Water companies should ensure their boards have clear oversight and understanding of asset health and what plans are in place to mitigate future risks, an Ofwat assessment into asset health has recommended.
The water regulator created an asset management maturity assessment (AMMA) to evaluate companies’ long and short-term objectives relating to their asset bases. Ofwat said there was evidence of ongoing improvement programmes across most companies that ranged from organisational transformation programmes to more focused initiatives on specific aspects of managing assets.
The report showed that most companies had only limited engagement with boards on asset health, unless related to performance commitments and outcome delivery incentives, which had engagement at all levels of organisations. Only a minority of companies engaged with their boards specifically on asset health and resilience.
The regulator said it expects boards to have visibility of current and longer-term asset health risks so they can make optimal decisions to meet their statutory duties.
The AMMA also recommended that short, medium and long-term strategies around asset health should be aligned and that employees should be skilled and competent to plan and manage assets.
Ofwat said it will consider whether its recommendations need reinforcing through the regulatory framework and if other steps are required to monitor the ongoing progress following the report.
It added that social and environmental value should be considered in decision-making and monitored to see whether benefits set out in the plans are delivered.
“Asset management is an important part of overall resilience so I’m pleased that we’ve been able to work collaboratively with the sector and develop this assessment,” John Russell, senior director at Ofwat said.
He added: “It has given us a shared understanding of where the sector needs to target improvements to ensure it is resilient now and in the future. The hard work starts now.”
Ofwat worked with the sector to identify strengths and weaknesses that may have implications for the regulatory regime and to understand how companies manage the risk of asset failure. Current approaches to management practices and where improvements are planned will be shared.
The regulator will consider how it reinforces its expectation that boards are more informed about asset health and resilience and whether companies should be required to report and publish on asset health and management.
AMMA will highlight best methods and areas to improve based on the evidence provided and collaboration will be encouraged to progress improvements.
Each company submitted a self-assessment with evidence relating to strategy and planning; asset information; decision-making; risk and review; and organisation and people.