Infrastructure Risk – Too High

The American Society of Civil Engineers has produced a reportcard on the state of the infrastructure in the US.

The good news is that the richest country in the world did not flunk.

The bad news is that the overall average grade is a D.

Now Warren Buffet reminds us that you shouldn’t expect an unbiased answer if you ask a barber whether you need a haircut.  And in this case, the civil engineers would benefit significantly from an increase of attention to infrastructure.

But let’s look at the sorts of suggestions that they make.  Many of them can be generalized to other areas of risk. (Paraphrased by Riskviews)

  • Encourage risk reduction/management programs
  • Use the best of current science rather than continuing to follow science from many years ago
  • Develop emergency action plans
  • Develop maintenance standards
  • Establish plan to fund needed improvements in risk management
  • Evaluate specific impact of failure to improve risk management
  • Educate stakeholders regarding above
  • Establish a regular review process

In the case of infrastructure, there is a recognized lifespan of the systems and a continual deterioration expected.

Risk systems in general are not thought of as wasting assets, but perhaps that is simply because risk management is so new.

Perhaps even the firms that have achieved the point of a full and integrated set of risk management systems should think of the useful life of those systems.

“The principal reason we have train crashes is a lack of investment in rail infrastructure – and the reason we have systemic crises is a lack of investment in financial infrastructure.”  Hugo Bänziger, in the FT

The money will always be there to keep funding innovations in the way that risk is added to a firm.

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Explore posts in the same categories: Enterprise Risk Management, Operational Risk, Risk Management, Risk Management System

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