Resilience review: ARUP - United Utilitiesmaintain services for people and protect the natural environment now and in the future.” (Ofwat, 2014). However, for the purposes of this

Resilience review: ARUP

Chapter 4: 3rd Party Report

Document Reference: T9034

This is a third party produced maturity assessment of our approach to resilience to understand their current position, plans and ambition through a series of interviews and document reviews. The report aims to identify areas of strength and gaps across the business, reviewing both current performance and future plans.

United Utilities Water Limited

United Utilities Water Ltd.

Independent Resilience Review

Contents

Executive Summary

1. Introduction and purpose

2. What is resilience and why does it matter?

3. Shocks and stresses

4. What is resilience to United Utilities?

5. Our Resilience Framework and approach

6. Financial resilience assessment

7. Operational resilience assessment

8. Corporate resilience assessment

9. Conclusions

10. Recommendations

11. Next steps

Appendix A: Interviewees

Appendix B: Reference documents

Appendix C: Additional reviewed documents

Front cover image: Thirlmere and the Northern Fells CC by Peer Lawther

Executive Summary

Introduction

Arup was commissioned to carry out a

resilience maturity assessment of United

Utilities Water Ltd. (United Utilities), the

regulated company of United Utilities Group

PLC. We worked closely with United Utilities

to understand their current position, plans and

ambition through a series of interviews and

document reviews. This report aims to identify

areas of strength and gaps across the

business, reviewing both current performance

and future plans. The maturity assessment

was carried out using a framework developed

by Arup to assess resilience in the round. This

report is intended to support United Utilities’

PR19 submission.

Understanding resilience

Our world is rapidly changing, with long-term

challenges, or chronic stresses, such as

climate change, depleting resources, and

changing demographics putting greater

demands on infrastructure. This brings

increasingly unpredictable risks, which will not

only push systems to their tipping points, but

also drive uncertainty around the impact of

hazards, shocks and disruptions.

In order to create truly resilient organisations

in the face of growing uncertainty, risk

management will need to be supplemented

with a broader consideration of resilient

systems.

Ofwat’s definition of resilience is: “the ability to

cope with, and recover from, disruption and

anticipate trends and variability in order to

maintain services for people and protect the

natural environment now and in the future.”

(Ofwat, 2014). However, for the purposes of

this review, we have adapted a definition from

100 resilient cities - ‘Resilience is the ability to

survive, adapt, and grow no matter what kind

of disruption is experienced; and anticipate

trends and variability in order to maintain

services for people and protect the natural

environment, now and in the future.’

Ofwat splits resilience into three main

categories – financial resilience, corporate

resilience and operational resilience.

United Utilities’ resilience challenge

United Utilities faces many similar challenges

to other water companies in the UK. However,

there are certain issues that have greater

impact such as topography, population

densities, and above average winter runoff.

United Utilities also has areas with very high

livestock populations, particularly in Cumbria.

Being able to respond and recover in an

efficient and timely manner following incidents

is vital to maintain and improve the company’s

services and to ensure that United Utilities is

at the forefront of the water industry.

In 2015/2016, United Utilities experienced a

number of major incidents, including

cryptosporidium at Franklaw Water Treatment

works and major flood events in Cumbria and

Lancashire. This led to a transformation in the

approach and methodology used to assess

risks and focused interest at board level to

embed lessons learnt across the business and

the industry more widely.

Our approach to resilience assessment

We have carried out a resilience assessment

based on a resilience maturity approach that

Arup has developed and used as the basis for

assessment with six companies.

The approach to maturity assessment is

based on a desk top review of key documents

provided by United Utilities, as well as

interviews with internal stakeholders from

various departments.

We have not attempted to prioritise any of the

three resilience categories (financial,

corporate and operational resilience) or sub-

categories above others. ‘Resilience in the

Round’, means being resilient across all of the

component parts and understanding the

connections and interdependencies between

these parts.

Customers

Financial

CorporateOperational

Figure 1: Resilience in the Round from Ofwat2,

which forms the basis of Arup’s resilience

assessment approach

1100 Resilient Cities, 20182 Ofwat (2017) Delivering Water 2020: Our final methodology for the 2019 price review;

Executive Summary

Overview of findings

Financial resilience

Analysing United Utilities against the five

resilience sub-headings:

• Financial viability: From a financial viability

perspective United Utilities is one of the

leading water companies in England and

has developed a robust approach to

assessing its financial viability scanning at

least two AMP cycles and publicly

reporting in its Annual Report a rolling five-

year Long-Term Viability Statement.

It has identified key risks and implemented

strategies to manage these risks including

economic uncertainty, financial market

conditions, interest rates, funding costs

and 15 ‘severe but reasonable’ operational

risks.

With a Moody’s A3 rating and below

industry average gearing at c.65% United

Utilities has plans to reduce this to below

60% by the end of AMP7. This provides

opportunities to raise additional capital

whilst maintaining an investment grade

credit rating. The company also has a

significant portfolio of insurance to cover

several extreme event scenarios.

United Utilities aims to maintain this robust

and flexible approach into the foreseeable

future.

• Protected finances for the regulated

business: 98% of United Utilities Group

PLC’s revenues come from the regulated

business of United Utilities Water Ltd, so

the risks from the wider group are limited.

Having low levels of non-regulated

activities is common to most other water

companies.

• Sustainable long-term planning: United

Utilities’ financial planning periods are

annual, five-year and 25-years. United

Utilities uses its Pioneer software to

monitor asset condition and understand

costs for maintenance and replacement. It

has identified a need in 10 years time to

start increasing its asset refurbishment

programme. This is being costed, with

thought being given to how to avoid steep

increases in AMP9 and beyond.

• Accessible financial reporting: Reporting is

available through the Annual Report, the

Annual Performance Report and financial

statements. An independent review of the

reports indicates that they are clear, easy

to understand and well presented. Ofwat

assessed United Utilities to self assurance

status in 2016 and re-confirmed this status

in 2017 – one of only two companies in the

industry.

• Robust financial monitoring: United Utilities

makes significant efforts to monitor its

finances. Driven by its organisational

structure and regulatory environment,

transparent analysis of its financial status

is undertaken. There is clear evidence

through the Treasury Committee and wider

governance processe that the company

considers trends in internal and external

factors that can impact on finances.

Corporate resilience

There are nine corporate resilience sub-

groups:

• Clear strategic direction: United Utilities

has a ‘systems thinking’ approach which is

at the core of its operating strategy.

Internally, there has been considerable

thought and activity to develop the

strategic direction of the organisation as a

whole and the individual business areas.

However, there is an opportunity to build

on this and develop and publish a long-

term strategy.

• Effective governance and assurance

processes: United Utilities follows an

Enterprise Risk Management approach

and has good processes in place for

identifying, reporting, managing and

controlling risks across the organisation,

and escalating to senior review and sign

off at appropriate levels and time scales.

However, there is currently not a single

board or executive level owner of

resilience for the organisation: there is an

opportunity to strengthen this, in line with

leading practice elsewhere.

• Effective business continuity planning:

United Utilities has a good risk-based

approach to business continuity planning,

and has developed their plans and

capabilities in line with relevant best

practice. United Utilities is actively involved

in exercising relevant plans including with

external agencies, and has demonstrated

a commitment to developing capabilities of

staff with training and accreditation. The

benefits of United Utilities' approach and

the realisation of the role of 24/7 Duty

Manager were demonstrated by the limited

disruption caused by the recent freeze-

thaw event in March 2018.

• Comprehensive horizon scanning: United

Utilities has an understanding of the

importance of incorporating horizon

scanning in their plans and strategies to

respond to long-term risks. However, there

is an opportunity to develop a robust,

comprehensive and joined up approach to

horizon scanning across the business,

including consistent integration into

organisational plans.

• Inclusive Customer engagement and co-

creation: United Utilities has a good

understanding of the need for customer

engagement and incorporation of customer

views into decision-making. There are

good practices in the form of digital

marketing and engagement, and a

targeted approach to provide appropriate

services to vulnerable customers with the

priority services register. There are

examples of pilot co-creation projects with

customers, and plans for more of this in

AMP7.

Executive Summary

Overview of findings (continued)

• Engaged stakeholders: United Utilities

appears to have an industry-leading

approach to mapping, managing and

engaging stakeholders. The key elements

of this approach are a single centralised

database of stakeholders; comprehensive

mapping of priorities across the business

and relevant stakeholders; an owner for

managing key relationships at a local,

regional and national level; good

engagement with multiple relevant

stakeholders on both short-term issues and

longer term strategies.

• Active role in the regions and community:

United Utilities has a range of

environmental and social initiatives that

demonstrate a desire for the organisation

to have a positive role in the local

community and region. Employee

involvement in these activities is

encouraged through up to 3 days of paid

volunteering leave per year. Some of the

goals against which United Utilities is

measuring its community impact could be

more ambitious..

• Comprehensive health safety and

wellbeing: United Utilities is measuring

leading KPIs for process safety. Leading

and lagging indicators are reported to the

board. There is an opportunity to develop a

more holistic view of H&S issues across

the lifetime of United Utilities' assets,

particularly embedding operational learning

into design. There is evidence of a good

focus on H&S and wellbeing initiatives

within United Utilities corporate offices.

• Collaborative and adaptive organisational

culture: This assessment has observed

both positive and negative examples of a

collaborative and adaptive organisational

culture in United Utilities. In HR

organisational practices there is a

customer focussed approach, and

innovative and collaborative practices in

parts of the business such as the

Innovation Lab and the successful

implementation of the MARS programme.

There is evidence of good customer centric

training across the departments. There is

scope to improve focus on customers in a

more consistent manner across all teams

to eliminate work in silo and provide a

more integrated approach.

Operational resilience

There are eight operational sub-groups:

• Continuity of service to customers: United

Utilities has a robust asset criticality

assessment approach and a supply

interruptions strategy which considers

historic trends and forecasts performance

requirements. The creation of the

Integrated Control Centre (ICC) in 2015

provided a platform for significant

improvement in operational efficiency.

United Utilities' long-term ambition is for ‘no

customer interruption’, through further

investment in systems thinking and

machine learning and improvements in the

ICC.

• Robust long term water resource

management planning: United Utilities has

an excellent approach to water resources

management planning which adopts a

multi-hazard approach.

