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State of New Jersey Department of Environmental Protection
State of New Jersey Department of Environmental Protection
Asset Management Policy Program-Renewing New Jersey's Water Infrastructure
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Asset Management Program Components

Financing
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Criticality/ Prioritization Assessment

A function central to managing utility assets is justifying timely investments in particular assets before others. To responsibly prioritize the repair or replacement of specific infrastructure components, a utility can make informed management decisions based on the criticality of an asset and the risk and significance of failure to the operation of the system. The threat of an asset failing potentially compromises a utility’s ability to function and meet performance standards.  This compromised function exposes the utility to adverse consequences, from both a financial and regulatory standpoint. Greater exposure of this risk is associated with assets deemed critical to the operation of the system and those that are more likely to fail before reaching the end of their useful life.

“Business risk exposure” (BRE)

There are tools available through software to calculate assess risk or BRE. One source: http://simple.werf.org/simple/media/BRE/howTo.html
is a method of calculating (scoring) the nature and level of exposure that a utility is likely to confront through a potential failure of a specified asset. Determining the criticality of system assets is necessary in order to determine the priority order in which infrastructure components will be addressed as part of the asset management program. Therefore, in conducting a prioritization assessment of system assets, there are key questions that should be considered when evaluating a system’s assets:
  • Which assets are most critical to the sustained function of the system?
  • What is the likelihood of each of these assets failing?
  • And, what are the consequences if an asset fails?

Together the probability and consequence of failure of an asset indicates the Business Risk Exposure (BRE) or criticality of that asset.

  1. Probability of Failure (PoF):
    There are a number of reasons why a system component may fail:

    • Mortality – The system component physically fails either through collapse, rupture, or some other mechanism and could be the result of a number of factors:
      • Asset age/condition
      • Installation/environmental characteristics (e.g. soil conditions)
      • Repair/service history
      • Operation and maintenance history
      • Historical knowledge
      • Operator experience with similar assets
    • Financial Inefficiency – The cost operating and maintaining an asset exceeds its economic value. It is cheaper to replace the asset than maintain or repair.
    • Deficient Capacity – The asset is still operational, but is unable to provide the capacity needed or level of service expected.

    The probability of failure of each component can be ranked using a scale of 1 to 5: very low (improbable failure) to very high (imminent failure).

  2. Consequence of Failure (CoF):
    The consequence of failure is the severity of loss a system would incur as a result of the failure of a particular asset. These consequences can include:

    • Public health / safety impacts or costs (may include injury to staff or the public);
    • Environmental impacts or costs: environmental consequences may be contamination, threat to life of species or plants, unsightly odors or sights, etc.;
    • Social impacts or costs: Social or community-impact consequences may be traffic disruption, impeding tourism or the public’s ability to use or enjoy an area or facility, etc.;
    • Reduction in Level of Service;
    • Cost of repair/replacement that may be unbudgeted expenditures;
    • Costs or impacts related to collateral damage caused by the failure;
    • Legal costs associated with asset failure;
    • Any other costs or impacts related to the asset failure such as loss of revenue or impacts to businesses.

    In assessing the overall consequences of asset failure, the utility should consider the associated costs above.

  3. Combined Rating:
    Assessing assets for prioritization can be done through ranking assets based on the significance of risk of the loss of each asset. The relative risk, or expected loss, associated with the failure of one asset versus another is based on both the probability and the consequence of the asset failing. Assets that are most likely to fail and which have the greatest consequences from failing are those that pose the greatest Business Risk Exposure (BRE) and should be prioritized for repair, replacement, or improvement.

    To assess this risk, the Probability and Consequence ratings for each component can be combined to get a “criticality or BRE rating”:

    Criticality (or BRE) Rating= PoF X CoF

    All of the inventoried assets can listed in a matrix/ table that can be organized by BRE/ criticality rating.
    Once all of the system assets have been evaluated based on probability and consequence of failure, the assigned BRE/ criticality values can be arranged from highest to lowest as a means of prioritizing the assets necessary to adequately maintain the system.

    The prioritization assessment should be updated periodically to account for changes in treatment, demands, and regulatory requirements.

  4. Vulnerability

    A widely recognized standard for assessing vulnerability to worst-case scenario threats is the Risk Analysis and Management for Critical Asset Protection (RAMCAP®) methodology. The RAMCAP® methodology has been accepted by the water/wastewater industry through ANSI/ASME-ITI/AWWA Standard J-100, which sets the requirements for all-hazards risk and resilience analysis and management and prescribes methods that can be used for addressing these requirements. Further information on the RAMCAP Plus (SM) process and related products and activities can be found at http://www.asme-iti.org/.
    is also a component of risk-- Based on location or construction, some assets may be more exposed to potential threats (storms/flooding, sabotage or terrorism, etc.) that could compromise the effective operation of the system. The potential adverse effects to system operations from the vulnerability of assets should be considered along with the condition of assets and the criticality/ business risk exposure rating when prioritizing assets.

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Last Updated: March 20, 2017