optimize these investments against the risk costs associated with the asset failures. As these asset portfolios age and their depreciated values reduce (therefore capital use charges reduce), their exposure to the risk of asset failure increases. In a regulated framework, it is vital that this aspect is addressed appropriately through insurance or the maintenance of an appropriate level of portfolio condition or quality. In general, future liabilities of assets, including these risk exposures, can be shown by the future renewal strategies.