• Robust, long term recycling planning:

United Utilities has a Business Strategy

Wastewater Network document which sets

out the business’s approach for

wastewater out to 2025. There is a working

group from across the business to develop

United Utilities' approach to Drainage and

Wastewater Management Plans (DWMPs)

and plans to recruit someone to deliver

this.

• Reflective risk based approach to asset

health: United Utilities has a combination of

tools to identify and categorise asset risks

and consequences. The business has also

developed a Base Asset Health Indicator to

monitor remaining asset life and there is a

good approach to dam safety. United

Utilities has developed a methodology for

assessing asset criticality, but currently

only 20-30% of above ground assets has

been assessed. There is a long-term

ambition for the business to assess

criticality across the entire asset base.

Following Franklaw incident, United

Utilities also developed Hazrev, which is a

step-by-step methodology for assessing

each treatment process. However, to date,

Hazrev has only been applied to water

treatment works.

• Innovative, collaborative, naturally resilient

approaches to risk mitigation: The

business has had a Sustainable

Catchment Management Programme

(SCaMP) for improving raw water quality in

place for some years. This programme

also captures wider benefits including

improving biodiversity and carbon storage

in upland peat moors; funding for

vegetation and hydrology monitoring is

planned to continue until 2020. The

business is using its core ‘systems

thinking’ approach to move towards

integrated catchments, in an attempt to

deliver outcomes required by customers

and regulators can be delivered in a more

efficient and sustainable way through

partnership working.

Executive Summary

Overview of findings (continued)

• Robust and flexible supply chain

management: United Utilities has a

‘category management’ approach to supply

chain management, with long-term holistic

view of the business’s demand. The

business recently reviewed their supply

chain to understand critical links and

currently in the process of reviewing

existing contracts and contracting

processes. United Utilities has several

controls to mitigate supply chain risks,

including: supplier relationship

management, contract assurance, strong

governance, business continuity plans,

alternative suppliers, market monitoring,

benchmarking and price hedging.

• Inclusive & skilled workforce: In 2015, an

Organisational Capability Review identified

key risks and critical business needs in a

changing world. This has led United

Utilities to develop a strong recruitment

process; United Utilities is active in the

apprentice market and has a good and

growing graduate programme. It

understands a need for leader

development, and in 2016 introduced the

‘aspiring manager’ programme to identify

emerging talent in middle management

roles. United Utilities recognises that it has

an ageing workforce, and is considering

options to mitigate this issue. It is

recognised that diversity doesn’t reflect

customers served, and that there is an

opportunity to improve.

• Robust, integrated and flexible technology:

Systems thinking is at the core of United

Utilities’ operating strategy, and brings

together multiple parts of the business from

operations to customer contact through

improved integration of information,

operational and engineering technology.

The Integrated Control Centre (ICC) is an

excellent systems-based approach, and

there are further plans to build on this.

Conclusions and opportunities to improve

In many areas, United Utilities is leading the

industry in their approach to risk and

resilience.

Following the Franklaw incident in 2015,

United Utilities has made significant

improvements to it’s approach to operational

resilience in particular. The business has a

good understanding of its asset base, and is

beginning to embed new processes to

understand criticality. There has also been a

focus on improving risk assessment

processes, and connecting assessment of

operational risk within the Enterprise Risk

Management system.

United Utilities’ systems thinking approach to

operations, and the Integrated Control Centre

enable the business to avoid or respond and

recover from incidents quickly.

In order to continue this good work, United

Utilities will need to continually learn and

improve. We saw good evidence of this

following shock events. There is an

opportunity to further build on this, developing

a longer-term approach to cultural and people-

led change. This would led to a more

collaborative and adaptive culture, enable the

business to change and thrive in a changing

and uncertain world.

In addition, the learning culture that appears to

be in place relating to incidents could be

further rolled out to learning into more forward-

looking activities, such as horizon scanning.

United Utilities’ systems thinking approach is

excellent and responds well to the guidance in

resilience in the round. There is an opportunity

for this to take a longer-term view, responding

to chronic stresses and trends. This could also

be more widely communicated internally and

externally, in order to build a view of shared

challenges and the opportunities to

collaboratively address these.

1. Introduction and purpose

Introduction – United Utilities

The United Utilities Group, through its

regulated company United Utilities Water Ltd.

(United Utilities) provides water and

wastewater services to 3 million homes and

200,000 businesses across the North West

region of England. The company’s vision is

delivered through providing the best service

to customers, at the lowest sustainable cost,

in a responsible manner1. As one of the 10

largest water and wastewater companies in

England and Wales, United Utilities’ strategic

goals are to 2:

• Provide great water

• Dispose of wastewater

• Give customers value for money

• Deliver service customers can rely on

• Protect and enhance the environment

United Utilities recognises that improving

their understanding of the challenges they

face, and increasing resilience in the face of

these is crucial to meeting the needs of their

customers in the medium to long term3.

This assessment

In January 2018, Arup was commissioned by

United Utilities to carry out a resilience

maturity assessment of their current and

future programme of activities.

The review focusses predominantly on United

Utilities Water Ltd. rather than the wider

United Utilities Group. It is based on an

established framework, developed by Arup’s

experts, in the areas of corporate, financial

and operational resilience.

The review was undertaken between March

2018 and July 2018 and commenced with a

scoping study to understand United Utilities’

initiatives. This was followed by a series of

interviews with key staff within the

organisation to explore current strategy,

existing processes and future plans. Arup

also reviewed several key documents to

inform the assessment.

The findings from the interviews and

document review were collated and analysed

to formulate a view of United Utilities’ current

and future status with regards to corporate,

operational and financial resilience, and

consequently provide scores against

established resilience framework principles.

This report

This document sets out by presenting a

definition for resilience and explaining its

significance for the water industry. It also

provides clarification on what constitutes

shocks and stresses and how these are

presented within United Utilities.

The report presents the resilience

assessment framework, developed by Arup.

In line with Ofwat’s definition, the framework

focuses on three key themes: financial,

corporate and operational and defines how

the organisation’s resilience is assessed and

what a well-functioning system should look

like.

The framework is presented at sub-theme

level, where each of the three themes is

broken down into several essential sub-

themes to enable accurate and detailed

assessment.

The results are presented as scores from 1

(Unaware) to 5 (Leading) and details of the

findings and evidence to support the scores

is provided for each theme.

Additionally, the report presents key

strengths and opportunities, and provides

recommendations to help the organisation

improve alongside highlight areas of leading

practice.

References: 1www.unitedutilities.com;2United Utilities (2017): Corporate Audit & Risk, Annual audit

planning day presentation;3United utilities (2017) Annual audit planning day slides

Customers

Financial

CorporateOperational


There are several different definitions of

resilience. For this review our working

definition of resilience has been adapted from

the definitions outlined by 100 Resilient Cities1

and Ofwat2:

We live in a fast changing world, with trends

such as rising resource consumption and

depleting resources, changing demographics

and climate change all placing greater

demands on infrastructure. Impacts of this are

being seen at individual, organisational, city

and national levels.

These changes bring increasingly

unpredictable risks, push systems to their

tipping points and drive uncertainty around the

impact of hazards and disruptions. Resilient

organisations will be those with the ability to

survive and thrive in these conditions.

Organisations must also consider how they

want to contribute to the resilience of the

wider world.

Resilience goes beyond simple risk

management approaches where typically

individuals hazards and mitigations are

identified. A resilience approach instead

allows an organisation to respond to

uncertainty as well as more quantifiable and

better understood risks.

A resilient organisation is not just concerned

with surviving and coping with challenges, but

also thriving and improving on its ability to

learn and anticipate changes.

Resilience reflects ‘the overall capacity of

individuals, communities, institutions,

businesses and systems to survive, adapt and

thrive no matter what kinds of chronic

stresses or acute shocks they experience’ 3

Ofwat has published guidance on resilience in

their PR19 consultation document (Ofwat,

Delivering Water 2020: Consulting on our

methodology for the 2019 price review). This

includes the concept of ‘Resilience in the

Round’ which recommends that customers

should be the focus of the business and three

themes of resilience should be considered:

© H

arr

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oo

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‘Resilience is the ability to survive, adapt,

and grow no matter what kind of disruption

is experienced; and anticipate trends and

variability in order to maintain services for

people and protect the natural

environment, now and in the future.’

Figure 1: Resilience in the Round from Ofwat2

Corporate resilience: the ability of an organisation’s

governance, accountability and assurance processes to

help avoid, cope with, and recover from, disruption; and to

anticipate trends and variability in its business operations.

Financial resilience: an organisation’s ability to avoid,

cope with, and recover from, disruption to its finances.

Operational resilience: the ability of an organisation’s

infrastructure, and the skills to run that infrastructure, to

avoid, cope with, and recover from, disruption in its ability

to provide critical services to customers.

References: 1100 Resilient Cities, 20182 Ofwat (2017) Delivering Water 2020: Our final methodology

for the 2019 price review;3Arup, 2013

Figure 2 illustrates the anticipated improvements in performance and response to disruption

from a company that integrates resilience into its standard practice.

It shows that a resilient company is able to return to good service or even a better service

than before as quickly as possible (i.e. bounce forward). A resilient system or organisation

will not just improve service, but will grow and develop as a result of disruption.

In the report ‘Building water infrastructure resilience’1, the concept of ‘Resilience Pathways’

is set out, where pathways can improve infrastructure performance during and after a shock

or stress has impacted on a network (Figure 3).


Figure 2: The effect of resilience initiatives on customer satisfaction over time.

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The Resilience Pathway

• Preventing failure: ensuring infrastructure systems can withstand the direct and indirect impacts

of events.

• Expediting recovery: supporting infrastructure systems to become functional again as soon as

possible after stress or collapse.

• Transforming performance: working towards a new and improved state, rather than simply

reverting to ‘business as usual’. This requires reflection on successes and failures.

Figure 3: Infrastructure Resilience Pathways © Arup.

References: 1Lloyd’s of London/Arup (2017) Future Cities:

Building water infrastructure resilience.

Ofwat guidance is directing water

companies to be resilient to both short-

term shocks and long-term stresses. Table

1 sets out a range of shocks and stresses

that we have identified that may be

relevant to water companies.

Stresses

Ofwat has identified two key stresses;

population change, and the impacts of

climate change which will be acutely felt in

the water sector.

Further stresses, and further detail is set

out in international and national

documentation, such as the World

Economic Forum’s annual Global Risk

Report, and the UK Climate Change Risk

Assessment 2017.

