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Communicating Risk and Reliability to Decision MakersAdam SharpeMarch 26, 2018

The outcome of a strategic decision made in the utility sector may not be realized for more than a decade.

As utility leadership and technical professionals our jobs are to communicate to decision makers the risk and/or reliability related to such decisions.

Introduction

RELIABILITY Probability that an item will perform its

intended function for a specified interval under stated conditions (MIL-STG-721C, 1981).

4 key aspects: probability, function, operating conditions, time

Risk and Reliability DefinedRISK Effect of uncertainty on objectives

(ISO, 2009). An effect is a deviation from

expected – either positive or negative.

• Reliability is concerned with establishing the expectations.• Risk is concerned with managing the deviations from those expectations. • Uncertainty is present in both and that overlap ties the two together.

The importance of communicating risk and reliability is stressed in industry guiding textbooks and standards BUT little guidance is provided.

Communication of Risk and Reliability

If we take the definition of risk as an “effect of uncertainty on objectives” (ISO 31000) and “an effect is a deviation from the expected”, then…Whose expectations?

And if “objectives can have different aspects and can apply at different levels of the organization”(ISO-31000), then…Whose objectives?

Why Communication of Risk and Reliability is Important…

Risk is personal

Perception is everything…and sometimes wrong.


Which line is longer?

The Müller-Lyer Illusion.

However, perception can be fairly accurate.


Source: Pardon, ca. 1970.

Framing Effect: Cognitive bias in which people reactto a particular choice depending on how it is presented.

Human Biases and Heuristics Our biases and heuristics (mental rules of thumb) have an incredible impact on

decision making.o An understanding of these is important for communications.

Framing Effect: EXAMPLE

Human Biases and Heuristics

Imagine that the State of NC was facing an unusual water borne disease outbreak that is expected to kill 1,200 people. Two alternative programs to combat this disease are being proposed. Assume the scientific estimates of the consequence of the programs are as follows:

• Program 1: if adopted, 400 people will be saved• Program 2: if adopted, there is a 2/3 probability that all 1,200 people will not survive

with a 1/3 probability that all will survive

Communication strategy needs to be a forethought, not an afterthought. It is very beneficial to have this strategy in place before any technical analysis,

allowing for the analyst to know what information is important and how the information needs to be communicated.

Communication Strategy

Key messagesFrequency &

form of communication

Familiarity of target audience

with subject matter

ID of target audience

Communication goals and objectives

Develop presen-tation objectives

Analyze the audience

Structure the main body

State the main ideas

Select supporting information

Develop transitions

Prepare the close

Difference between public speaking and technical presentations:o Technical presentations are audience-oriented and public speaking is speaker-oriented. o Technical presentations focus on value while public speaking focuses on entertainment.

Best practice recommendations:

Presentations and Public Speaking

Focus on decision making, not the process Develop a quick and comprehensive

understanding Know you are bringing the right talent to

the decision at the right time Quantified values and risks Translate strategic direction into action

plans Drive the process forward with results at

each step Be efficient (productive) with decision

makers’ time

What Decision Makers Want…

Lessons learned: Presentation of technical information

must be aligned with decision maker(s) and needed purpose at that particular point in time.

Do your best to understand the people and the situation, and make it about them and not you or the analysis.

To do something good and be part of the solutiono To get re-electedo To get things done that are important to

them To avoid making people mad at them if

they do not care much about the issue To not look bad to the public, their

colleagues, or the media

What Elected Leaders Want…

Analogous to signal to noise ratio in electronics

Goal is to maximize the signal (your objectives) and minimize the noise (potential distractions)

Noise comes in numerous forms:o Forms of communicationo Communication forumso Visual, verbal, and vocal imageo Patterns of communication

Limit the Noise In Your Communication

Resources

Graphical excellence (per Tufte) is: o The well-designed presentation of

interesting data – a matter of substance, of statistics, and of design.

o Consists of complex ideas communicated with clarity, precision, and efficiency.

o that which gives to the viewer the greatest number of ideas in the shortest time with the least ink in the smallest space.

o Nearly always multivariate.o Requires telling the truth about the data.

Visual Display of Quantitative Information

Resources

Graphics for analytical data:o Primary graphics

• Maps & photos• Times series charts• Tornado diagrams• Tables

o Secondary graphics• Histograms• Scatter plots• Pie charts• Decision trees• Influence diagrams

Visual Display of Quantitative Information

Context: A progressive utility was seeking to evaluate their 50-year water resource planning options.o Many considerations were required:

uncertainty, reliability, levels of service, regulatory influence and finances.

CASE EXAMPLE #1:Long Range Planning

Problem Statement: The development of reliable, flexible water supply and management solutions that are financially responsible, maintain quality of service and support commitment to protecting public health and being good stewards of the natural environment.

CASE EXAMPLE #1:Long Range Planning

Context: A rural county in SC, impacted by the recession, was presented a significant economic development opportunity that would provide:o Increased tax revenues for the County

and o Increase employment with the potential to

reduce the social services burden.

CASE EXAMPLE #2:Infrastructure Requirements for Economic Development

Problem Statement: Problem Statement: Should the County make a $15M investment in infrastructure to support the development of an intermodal logistics facility to support the struggling regional economy?

CASE EXAMPLE #2:Infrastructure Requirements for Economic Development

Context: A community with a history of multiple asset management functions being implemented, new focus was being placed on formalizing and expanding these functions to the stormwater system. o With an understanding that there is no

independent utility enterprise fund to support these activities for stormwaterassets.

CASE EXAMPLE #3:Risk-based Asset Management Decision Making

Problem Statement: Historical investments in inspection and maintenance have been reactive for the stormwater system; there is a need to shift practices with a comprehensive understanding of system risk and focus of optimizing investments for highest risk assets.

CASE EXAMPLE #3:Risk-based Asset Management Decision Making

Context: A leading utility authority with a well established asset management program wanted to develop a comprehensive understanding of its renewal and replacement (R&R) funding needs and associated risks with previous and future funding level decisions.

CASE EXAMPLE #4:Infrastructure R&R Funding Decisions

Problem Statement: An R&R forecast is needed to support the planning to preserve the existing system functionality and reliability by anticipating future renewal and replacement needs and to ensure adequate and timely funding is available over the next 20 years.

CASE EXAMPLE #4:Infrastructure R&R Funding Decisions

Control what you can - develop a strategy every time you communicate!Summary

1. Understand your target audience preferences.

2. Understand the target audience knowledge of the subject matter.

3. Understand the target audience knowledge of technical analysis.

4. Establish your key objectives for communications.

Type of presentation forum

Presenters Type of graphics Format Colors Word choices

After these are established

Thank youAdam [email protected]

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