**5.2. Risk assessment**

proach). However, this is not directly applicable to urban water infrastructures and other networked infrastructures that have indefinite lives and behave as systems, not as mere col‐

As argued by Burns *et al.* (1999), infrastructure assets are defined functionally as assets that are not replaced as a whole but rather are renewed piecemeal through the replacement of individual components, whilst maintaining the overall function of the system. As a whole, infrastructure system assets have indefinite lives. Conversely, economic lives can only be as‐

However, intervention decisions cannot be made based exclusively on the analysis of each individual asset. Individual assets cannot deliver a service by themselves, but only as part of a system or subsystem. The causes of malfunctions are often located away from where the symptoms emerge. Levels of service cannot be allocated to individual assets, for most of the infrastructure's components. Intervention alternatives, aimed at producing the desire defect, tend to imply jointly modifying a combination of assets, which display different remaining

These two key features – the indefinite life of the infrastructure as a whole, and its system behavior – make the classical life-cycle approach effectively unsuitable to IAM. The objective is to ensure that the service provided meets the targets over time, keeping the risk in accept‐

How long is "long-term"? Long enough that interventions are given time to reach their infra‐ structural maturity, all the lifecycle stages of the most relevant assets are included in a meaningful way, and the investments under consideration are rewarded by their accrued benefits; but not so long into the future as to unreasonably limit the significance of the as‐ sumptions made for the scenarios considered, such as demand or land use projections.

As previously mentioned, IAM aims at ensuring that, in a long-term perspective, service performance is kept adequate, risks incurred are acceptable and the corresponding costs are as low as feasible. Assessing performance, risk and cost is therefore key to effective IAM.

Performance may translate by either the efficiency or the effectiveness of the service. Per‐ formance assessment is a widespread activity used in economics, business, sports and many other walks of life in general, in order to compare and score entities and individuals and take management or other decisions (Alegre *et al*., 2000, Matos *et al*., 2003, Alegre *et al*. 2006,

Assessment is defined as a "process, or result of this process, that compares a specified sub‐ ject matter to relevant references" (ISO 24500).Performance assessment is therefore any ap‐ proach that allows for the evaluation of the efficiency or the effectiveness of a process or

Cabrera &Pardo, 2008, Sjovold *et al*. eds., 2008, ISO 24510, ISO 24511, ISO 24512).

lections of components with independent functionality.

lives, values, condition, etc..

54 Water Supply System Analysis - Selected Topics

**5. Performance, risk and cost**

**5.1. Performance assessment**

signed to the individual components of an infrastructure system.

able levels and minimizing the overall costs from a long run viewpoint.

Risk analysis may address an organization in its entirety, a system or sub-systems (aggregat‐ ed or lumped analysis), or individual system components(component or discrete analysis). Risk assessment may be carried out in many different ways, and is often (though not al‐ ways) quantifiable: for instance, if the probability of failure of every pipe in a network is known, as well as its consequence, expressed in terms of the ensuing reduced service (un‐ met demand), the total risk of not supplying the users may be expressed as the expected val‐ ue of the annual unmet demand (Vitorino *et al*., 2012).

Risk analysis is a vast field of expertise where several mainstream frameworks have been developed for infrastructure-based problems, such as fault-tree analysis or the approaches centered on risk matrices (Almeida *et al*., 2010). The latter is one of the most versatile and structured formalisms available when approaching the range of (quantifiable or unquantifi‐ able) risks that are faced by urban utilities, and is based on a thorough analysis of risk conse‐ quences and on the categorization into both probability and consequence classes.

Although other classes of consequences may be adopted, a typical classification might look

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http://dx.doi.org/10.5772/52377

57

The way in which probability and consequence are combined reflects the degree of cautious‐ ness of the analyst, which may vary. Fig. 3 shows a moderate risk perception matrix. A risk matrix should have at least three risk levels (low, medium and high risks) that are to be as‐ sociated with the acceptance levels of risk: Low or acceptable risk (green); Medium or tolera‐

Cost assessment is the other fundamental axis of analysis for comparing and selecting inter‐ vention alternatives in an IAM framework. All relevant costs and revenues items that take place during the analysis horizon and which differ from the *status quo*, should be accounted

The inclusion in the analysis of cost items that are common in nature and value to all alter‐ natives is optional, as they will not have an effect on the comparison but may be useful in informing it. However, if quantifying the actual net present value or internal rate of return of a financial project is important to the exercise, then all the relevant costs and revenues must be included. In practice, it is often the case that rehabilitation interventions do not af‐ fect revenues, and mainly have an effect on system performance, on system risk(by affecting system reliability) and on capital and operational costs (e.g., repair costs, complaint manage‐

**•** Investment costs, expressed as a given amount at a given point in time, and with a given depreciation period (if not linear, a depreciation function must be known as well).

like this: 1 – insignificant; 2 – low; 3 – moderate; 4 – high; 5 – severe.

ble risk (yellow); and High or unacceptable risk (red)(Almeida *et al*., 2010).

**Figure 3.** Risk matrixadopting a moderate risk perception

for, for any of the intervention alternatives considered.

ment, regulatory or contractual service compliance failure).

In general and simplified terms, the main cost items include:

**5.3. Cost assessment**

Probability classes can be defined by different probability intervals that may be derived, typically, from linear, exponential or logarithmic functions. The selection of probability classes is done by the decision maker; the criteria are not only depending on the type of problem but also on the range of possibilities acceptable to the decision maker, thus related to her perception of risk. Probability and probability classes are assigned to each individual component of the system when dealing with a component-based analysis or to an area/ sector when the analysis is focused on an area with specific and known risk features.

Independently of the type of failures that may take place, they can result in a range of poten‐ tial consequences not only to the water infrastructure and services but also to other infra‐ structures. Moreover, consequences can also include socio-economic disruptions and environmental impacts. Therefore, when assessing the risk associated with a specific event, several consequence dimensions should be taken into consideration (Table 1).


**Table 1.** Dimensions of consequence (adapted from Almeida *et al*., 2011)

Although other classes of consequences may be adopted, a typical classification might look like this: 1 – insignificant; 2 – low; 3 – moderate; 4 – high; 5 – severe.

The way in which probability and consequence are combined reflects the degree of cautious‐ ness of the analyst, which may vary. Fig. 3 shows a moderate risk perception matrix. A risk matrix should have at least three risk levels (low, medium and high risks) that are to be as‐ sociated with the acceptance levels of risk: Low or acceptable risk (green); Medium or tolera‐ ble risk (yellow); and High or unacceptable risk (red)(Almeida *et al*., 2010).

**Figure 3.** Risk matrixadopting a moderate risk perception