Shocks

The National Risk Register outlines a

range of short-term shocks relevant across

industries in the UK. Risks identified are

wide-ranging and include potential cyber

attacks, legal risks, toxic gas leaks.

Uncertainty

Although organisations can review and

assess both short and long-term risks, it is

widely accepted that within today’s

dynamic and uncertain environment, these

shocks and stresses are increasing in

frequency and diversity, requiring

successful businesses to adapt their

operations beyond risk management of

likely and understood shocks.

The Ofwat guidance recognises that

resilience as well as risk management is

needed to overcome short-term disruptive

shocks and chronic long term stresses,

especially when these are uncertain and

unknown. Therefore, the characteristics of

the organisation, as well as the mitigation

plans they have in place, are important in

developing resilience.

Shocks Stresses

Disruptive events, which impact the ability to

provide a high quality service. In the water

industry, acute shocks include sudden events

such as floods, fires or cyber attacks.

Chronic conditions which weaken the function of the

organisation or system long-term. Examples highlighted

in particular by Ofwat include population growth and

climate change. Stresses are also often felt as shocks

when they reach a tipping point.

Terrorist attack

Failure of climate

change mitigation and

adaptation

Demographic change Land use change

Civil unrest Temperature extremes Urban creep Coastal erosion

Extreme vandalism Infectious diseases MigrationEnvironmental change inc.

invasive species

Hoax calls Environmental pollution Skills shortagesInequality and increasing

income disparity

Cyber attacks Fire eventsUnemployment and

underemployment Growth vs recession

Power outages Nuclear incident Lifestyle change Financial crisis

Asset failure FloodingRising chronic and lifestyle

diseasesUnmanageable inflation

Telecommunication

failure

Severe energy price

change

Climate change (inc.

drought and sea level rise)Bad debt

Data fraud/ theft State collapse or crisis Macro industry changeResource scarcity (inc.

fuel)

Dam failure Industrial disputes LeakageIncreased cost of

borrowing

False positive

alarms Supply chain failure Ageing infrastructure Structural change

Water supply

contamination

Failure of regional,

national or global

governance and

planning

Abstraction licences

change

Changing regulation,

policy and international

governance

Digital revolution

Table 1: The shocks and stresses that may impact the UK water sector

3. Shocks and Stresses

example. United Utilities is one of the top three

water companies in terms of urban runoff and

winter runoff 3. This results in higher risks of

flooding and potential drainage network

challenges compared to other water

companies.

The percentage of waste water works capacity

in urban areas is significantly above average

and the company has the third highest resident

population3, requiring an increased

understanding of the customer base and robust

customer management procedures.

United Utilities’ supply area is amongst the

areas with the highest livestock populations,

particularly the Cumbria area with significant

risk from any restrictions e.g. foot and mouth

was an historic threat.

Approximately 30% of the 57,00 hectares

owned by United Utilities is classified as a Site

of Special Scientific Interest (SSSI)6, meaning

United Utilities has a greater roles than many

in contributing to environmental resilience.

United Utilities also serves the area of the Lake

District National Park, which is subject to

specific planning rules and has its own

significant challenges.

United Utilities has developed its thinking

around resilience over many years. Many

aspects of the approach to developing it’s

business for customers, the environment

and communities contribute to United

Utilities’ resilience today.

As part of their drive for continuous

improvement, United Utilities is currently

undertaking several initiatives to improve the

ability to respond to challenges and align

programmes of work and PR19 plans

with the resilience guidance provided by

Ofwat in it’s PR19 methodology and

‘Resilience in the Round’.

The company’s approach to resilience has

been greatly enhanced by learning from

recent incidents, such as boil water notices

and extreme flooding1. An incident of

unprecedented scale which provided

significant learning was Franklaw Water

Treatment Works in 2015, where

cryptosporidium was detected in routine

sampling2. Following the incident,

improvement areas were identified across a

number of risk management processes and

a water transformation programme was

established to both address issues

alongside delivering performance

improvements. United Utilities undertook a

holistic asset resilience review with resultant

plans that are monitored on a regular basis

until completed2. United Utilities has also

taken the opportunity to share this learning

across the industry.

Capability has been improved in a number of

areas, and the business has adopted a

systems thinking approach1. It is evident

from discussions that there is a drive from

board level to use the lessons learnt from

previous incidents to progress and enhance

resilience capability throughout the

organisation.

United Utilities faces many of the shocks

and stresses listed in Table 1 and their

thinking continues to evolve in respect to

these as trigger points arise. There are

specific key business risks, regarded by

United Utilities as principal risks and

communicated to the board through the

annual review of risk profile 2. These,

excluding political and regulatory risks, are

summarised in Table 23.

There are a number of factors that lead

United Utiliities to experience global and

national challenges in a distinct way. For

4. What is resilience to United Utilities?

United Utilities Principal Risks3

Manchester and

Pennine water

supplies

Risk of failure of the

Haweswater supply system.

Bad debt

provision

Inability to collect acceptable

levels of cash

Water Network

Failure

Failure of the network due to

freeze-thaw, dry condition,

ground movement and other

factors.

Cyber risk IT or OT systems security

Sewer floodingFailure of the wastewater

network

Serious

pollution

Unintended introduction of

sewage and other pollutants

into the environment.

Leakage Failure to maintain acceptable

levels of leakage

Exceedance of

permits

Failure of treat wastewater to

the required quality standard

Failure to treat

water

Failure of water treatment

works and potential loss of

supply to customers

Customer

service

performance

Failure in delivering customer

service performance measures

Table 2: United Utilities Principal Risks5References: 1United Utilities(2018): Business Plan_Chapter 4 (Silver Gateway);2United Utilities (2017): ‘Franklaw incident’ presentation;3Vivideconomic; Arup (2017): Understanding the exogenous drivers of wholesale wastewater costs in England and Wales;4United Utilities – Bathing water technical note v1;5United Utilities – Group Board review of the risk profile reference document.6United Utilities – Catchment Management (https://www.unitedutilities.com/corporate/responsibility/environment/catchment-management/)

United Utilities Water Ltd.Resilience in the Round Review

Private & Confidential – July 2018 12

Resilience Framework

With support from financial, corporate and

operational resilience experts within Arup,

we have developed a holistic resilience

framework based on Ofwat’s ‘Resilience in

the Round’ concept, with sub-themes to

explore activities within the three themes in

more detail.

The framework is presented in Figure 5, and

a description of the sub-themes is provided

in the following sections. (Table 4-6)

This framework is designed to enable United

Utilities to think about short-term

management of risks, alongside longer-term

trends and lower likelihood risks, in order to

become truly resilient for the benefit of

customers and the environment.

6. Our resilience framework and approach

Figure 5: Water resilience framework



6. Our resilience framework and approach

Level 5: Leading The company has a best practice approach to this goal with

cutting edge actions and responses currently in progress.

There is significant horizon scanning for future changes and

clear methods to including these within plans and strategies.

Regular reviews and updates are part of business as usual.

Level 4:

Response

actioned

The company has created a response and actions to meet

this goal which is being applied in practice across the

company. The company is focused on proactive actions to

prevent issues before they arise.

Level 3:

Response

developed

The company set a clear goal around this and has developed

a response. This response has yet to be widely actioned,

though some pilots may have been undertaken.

Level 2: Aware The company is aware of the need for this goal but has not

yet been formally adopted into process, plans, strategies and

operational activities. There has been very limited response

to these gaps. In general the company reacts only to issues

that arise as they arise

Level 1: Unaware The company has not determined this as a goal. There are

significant gaps in understanding, processes, plans,

strategies and operational activities to achieve this goal.

Table 3: Definition of the maturity assessment scoring scale

Resilience assessment

The approach to maturity assessment is based

on a desk top review of key documents provided

by United Utilities, as well as interviews with

internal stakeholders from various departments.

The results were presented using scores from 1

to 5 against each sub-theme, as defined in Table

3

In addition to United Utilities’ assessment scores,

preliminary industry average scores are also

presented to provide an indication of comparative

current performance. We have carried out similar

assessments with six other water companies in

England and Wales. We have anonymised the

data collected from these assessments to

develop an approximate industry benchmark

score for each sub-theme.

Deliberately we have not attempted to prioritise

any of the three resilience groups (financial,

corporate and operational resilience) above

others, nor weight the individual sub-components

of the groups. This helps to recognise the

interdependencies across the components, i.e.

failing on one of the sub-components can mean

a whole company is not resilient.



Our resilience framework



Financial assessment framework

Sub-theme Level 1: Unaware Level 5: Leading

Financial viability No financial viability assessments beyond the

next year.

The Directors review the long-term viability of the company as an extension of their business planning process, and by their

actions retain a strong investment grade rating for the company (ideally S&P equivalent >= ‘BBB+’ Stable Outlook). To do this

the company:

• has financial systems to accurately project planned Opex, Maintenance and Capex expenditure in each AMP;

• has access to sufficient additional liquidity (cash or access to cash) in the event of unforeseen events or failures;

• publicly reports in accounts look-forward rolling financial viability statements for at least five years based on long-term

scanning spanning at least two AMPs, regularly stress testing the company to meaningful shocks (e.g. impact of change in

inflation, major wastewater event, terrorism/ cybersecurity incident, failure to accurately predict Opex costs and future

Capex costs, etc.), including the Ofwat July 2018 stress tests;

• to accommodate stress tests and scenario analysis (e.g. the Ofwat July 2018 stress tests) has determined appropriate

gearing levels and appropriate use of instruments such as inflation-linked debt; and

• has appropriate insurance policies and cover.

Protected finances

for the regulated

business

The company has not considered ring-fencing

finances for regulated activities.

The company has appropriate measures for ring fencing finances for regulated activities to protect the interests of customers.

Where the company has non-regulated activities, these are managed appropriately so they do not risk the financing of

regulated activities. The company maintains flexibility to finance regulated company activities in the event of shocks to the

group finances, evidenced by results from stress tests, spare cash reserves, liquidity, etc.

Sustainable long-

term financial

planning

The company’s plans are limited to the

current AMP period. There is also no fixed

process for sign off and no plan for regular

approval.

