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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.
Why Communication of Risk and Reliability is Important…
Which line is longer?
The Müller-Lyer Illusion.
Perception is everything…and sometimes wrong.
Why Communication of Risk and Reliability is Important…
Which line is longer?
The Müller-Lyer Illusion.
However, perception can be fairly accurate.
Why Communication of Risk and Reliability is Important…
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]