The company is looking forward 25+ years, with investment and expenditure plans linked to the strategic direction of the

company. These are regularly reviewed and tested. Base operating and maintenance expenditure together with any additional

enhancement or replacement expenditure to meet customer and regulatory requirements have been identified on a year-by-

year basis in the short to medium term and AMP-by-AMP basis for the longer term. The company has an excellent

understanding of the current and future predicted condition and performance of all its assets. All new investment is future

proofed.

Accessible

financial reporting

The company only reports the minimum

financial information that is required by

Companies House and Ofwat. The

information may be difficult to understand.

Financial reporting is appropriately tailored for the needs of investors, other stakeholders, and interested water customers. The

company publicly reports its financial and annual performance (via the annual reports and APRs) using customer focused

language. Customer billing information provides sufficient information to enable customers to understand major areas of

expenditure and impacts, such as leakage reduction. Corporate, financing and tax structures are transparent and easy to

understand.

Table 4: The financial resilience sub-themes within the resilience framework

Table 4 spanning two pages presents the financial assessment framework and a

description of the financial sub-themes

What is financial resilience?

Ofwat – “An organisation’s ability to avoid, cope with, and recover from, disruption to its finances.”

Therefore, whilst financial viability and the ring-fencing of regulated activities is a component, also

important is having proper costed sustainable long-term plans, and having systems and monitoring to

appropriately report to investors, Ofwat, stakeholders and the interested consumer.



Financial assessment framework


Robust financial

monitoring

The company only undertakes basic financial

monitoring.

The company has appropriate measures to monitor and confirm the company’s long-term viability, which goes beyond

AMP cycles to track trends in maintenance programmes, climate change and demographic changes, etc. These

measures are supplemented by regular sensitivity tests and scenario testing. Such information is recorded and reported

routinely at Board level, with clear criteria for when material divergences from expected plans need to be discussed and

actioned.

Table 4: The financial resilience sub-themes within the resilience framework

What is financial resilience?

Ofwat – “An organisation’s ability to avoid, cope with, and recover from, disruption to its finances.”

Therefore, whilst financial viability and the ring-fencing of regulated activities is a component, also

important is having proper costed sustainable long-term plans, and having systems and monitoring to

appropriately report to investors, Ofwat, stakeholders and the interested consumer.



Corporate assessment framework

Table 5: The corporate resilience sub-themes within the resilience framework


Clear strategic

direction

The company has no clear aim or vision. Disparate,

multiple company strategies and plans exist.The company has a clear aim and strategy which is well communicated and is recognised by all, both internally

and externally. All plans and decisions are based on how they will work towards this strategy.

Effective

governance and

assurance

processes

There is limited or no company-wide process for

assurances, approval and sign-off. Processes, roles,

governance and reporting varies across teams.

The company has reliable and well disseminated processes, roles, governance and reporting covering all aspects

of the business. There is a clear process for assurance, approval and board sign-off.

Effective business

continuity planning

The company has no business continuity plan, no

relevant policy in place, and no resource allocated to

develop and implement this. There may be unformal

resilience arrangements within some teams. There

are no training nor exercise programmes, and limited

or no resilience planning or response plans for critical

assets.

The company has a risk-based approach to resilience planning linked to the National Risk Register and the likely

impact on service to customers. A set of response plans are in place to prepare for, respond to and recover from

potential impacts. Plans are regularly trained and exercised, with everyone in the company knowing their roles and

responsibilities. All critical assets have emergency plans and all critical teams will be able to recover to minimise

impact on service. Approaches will follow best practice, e.g. ISO 22301 and the Business Continuity Institute Good

Practice Guideline 2018.

Comprehensive

horizon scanningNo horizon scanning is undertaken for the business.

Plans, strategies and actions are all based on the outcome of comprehensive and robust horizon scanning which

takes into account future shocks and stresses that may impact areas of the business. Horizon scanning is

regularly reviewed.

Inclusive customer

engagement and

co-creation

There is limited customer engagement undertaken.

Any that is undertaken is one way and only provides

the customers with information. There is no or limited

consideration of vulnerable customers

The company has a clear two-way dialogue with customers to ensure that customers are included and to improve

transparency, cooperation and collaboration on current performance and future direction for the business.

Customer policy and practices are established to meet the needs of customers in vulnerable circumstances. The

company aims to establish trust, confidence and legitimacy.

Engaged

stakeholders

Communication with stakeholders is rare and only

occurs when it is required by regulation.

The company plans, manages and undertakes regular and clear communications with stakeholder groups and

organisations. Collaboration is determined through multi-agency participation with tangible outputs that improve

the resilience to customers and the business.

What is corporate resilience?

Ofwat – “The ability of an organisation’s governance, accountability and assurance processes to help avoid, cope

with, and recover from, disruption; and to anticipate trends and variability in its business operations.”

The following table presents the corporate assessment framework and a

description of the corporate sub-themes




Active role in the

regions and

community

The company does not undertake activities to benefit

the wider community, and has no plans to do so.

The company undertakes activities which have wider benefits to the communities that are served allowing them to

grow and develop through enabling sustainable growth, both at a regional and local level demonstrating corporate

citizenship in the process. The company is establishing goals to meet the carbon challenge contributing to their

global and local impacts.

Comprehensive

health, safety and

wellbeing

Limited or no plans for health, safety and wellbeing.

Any plans and activities that are undertaken are

required by regulation.

Limited or no health and safety culture.

The company has reliable and robust plans for health, safety and well-being which will make significant and

measurable improvements to the lives of the workforce. There is a strong health and safety culture, where

behaviours are over and above what is required.

Collaborative

organisational

culture

The organisational culture has no or limited

recognition of the importance of collaboration and

change in service of customers, community or the

environment.

A notable organisational culture that puts collaboration and change at the heart of all they do. This is apparent in

the values, policies, plans and working practices of all employees who understand the fundamental roles they play

in the service value chain.; working together across boundaries in the service of the customer and community.

Empowered and engaged staff, with the capability, capacity and mandate to learn and adapt to events and

change, is evident in the short, medium and long-term management of the operation; not simply one-off

innovations and in response to major ‘events’. The organisational approach to collaboration aligns with ISO044.

Corporate assessment framework

Table 5: The corporate resilience sub-themes within the resilience framework

What is corporate resilience?

Ofwat – “The ability of an organisation’s governance, accountability and assurance processes to help avoid, cope

with, and recover from, disruption; and to anticipate trends and variability in its business operations.”

The following table presents the corporate assessment framework and a

description of the corporate sub-themes



Operational assessment framework


Continuity of

service to

customers

The company has limited or no understanding of the

impacts of outages on services. There is limited or no

consideration of vulnerable customers. There is

limited or no consideration of dependent critical

services.

Company operations focus on providing a continuity of service to customers and avoiding critical service failures,

such as supply interruptions and internal sewer flooding. It takes into account the different needs of customers,

particularly those who are vulnerable. Service interruptions only occur in the most unforeseeable situations. Asset

condition and criticality is understood and all critical aspects of the network have redundancy built in. Mechanisms to

regularly review and update all plans are in place.

Robust long-

term water

resource

management

planning

The WRMP is limited to a short term approach and

does not facilitate sustainable approaches to water

management. Planning does not include collaborative

projects and stakeholder engagement, and is not

aligned across the business.

Water resource management planning and drought planning has been undertaken for the long-term and integrated

into business planning to ensure that the company can meet their supply obligations and facilitate sustainable growth.

Plans are produced collaboratively with the EA and regional planning groups to ensure best value for customers with

respect to cross-company, regional and national supply options. The approach looks at a full range of hazards based

on a robust evidence base. Water resource management planning looks beyond the statutory minimum of 25 years

into the future, and develops adaptive pathways for delivering in the long-term.

Robust, long-

term water

recycling

planning

Wastewater management planning is limited to a short

term approach and does not facilitate sustainable

approaches to wastewater management. Planning

does not include collaborative projects and

stakeholder engagement, and is not aligned across

the business.

The company has undertaken drainage and water recycling planning for the long-term enabling sustainable growth in

the region without impacting existing customers. Wastewater plans are developed with stakeholders and integrated

into their business plans. Plans are published and shared. They focus on critical service failures such as internal

sewer flooding and pollution incidents. Best practice from the 21st Century Drainage programme is followed.

Reflective risk-

based approach

to asset health

There is a focus on short term high-likelihood risks.

The company has limited or no asset health measures

in place. Asset management best practise is not

followed, and there are no regular updates or reviews

of asset management strategy.

The company has undertaken a comprehensive assessment of asset health and asset risk, including long-term low-

likelihood risks, having detailed and accurate information on the state of all assets, the way they are configured and

the way they are operated. Focus is on criticality, protecting customers and the natural environment from exposure to

known risks, and reducing vulnerability to future uncertainties. There is a region wide asset strategy which is adaptive,

regularly reviewed and considers changing requirements in the long-term (25 years). They follow best practice for

asset management, e.g. ISO 55000.

What is operational resilience?

Ofwat – “The ability of an organisation’s infrastructure, and the skills to run that infrastructure, to avoid, cope with

and recover from, disruption in its performance”.

The following table presents the operational assessment framework and

a description of the operational sub-themes

Table 6: The operational resilience sub-themes within the resilience framework



Operational assessment framework



Innovative,

collaborative,

naturally-

resilient

approaches to

risk mitigation

There is limited or no consideration of naturally-

resilient approaches to risk mitigation. The company

has a short term vision, excluding smart technology,

natural solutions or collaborative approaches to risk

management, and demonstrates minimal foresight or

innovation associated with new challenges. There is

limited or no evidence of collaboration with land users,

and minimal influence over catchment activities.

There is a robust approach to considering a wide range of options to risk mitigation. Approaches are collaborative,

innovative and embrace technological change and the role of the natural environment. A system-wide approach is

taken. Collaboration is integrated into business plans, working with customers, other companies, and wider

stakeholders to deliver solutions. Approaches considered include encouraging customers behavioural change through

smart customer engagement, and use of smart technologies to improve asset performance, customer information,

leakage management and water efficiency, natural solutions, such as catchment management to improve raw water

quality, and blue-green infrastructure to manage storm water and reduce flooding and pollution incidents. Catchment

solutions are considered across the whole catchment, integrating water and wastewater needs.

Robust and

flexible supply

chain

management

The company has not considered the impact of energy,

resource and skills supply chains on their operations.

There is limited or no consideration of potential shocks

and stresses and their affect on supply chains. No

alternative source of supply considered.

The company considers the impact of energy, resource and skills supply chains on their operations and ensure diverse

and competitive supply chains that deliver the best outcomes for their customers. Supply chain needs are considered in

the long-term, based on horizon scanning. Collaborative relationships are developed with the supply chain, to avoid

boom and bust cycles. The company also considers the flexibility of their supply chains, particularly during shock

events. Internal processes are in place to keep this under review, sharing knowledge and developing solutions with

others. The supply chain is considered as a network. The company also considers how they can effectively utilise

options beyond their boundaries to mitigate their risks, e.g. use of water trading and bio resource trading markets.

Inclusive and

skilled

workforce

There is limited or no long-term thinking regarding

labour availability. The company has limited or no

workforce continuity plans, and has made no attempt to

identify skills gaps between their current and future

workforce.

The company has identified the capabilities and skills required to deliver outcomes for customers in the long-term,

based on robust horizon scanning. Robust people plans have been developed to fill any current or emerging gaps to

support these business needs, identifying recruitment, training and development, knowledge management, succession

planning and increasing diversity. The company works across the water industry and utility sector to address these

skills gaps. The company is seen as the first choice for highly skilled individuals, and valued employees recognise it as

a great place to work. The company encourages diversity through a range of programmes, such as employee network

groups and leadership role models.

Robust,

integrated and

flexible

technology

Technology is not used intelligently. There is a

fragmented network with no system cohesion. The

company has a focus on physical security.

Technology is used intelligently to deliver real operational and strategic gains. Data-driven decisions are the norm,

using both real-time data to adapt and respond, as well as using data for robust long-term decisions. Systems are

integrated, including operational technology and information technology systems. Interoperability and integration with

systems in other sectors has been considered. Cyber security is paramount, with redundancy built into systems, and

processes in place to continually review and improve this. People are at the centre of how technology is designed and

implemented, both customers and staff.

What is operational resilience?

Ofwat – “The ability of an organisation’s infrastructure, and the skills to run that infrastructure, to avoid, cope with

and recover from, disruption in its performance.”

The following table presents the operational assessment framework and

a description of the operational sub-themes




Financial, corporate and operational resilience:

maturity assessment

The following pages present details of the

findings for the assessment. These were

collated through document reviews and

interviews with subject matter experts within

United Utilities.

The findings were analysed against the

framework sub-themes and a total score is

provided for each theme as per the scoring

scale presented on page 12.



Financial resilience: maturity assessment



Current and

Ongoing

Activities

United Utilities regards financial resilience as one of its key strengths, which is supported by its financial metrics1, e.g. liquidity and gearing ratios. The business was the

first to produce a long-term viability statement (LTVS) in its 2015 Annual Report, following the introduction of a new provision in the UK Corporate Governance Code.

United Utilities currently provides a rolling 5-year look forward LTVS in its Annual Reports. Ofwat requires companies to present for a minimum period of 5 years A, which is

longer than the majority of FTSE 350 companies D.

Some water companies are addressing beyond this minimum 5-year period C. Whilst the rolling 5-year period is what United Utilities report to the market, internally United

Utilities undertakes viability assessments over two AMP cycles, acknowledging the further into the future one reports a LTVS the greater the degree of uncertainty,

especially regulatory uncertainty. This longer term analysis is evidenced by the PR19 submission which has a 7-year look forward viability statement. During our meetings

with United Utilities, the Company provided a Treasury management information pack which included various financial information and metrics, for example, liquidity risk,

market risk and credit investor relations, which are all in line with Ofwat’s PR19 final methodology E.

The business continuously monitors its credit ratings. The rating agencies tend to look at 3-year forward to determine their views on a business. As at early July 2018,

United Utilities Water Ltd. had a Moody’s A3 Stable Outlook credit rating, and an S&P A- Stable rating, making them the strongest FTSE listed water company ahead of

Severn Trent Water. These ratings show that United Utilities Water Ltd. has considerable financial headroom, and a good access to debt capital markets.

Level 1: Unaware

No long-term financial viability calculations beyond the

next year.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: LeadingThe Directors review the long-term viability of the company as an extension of their business planning

process, and by their actions retain a strong investment grade rating for the company (ideally S&P equivalent

>= ‘BBB+’ Stable Outlook). To do this the company:

• has financial systems to accurately project planned Opex, Maintenance and Capex expenditure in each

AMP;

• has access to sufficient additional liquidity (cash or access to cash) in the event of unforeseen events or

failures;

• publicly reports in accounts look-forward rolling financial viability statements for at least five years

based on long-term scanning spanning at least two AMPs, regularly stress testing the company to

meaningful shocks (e.g. impact of change in inflation, major wastewater event, terrorism/ cybersecurity

incident, failure to accurately predict Opex costs and future Capex costs, etc.), including the Ofwat July

2018 stress tests;

• to accommodate stress tests and scenario analysis (e.g. the Ofwat July 2018 stress tests) has determined

appropriate gearing levels and appropriate use of instruments such as inflation-linked debt; and

• has appropriate insurance policies and cover.

Current and ongoing

activities

United Utilities (5.0)

Preliminary Industry Average (3.5)

Planned for AMP 7

and beyond



Financial viabilityFinancial resilience: maturity assessment

Interviews: 1Mark Small, Head of Finance Planning

Documents reviewed:A Ofwat (2018): Expectations for companies in issuing long-term viability statements. IN 18/04; B United Utilities

Water Ltd (2018): 2017/18 Annual report; C Ofwat (2017): Monitoring financial resilience, D EY (2017): Annual

reporting in 2016/17, E Ofwat (2017): Delivering Water 2020: Our final methodology for the 2019 price review, F Ofwat (2018): Putting the sector back in balance: Consultation on proposals for PR19 business plans, G Ofwat

(2018): Putting the sector back in balance – summary of Ofwat’s decision on issues for PR19 business plans.



Current and

Ongoing

Activities

United Utilities Water Ltd.’s March 2018 accounts show a net debt/ RCV ratio of 64% (equivalent to 65% per Ofwat methodology), which is at the lower end of the

industryB. United Utilities is targeting an Ofwat methodology gearing below 60% by the end of AMP7. United Utilities Water Ltd. reports it had 21 months of liquidity (cash

and access to committed debt) at the end of March 2018, in line with their policy of maintaining liquidity between 15-24 months1. Please note that we have not calculated

the liquidity ratio independently.

Additionally, unlike the majority of water companies, United Utilities Water Ltd. is one of the few WaSC reporting a surplus in its defined benefit pension fund, strengthening

its financial resilience (March 2018 surplus of £264m)B. If one subtracted the pension surplus from the net debt position, United Utilities Water Ltd.’s March 2018 Adjusted

Gearing rate would be 62%*. We did not review its pension scheme, however, United Utilities stated that it has taken a number of steps to attempt to maintain the pension

fund in surplus. For instance, in April 2018, to further hedge its pension scheme, it extended its asset – liability matching approach to fully hedge exposure to inflation and

interest rates and eliminated exposure to riskier investments 1,B.

In undertaking stress tests to assess its financial viability, United Utilities runs an internal Enterprise Risk Management process (ERM). From the Annual Report, United

Utilities’ key areas of risk or uncertainties are: (1) stability of financial institutions and the world economy, (2) economic uncertainty, (3) inflation/ deflation, and (4) financial

market conditions, interest rates and funding costs. Additionally there are many other operational risks they assess, e.g. major water supply issues in the Manchester and

Pennine areas area as a result of failures to the water supplies from the Lake District, cyber risks, a major sewage flooding incident, and failing to effectively treat waste

water thereby breaching permits (see page 11 for more information). The largest ‘severe but reasonable’ low-probability event would have an AMP7 impact of

approximately £563m, c.10% of the AMP7 Totex request of c.£5.4bn1.

As well as their own ERM system, United Utilities has run the Ofwat July 2018 sensitivities, including the combined sensitivity of a 10% overspend on totex per annum

(c.£540m in AMP7), an ODI penalty equivalent to 1.5% of RORE in each year, and a financial penalty of 1% of revenue in one year F,G.

With any Totex overspend a proportion of the overspend will be recovered from water customers in the following AMP cycle, with shareholders bearing the remainder of

the overspend. As the reclaim happens in the following AMP there is therefore a need for short-term funding for this portion. At present United Utilities is projecting up to

around £1.9bn of dividends over the seven year liability period (2018/19 – 2024/25). From modelling we have seen, but not validated, United Utilities Water Ltd. would be

able to absorb the ‘Ofwat’ combined scenario or their own largest ‘severe but reasonable’ low probability operational event by increasing gearing without having to resort to

other mitigating actions. The mitigating actions available for more combinations of extreme circumstances include:

• claiming where possible from United Utilities comprehensive insurance cover. It has insurance for (a) property and business interruption, (b) terrorism/ cyber attacks,

(c) public liability, (d) employers liability, ( e) water meter liability, (f) crime, (g) personal accident and travel incidents, (h) property damage, (i) engineering inspections,

(j) directors indemnity, and (k) pension trustee issues1. For example, in 2015 several significant storms in the Cumbria region impacted on United Utilities services,

resulting in around £40m in damages. The business was able to cover the costs of the storm damages with insurance later reimbursing1. Overall, this assessment

found that the business has shown good financial resilience to recent shock events;

• reducing or stopping dividend payments. United Utilities notes there are no controlling shareholders, with most shareholders having small stakes in the company (at a

maximum of approximately 8% owned by Lazard Asset Management), and shareholders are supportive of stable long-term growth and long-term dividend yield 1;

• potentially selling off some assets; and

• adjusting investment in other parts of the business. For example, the capital expenditure programme could be deferred if required, which could be up to £100m in Years

1, 2 and 3 of AMP7 (this equates to approximately 20% of Capex) with medium risk to performance.


* Adjusted gearing = [ Net debt +/(-) pension deficit/ surplus ] / RCV








Current and

Ongoing

Activities

In conclusion, in the extreme scenarios they have presented there is evidence that United Utilities could retain an investment grade credit rating (i.e. >=S&P BBB- or

Moody’s Baa2) as required by their water licence. Even if all modelled ‘severe but reasonable’ low probability events were to happen in AMP7 equity investors could be

approached for more money. As stated, the likelihood of multiple individually extreme low-likely events happening over the AMP7 cycle is extremely small, giving further

comfort that with less severe scenarios United Utilities will be able to continue operating.

Thus, as it has the highest credit rating of any FTSE listed water company, has a very large equity base, undertakes long-term scanning across two AMPs which is

supported by its five-year rolling Long Term Viability Statements, continues to perform challenging stress tests, and has below industry average gearing the company is

one of the few to be awarded a (5) leading status.

Planned for

AMP7 and

beyond

United Utilities’ PR19 business plan supports a further reduction to below 60% by the end of AMP7, in line with Ofwat’s reference level of 60% for AMP7 and aims to

maintain the credit ratings to at least A3 (Moody’s) and BBB+ (S&P)1. For these and other reasons provided for their current activities, a (5) leading rating is awarded for

AMP7 and beyond.









Current and

Ongoing

Activities

United Utilities Group PLC’s structure is relatively simple organisation, with 98% of the overall group’s revenues now comprising United Utilities Water Ltd1. In 2010, United

Utilities sold its electricity subsidiary, Electricity North West, and in 2016 United Utilities exited from non-household retail services to form a 50:50 joint venture with Severn

Trent, Water Plus, in response to the market opening. In the financial year 2017/18 the regulated water company, United Util ities Water Ltd. lent £100m to the non-

regulated Water Plus company B. Whilst this represents less than 1% of the RCV of United Utilities Water Ltd., there is still a small risk should Water Plus not be able to

service the loan commitments.

We note that there are two material litigations mentioned in the United Utilities’ Annual Report: one relates to United Utilities International Ltd and the other relates to

United Utilities Water Ltd. However, in meetings United Utilities has informed us that the risk of these claims succeeding are low and should not adversely impact its credit

rating 1.

Overall, given the dominance of regulated activities and the size of the intercompany loan it is not considered that other parts of the Group would place an undue burden

on the financial position of United Utilities. Therefore, like many other water companies with a low (<5% of total revenue) level of non-regulated activities a score of (4)

response actioned is awarded.

Planned for

AMP7 and

beyond

United Utilities Water Ltd. has confirmed the intention is for the loan to the non-regulated Water Plus to be repaid by 2020, and from then on the ring-fenced business will

not lend money for other non-regulated activities. Therefore, like many other companies a score of (4) is awarded 1.

Level 1: Unaware

The company has not considered ring-fencing finances for

regulated activities.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has appropriate measures for ring fencing finances for regulated activities to protect the

interests of customers. Where the company has non-regulated activities, these are managed appropriately so

they do not risk the financing of regulated activities. The company maintains flexibility to finance regulated

company activities in the event of shocks to the group finances, evidenced by results from stress tests, spare

cash reserves, liquidity, etc.

Current and ongoing

activities



Planned for AMP 7

and beyond



Protected finances for the regulated businessFinancial resilience: maturity assessment








Current and

Ongoing

Activities

United Utilities Water Ltd.’s Annual Report includes the strategic report on United Utilities’ key milestones in its business planning for the next 25 years B. Later in 2018

summer United Utilities is planning to publish an updated 2020-2045 Water Resources Management Plan. The plan has cost analysis for some parts of the water business.

As explained in the operational sub-theme “Reflective risk-based approach to asset health’ (p.56), United Utilities has an innovative software tool, Pioneer, that is used to

collect asset condition data (e.g. from CCTV cameras when there are routine incidents) from the majority of the above-ground assets and many of the below-ground assets,

and uses interpolation where the asset condition of underground pipes is not known, e.g. assessing the age of housing stock in areas, and then estimating the condition of

pipes based on the design characteristics and materials of other pipes used in areas of with similar housing stock1. By the end of 2018 there will be a virtually complete asset

register for the water network assets, with more complete waste water asset analysis during AMP7.

The Pioneer software then uses common pricing metrics to give a high-level estimate of the costs of replacing pipes and other assets into future AMP periods.

United Utilities uses software to plan refurbishment work to sequence refurbishment works. As well as the ongoing refurbishment work, in some area’s the company’s long-

term horizon scanning is picking up new investments that will be needed in the future to accommodate climate changes and demographic pressures.

Understandably, estimates for the next 7 years covering the PR19 business plan are more accurate than estimates in 10-20 years time, but longer term analysis is showing

that:

• from privatisation to 2010, 40% of all the water distribution assets were replaced, but like many other water companies in the last eight years there has not been a

significant asset replacement/ refurbishment programme for waste and waste water assets, as the focus has been on environmental improvements and investments;

• during these last eight years, despite an increasing average asset life, technical and innovation advances have allowed asset failures to be dealt with more quickly, and

imminent failures picked up before incidents happens which has contributed to lower leakage levels; and

Level 1: Unaware

The company’s plans are limited to the current AMP period. There

is also no fixed process for sign off and no plan for regular

approval.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company is looking forward 25+ years, with investment and expenditure plans linked to the strategic

direction of the company. These are regularly reviewed and tested. Base operating and maintenance

expenditure together with any additional enhancement or replacement expenditure to meet customer and

regulatory requirements have been identified on a year-by-year basis in the short to medium term and AMP-

by-AMP basis for the longer term. The company has an excellent understanding of the current and future

predicted condition and performance of all its assets. All new investment is future proofed.

Current and ongoing

activities



Planned for AMP 7 and

beyond



Sustainable long-term financial planningFinancial resilience: maturity assessment








Current and

Ongoing

Activities

• in about 10 years time the gradually declining asset health will offset the technical advances and leakage and failures could start to rise again unless the replacement/

refurbishment programme is accelerated.

Therefore a score of (4) is awarded as United Utilities is aware of the challenge and is already starting to work out how this can be paid for whilst trying to avoid steep rises in

totex requirements in AMP9, AMP10 and beyond. To assist, visualisation this investment data is presented in a dashboard view which can be mapped to show where exactly

this investment is needed in future AMP cycles.

Planned for

AMP7 and

beyond

Having virtually complete understanding of asset health and criticality of all the water and waste water assets by the end of AMP7 puts the company in a strong position to

plan refurbishment and new investment works in future AMPs in a sustainable way, adjusting to trends and events 1.

Sustainable long-term financial planningFinancial resilience: maturity assessment








Current and

Ongoing

Activities

As other companies United Utilities reports performance through the Annual Performance Report, the Annual Report and Financial Statements. United Utilities Group PLC

is a public listed company, which have to make extensive disclosures and submissions to rigorous regulators. The listing process also provides transparency in its

ownership, shareholders and financial structure.

United Utilities has independent audit and assurance being carried out on its Annual Report and Annual Performance Report. Evidence shows that United Utilities is very

engaged and proactive with changes in accounting reporting standards to ensure its financial reporting is clear, understandable and representative of its performance and

financial position. All this provides further comfort to customers and stakeholders on the quality and transparency of its reporting.

The 2017 Annual Performance Report includes historical performance, and according to Ofwat (2017) contains ‘well presented, clear and easy to understand performance

information’, as does the United Utilities website D. The Annual Performance Report also gained the Plain English Campaign’s Crystal Mark for clarity.

United Utilities has improved its Ofwat reporting standard of assurance from the ‘targeted assurance’ to the ‘self-assurance’ status in 2016 and this was maintained in 2017.

It is one of two companies with this highest standard. United Utilities improved in 2017 in areas that were assessed as minor concerns in 2016. In the 2017 assessment

there were a couple of minor areas of errors and for improvement, however, we believe that the Company will be able to address them in the next reporting period.

Planned for

AMP7 and

beyond

We are not aware of any major plans UU has to change its approach. In order to maintain its “leading” rating, United Utilities will need to continue to review, learn, and

improve its approach. We note, for example, that the Investment Association has some recommendations on annual reports, which may be helpful for future reporting.

Level 1: Unaware

The company only reports the minimum financial information

that is required by Companies House and Ofwat. The

information may be difficult to understand.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

Financial reporting is appropriately tailored for the needs of investors, other stakeholders, and interested

water customers. The company publicly reports its financial and annual performance (via the annual reports

and APRs) using customer focused language. Customer billing information provides sufficient information

to enable customers to understand major areas of expenditure and impacts, such as leakage reduction.

Corporate, financing and tax structures are transparent and easy to understand.

Current and ongoing

activities



Planned for AMP 7

and beyond



Accessible financial reportingFinancial resilience: maturity assessment








Current and

Ongoing

Activities

United Utilities actively monitors credit ratings and other financial metrics, and forecasts these metrics over AMPs, for example, gearing, interest cover and adjusted cash

interest cover. Sensitivity analysis is routinely undertaken. Like most other water companies United Utilities has to provide regular updates to its bond investors.

As well as providing Ofwat with all necessary information, as a premium listed London Stock Exchange company, United Utilities Group PLC must make extensive

disclosures and submissions to the London Stock Exchange. This means high levels of governance and accountability are required, in accordance with listing rules.

There are three main financial Committees and Boards that report to the main Group Board:

• The Treasury Committee is held every four months and is chaired by a non-exec director. This committee covers operational compliance, liquidity risk, credit risk,

market risk, capital risk, operational activities and credit investor relations. The Group Board is responsible for treasury strategy and governance, which is reviewed

every year.

• The Group Audit & Risk Board (GARB). The GARB feeds up to Group Board for review and sign-off, which is ultimately responsible for risk management and the

company’s viability A.

• The Corporate Audit Committee meets quarterly, and has a primary focus on financial, regulatory compliance, and emerging themes C. The quarterly audit meetings are

informed by ongoing reviews and regular meetings of the GARB, including a focus on both current and future risks 1.

There clear rules for when any under- or over-spend on budgets needs to be highlighted to the main Board, which is done via monthly reporting of budget variations from

all operational areas. Thus, like many other water companies that have stringent checks and balances a score of 4 is awarded.

Planned for

AMP7 and

beyond

There was no indication of planned changes in AMP7 or beyond so the score of 4 is retained1.

Level 1: UnawareThe company only undertakes basic financial monitoring

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: LeadingThe company has appropriate measures to monitor and confirm the company’s long-term viability,

which goes beyond AMP cycles to track trends in maintenance programmes, climate change and

demographic changes, etc. These measures are supplemented by regular sensitivity tests and

scenario testing. Such information is recorded and reported routinely at Board level, with clear

criteria for when material divergences from expected plans need to be discussed and actioned.

Current and ongoing

activities



Planned for AMP 7

and beyond



Robust financial monitoringFinancial resilience: maturity assessment








Corporate resilience: maturity assessment




Clear strategic direction

Current and

Ongoing

Activities

United Utilities’ ‘systems thinking’ approach has been discussed as the organisational approach, and is outlined as the ‘heart of the Operating Strategy D. This

assessment sees an opportunity in increasing the extent that this forms the core of the organisational strategy and is communicated to and acted upon by staff.

United Utilities vision is: “to be the best UK water and wastewater company, providing great service to our customers”. In the lead up to PR14, a 25 year long high level

strategy was published A This publicly available document isn’t currently planned to be updated, however, there has been recent internal activity to review the strategic

direction as part of PR19 planning1.

Through this assessment, we have seen evidence of the strategic direction of the business being developed as part of PR19 planning B but communication more widely

in the organisation has yet to be planned. There are illustrations at the start of the document which show how individual plans for the different areas of the business (bio

resources, water+, water resources, wastewater+) sit under the organisational vision and strategy. These plans set out goals relating to the wholesale business and a

path of time-based achievements for each AMP from 2020 up to 2040. For example, the water resources business has goals relating to reducing costs of water services

by 20%, and generating 20% of income from new revenue streams by exploiting opportunities in the circular economy and natural capital accounting. This demonstrates

some thought has been given to the longer term strategic direction. However, there are some gaps in the activities, particularly in the longer term beyond AMP8 looking

forward to 2040, and alignment outside the wholesale business. In addition, there are more detailed business strategy documents for each of the business areasC which

were authored in 2016. These build on the strategic goals of each business area, and develop more detail on the activities and costs involved in meeting these goals

and achievements over time. It is not clear how regularly these are reviewed and how widely communicated and recognised they are within the organisation.

We have awarded a “level 3”, as whilst there are a number of organisational strategies, these could look further into the future and be better communicated, both

internally and externally.

Planned for

AMP7 and

beyond

The information shared with regards to the operating strategy D provides an insight into the relationship between strategy, design, plan and operating model. There could

be broader communication of the strategic direction of the organisation, and through this assessment, we have not seen any future plans for United Utilities to define the

strategic direction for the organisation in a single, clear, up to date organisational strategy document which: embeds the systems thinking approach, underpins internal

plans and decisions, and provides a single point of reference for external stakeholders to update the version available on the website.

Level 1: Unaware

The company has disparate, and multiple strategies and

plans. There is no clear aim or vision for the business.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has a clear aim and strategy which is well communicated and is recognised by all, both

internally and externally. All plans and decisions are based on how they will work towards this strategy.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Jo Harrison

Documents reviewed: A United Utilities: Long term strategy (www.unitedutilities.com), BUnited

Utilities: Wholesale PR19 SDS, CUnited Utilities: Business strategy documents, D United Utilities

(2018): ‘Systems Thinking’ presentation

http://www.unitedutilities.com/




Effective governance and assurance processes

Current and

Ongoing

Activities

United Utilities’ governance and assurance processes are comprehensive in their approach to identifying, reporting, managing and controlling risks across the organisation

and to the board for review and sign off. There are potential opportunities for embedding the principles of resilience more prominently in these processes, as they currently

focus heavily on risk management aligned to ISO 31000, with reference to resilience principles in the control and mitigation of individual risks, but don’t consider the

resilience of the organisation more broadly.

The Business Risk Management Framework follows an Enterprise Wide approach, which considers internal and external factors and covers all risk types across the

company, with risks transcending from Operational to Tactical and up to Strategic level. The RADAR database links risks to ODI performance metrics and reputational and

customer evaluation1. Within United Utilities’ governance structure, there is a clear framework of roles and responsibilities for risk management across the group. There is

an executive sponsor of risk management. In addition, there is a separate individual responsible for asset and operational resilience with governance processes in place

where activities are monitored, managed and fed up to the Group Audit & Risk Board (GARB). The GARB feeds up to Group Board for review and sign-off, who are

ultimately responsible for risk management and the company’s viabilityA. In respect to resilience challenges the board owns them as a whole with no one executive level

owner of resilience in the organisation. Other organisations create a champion for resilience to ensure consistency of thinking and this may be an opportunity for United

Utilities to consider, to expand on their separate risk management and asset and operational resilience roles.

Bi-annually, the board reviews the 10 most significant Group and Wholesale operational risks that are identified in the organisation’s RADAR database, plus an additional

five risks with a potentially very high impact severityB. The inclusion of these low likelihood, high impact events shows a positive step toward resilience thinking in the

organisation’s governance. The internal Corporate Audit Committee meets quarterly, and has a primary focus on financial, regu latory and compliance risks and controls,

and emerging themesC. The quarterly audit meetings are informed by ongoing reviews and regular meetings of GARB throughout the year, including a focus on both

current and future risks1. In addition, BURA meetings are held 6 monthly, and are focused on specific areas with the relevant department’s Director, R isk Lead and a

representative from the Corporate Risk Team in attendance.

Their is regular engagement between the Board and the Chair of the Customer Challenge Group (known as ‘YourVoice’), and the Corporate Responsibility Board is

involved in decision making. YourVoice’s findings are reported alongside the findings of the Corporate Audit team and external technical and financial auditors to aid the

Board’s decision to approve the annual suite of performance reports F.

Level 1: Unaware

There are limited or no company-wide processes for

assurance, approval and sign-off. Processes, roles,

governance and reporting is different across teams.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has reliable and well disseminated processes, roles, governance and reporting covering all

aspects of the business. There is a clear process for assurance, approval and board sign-off.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1James Taylor, 2Craig Percival, 3Mark Abbott

Documents reviewed: AUnited Utilities (2017): Business Risk Management Framework, BUnited

Utilities (2018): Group Board review of risk profile , CUnited Utilities (2018): Corporate Audit

planning approach and 2018/19 plan, DOfwat (2017): Company monitoring framework: 2017

assessment, EUnited Utilities (2017): Annual performance report 2017 , FUnited Utilities (2017):

AMP6 regulatory reporting assurance framework




Effective governance and assurance processes

Current and

Ongoing

Activities

In Ofwat’s 2015/16 assessment United Utilities was moved to the highest rating “self-assurance” D. In the most recent Ofwat assessment, United Utilities exceeded

expectations for the “Assurance plan”, “Data assurance summary” and “Reliable, timely and appropriate information”, while meeting expectations in eight other areas E.

The Annual Performance Report describes the “three lines of assurance” framework, that includes management, economic regulation or finance team, and the

independent audit and assurance activities. United Utilities’ assurance process has been assessed by recent external audits (in 2015 and 2017), that identify United

Utilities’ risk management approach as representing best practice.

Planned for

AMP7 and

beyond

There are no overarching changes planned for United Utilities’ approach to governance and assurance. The Board is engaged in the oversight of the Company’s Price

Review 2019 (PR19) business planning process (the plan itself being drafted by management). The Board has also recently been engaged in considering the latest update

to the draft WRMP submission to Defra in 2019.

The proposed Audit Plan for 2018/19C submission outlines 65 audit activities, with 43 of these proposed to be completed this year. The key activities included in the plan

relate to PR19 submission planning, and changes relating to new legislation and the wholesale and domestic retail market.

Interviews: 1James Taylor, 2Craig Percival, 3Mark Abbott

Documents reviewed: AUnited Utilities (2017): Business Risk Management Framework, BUnited

Utilities (2018): Group Board review of risk profile , CUnited Utilities (2018): Corporate Audit

planning approach and 2018/19 plan, DOfwat (2017): Company monitoring framework: 2017

assessment, EUnited Utilities (2017): Annual performance report 2017 , FUnited Utilities (2017):

AMP6 regulatory reporting assurance framework




Effective business continuity planning

Current and

Ongoing

Activities

United Utilities has a good risk-based approach to business continuity planning, and has developed their plans and capabilities in line with relevant best practice to improve

the continuity of services to their customers. United Utilities is actively involved in exercising relevant plans including with external agencies where necessary, and has

demonstrated a commitment to developing capabilities of staff with training and accreditation

United Utilities’ Enterprise Risk Management includes a risk register (RADAR) which is used across the business and considers business risk, issues, opportunities, and

their associated controls (and enablers for opportunities) alongside actions. The RADAR database also facilitates the categorisation and aggregation of risk notably by

directorate, company objectives and inherent risk areas which constitute the company’s principal risks in the annual report.

United Utilities has a comprehensive set of business continuity and contingency plans in place, that are aligned to ISO “Business Continuity Management” 22301

guidelines. There are approximately 80 business continuity plans in place, with 85% of them tested annually, with over 20 tests, including fully integrated IT disaster

recovery B. United Utilities’ approach follows follow the BCI best practice, plans are developed at a departmental level and all follow the same template, and there is a

single activation plan which sits under the company incident procedure1. In order to assure the effectiveness of these plans and to ensure staff remain familiar with them,

exercising is an important component of United Utilities contingency planning, and has included:

• 2016 held or participated in ten exercises of contingency plans

• May 2017 workshop exercise for all agencies in Merseyside

• July 2017 major internal United Utilities crisis level exercise centring on a hypothetical cyber-attack.

United Utilities has developed an understanding of the criticality of their operational assets, represented by the time for a single point of failure to impact on service.

Contingency planning to address disruptions to operational assets includes the incident management policy and procedures, tactical plans and site specific planning. The

recent freeze-thaw event in March 2018 was foreseen and well managed by United Utilities’ 24/7 Duty Manager, and this event resu lted in limited impact on the continuity

of United Utilities’ services to customers1. United Utilities were commended by Ofwat for their proactive communications and use of real-time telemetry to identify and

repair leaks before they impacted on water supply services to customersC.

Level 1: Unaware

The company has no business continuity plans. No

resource allocated. No policy in place. There are unformal

resilience arrangements within some departments/teams.

No training or exercise programme is implemented. There

are also limited or no resilience planning or response plans

for critical assets.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has a risk-based approach to resilience planning linked to the National Risk Register and the

likely impact on service to customers. A set of response plans are in place to prepare for, respond to and

recover from potential impacts. Plans are regularly trained and exercised, with everyone in the company

knowing their roles and responsibilities. All critical assets have emergency plans and all critical teams will

be able to recover to minimise impact on service. Approaches will follow best practice, e.g. ISO 22301 and

the Business Continuity Institute Good Practice Guideline 2018.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Niall Clarke

Documents reviewed: A United Utilities: Resilience presentation (Jo Harrison), B United

Utilities (2017): PR19 resilience supplementary (Bronze), C Ofwat (2018): Review of water

companies’ response to the ‘Beast from the East’




Effective business continuity planning

Current and

Ongoing

Activities

United Utilities is among the first non ‘blue-light’ organisations that has integrated their incident management procedures and training to the ‘joint emergency services

interoperability framework’, developed by the Cabinet Office and aligned to the approach of Police, Fire and Ambulance to inc ident response.

Planned for

AMP7 and

beyond

United Utilities has an annual review of contingency planning and exercises, and interviewees discussed an ambition to do more structured contingency planning.

Recognising that although the business has a good approach, there is potential to improve.

There are no fundamental changes planned for the approach to business continuity, but the policy has recently been updated. United Utilities will be doing more work on flu

and fuel in line with the National Risk Register, and the work area recovery strategy (the mix and risk appetite) is up for review over the next nine months.

Interviews: 1Niall Clarke

Documents reviewed: A United Utilities: Resilience presentation (Jo Harrison), B United

Utilities (2017): PR19 resilience supplementary (Bronze), C Ofwat (2018): Review of water

companies’ response to the ‘Beast from the East’




Comprehensive horizon scanning

Current and

Ongoing

Activities

United Utilities has an understanding of the importance of incorporating horizon scanning in some plans and strategies to respond to long- term risks1. There is an opportunity

to further develop pockets of good practice into a robust, comprehensive and joined up approach across the business.

United Utilities considers new or emerging risks within its risk management process2, identifying issues or opportunities for the business. The outcome of this approach is

summarised in the “Full Year Review of the Risk Profile”A report, which highlights the nature, extent and distribution of the business risk profile relative to ten inherent risk

areas that are regarded as the principal risks for the purposes of the annual report. During this assessment, we reviewed the latest version of this document. Some emerging

risks are taken into account in the report (Brexit, climate change, General Data Protection Regulation, etc.) as “worthy of note due to their potential impact”, although they fall

outside of the top ten or high impact risk list. There is a Political and Regulatory group which meets every two to three weeks, and a Wholesale Strategy and Change Board

which meets monthly1. A core part of the role of the Strategy Manager for each of the business areas is to undertake day-to-day horizon scanning and constantly update the

strategy for their area. It was not clear from this assessment how United Utilities’ approach looks to the longer term, and how these risks are routinely identified and co-

ordinated between individual sponsors, who each take responsibility for considering new and emerging risks for their business area. There could be duplication of effort which a

more centralised, joined up approach to horizon scanning may avoid.

In 2017, a review of the main drivers for changeB that may impact the business was carried out against the ‘Forces for Change’ framework, developed by Business in the

Community. The framework identifies 6 themes, or ‘Drivers for Change’ and based on them, a number of sub themes were considered which, over different time frames, may

impact United Utilities as it currently operates. The aim of the report was not to provide solutions or answers to the individual sub-themes, but to stimulate debate and influence

discussion through its executive strategy process. It is not clear from this assessment how this document has been used and if it has influenced or been embedded in the

organisational plans. It is also not known if this will be reviewed and updated in the future or on a regular basis.

In a number of areas, United Utilities is planning beyond what is proposed by the regulator. The draft of the Water Resources Management Plan 2019C looks beyond a 25 year

planning horizon out into the 2080s to ensure robustness and includes an anticipation of trend to maintain the service, although specific investment strategies are to be

identified. The wastewater planning side of the business considers population growth using the same data and approach3. Overall, trends such as population growth in the

region and climate change are quite well understood within the business. The climate change adaption planD explains to the government how United Utilities are preparing for a

changing climate, describing the actions currently implemented and in progress.

Level 1: Unaware

No horizon scanning is undertaken for the business.

Level 2: Aware Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

Plans, strategies and actions are all based on the outcome of comprehensive and robust horizon scanning

which takes into account future shocks and stresses that may impact areas of the business. Horizon scanning

is regularly reviewed.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Jo Harrison, 2James Taylor, 3Paul Tipper, 4Dave Odgen, 5Kieran Brocklebank

Documents reviewed: AUnited Utilities (2018): Group Board review of risk profile; B United

Utilities (2017): Part 3 United Utilities future cost pressures - Drivers for change; C United

Utilities (2017): Draft Water Resources Management Plan 2019; DUnited Utilities (2015):

Adaptation progress report 2015 under the Climate Change Act 2008




Comprehensive horizon scanning

Current and

Ongoing

Activities

A forward looking approach is embedded in multiple areas of the business, especially through the extensive implementation of technology in United Utilities’ operating model

(systems thinking approach)4. A range of projects and actions (idea scouts, Innovation Lab for new suppliers, and links with academia) were identified during this assessment

to highlight United Utilities’ involvement in horizon scanning5. However, a long term approach is not applied consistently in each area of the business and different timeframes

are considered. A robust and joined-up approach to horizon scanning, which is regularly reviewed and shared between relevant parts of the organisation, represents an

opportunity for United Utilities to understand the business’ interdependencies and improve the approach to long term planning .

Planned for

AMP7 and

beyond

The review did not find plans for changes to the approach to horizon scanning more broadly across the business.

There are plans to update climate change models based on UKCP183.

Interviews: 1Jo Harrison, 2James Taylor, 3Paul Tipper, 4Dave Odgen, 5Kieran Brocklebank

Documents reviewed: AUnited Utilities (2018): Group Board review of risk profile; B United

Utilities (2017): Part 3 United Utilities future cost pressures - Drivers for change; C United

Utilities (2017): Draft Water Resources Management Plan 2019; DUnited Utilities (2015):

Adaptation progress report 2015 under the Climate Change Act 2008




Inclusive customer engagement and co-creation

Current and

Ongoing

Activities

This assessment found that United Utilities has a good understanding of the need for customer engagement and incorporation of views into the decision-making process.

In some areas, including long-term water resources planning, the company is leading in its approach for inclusive customer engagement and co-creation. There is good

evidence of less in-depth regular engagement with customers, beyond and between the engagement required as part of the PR planning process.

United Utilities has developed an understanding of its customers with wide ranging customer research including surveys, focus groups, face to face interviews and a

segmentation approach to tailor engagement to different types of customers depending on their characteristics and situation F. United Utilities has developed multiple digital

challenges to make it easier for customers to contact them, and has an internal customer insight hub which is a single reference point for customer data across the

business areas and the regions it serves F.

The Water Resources Management Plan A has been developed with significant, early and innovative customer engagement, utilising multiple tools (qualitative, quantitative,

business as usual and innovative techniques)1. United Utilities was also the first water company to undertake an immersive experience workshop, where customers could

roleplay with the consequence of a service failureA. The business has also enhanced their customer approach through development of new innovative techniques such as

the ‘Programme Choice’ game. The ‘YourVoice – customer and stakeholder panel’ was recently established and succeeds the previous Customer Challenge Group B, to

act as an independent body of individuals providing a challenge to the business. An online community panel, known as “WaterTalk”, was also established, recruiting 7,300

customers to take part. This is used to develop a rounded perspective of customer concerns, and an extensive programme of dedicated customer research and day-to-day

contacts from customers were used to understand their priorities and expectations for resilient water and wastewater services1.

Examples of co-creation with customers in United Utilities’ practices include the immersive workshops, where customers provide input to United Utilities’ approach to long-

term issues and approaches including the natural capital pilot projects. Also, individual projects including the Petteril catchment work, and the route of a new main through

a sensitive area in West Cumbria, have involved input from customers and community groups to shape the design of United Utili ties’ interventions2.

Level 1: Unaware

There is limited customer engagement undertaken. Any

that is undertaken is one way and provides the customers

with the information. There is no or limited consideration

of vulnerable customers.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has a clear two-way dialogue with customers to ensure that customers are included and to

improve transparency, cooperation and collaboration on current performance and future direction for the

business. Customer policy and practices are established to meet the needs of customers in vulnerable

circumstances. The company aims to establish trust, confidence and legitimacy.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Ben Nadel, 2Chris Matthews and Gaynor Murphy

Documents reviewed: AUnited Utilities (2017): Draft Water Resources Management Plan; Bhttps://www.unitedutilities.com/corporate/about-us/performance/yourvoice/; C United Utilities

(2017): 2016/17 Annual report, DUnited Utilities (2017): PR19 resilience supplementary

(Bronze) , EUnited Utilities (2017): United Utilities’s approach to affordability & vulnerability

(Silver), FUnited Utilities: ‘Customer engagement’presentation




Inclusive customer engagement and co-creation

Current and

Ongoing

Activities

Following the Franklaw incident in 2015, United Utilities has developed the centralised approach to operational management and customer communication in the ICC, and

embedded the lessons learnt from this incident with a focus on the importance of constant and consistent customer communication. From this incident, United Utilities

developed the Priority Services programme, that offers customers support on short and long term personal challenges, with 30,000 customers now registeredC.

United Utilities’ Priority Services approach aims to provide appropriate services to vulnerable customers, who are identified on a centralised database with input from

multiple relevant organisationsE. Working with credit agencies and the debt charity Step Change has helped United Utilities to develop an understanding of vulnerable

customers. Staff receive training on undertaking sensitive conversations with vulnerable customers.

Planned for

AMP7 and

beyond

United Utilities is conducting a variety of research pieces to inform future programmes and customer engagement, including those with a focus on behavioural economics,

potential future trends and monitoring changes in customer prioritiesF. The research programme is discussed with ‘YourVoice’ and has been changed to reflect their

comments. There is an ambition to make the ‘WaterTalk’ online panel a more informed community over time to provide a more educated input on customer concerns and

priorities, but no evidence was seen of a plan to implement this. There are plans to roll-out the Priority Services programme to more vulnerable customers and improve the

initiatives it offers such as the ‘lowest bill guarantee’ E. This assessment has seen limited evidence of how United Utilities plan to conduct the in-depth engagement with

customers seen as part of the PR19 planning process more regularly beyond the PR19 plan.

Interviews: 1Ben Nadel, 2Chris Matthews and Gaynor Murphy

Documents reviewed: AUnited Utilities (2017): Draft Water Resources Management Plan; Bhttps://www.unitedutilities.com/corporate/about-us/performance/yourvoice/; C United Utilities

(2017): 2016/17 Annual report, DUnited Utilities (2017): PR19 resilience supplementary

(Bronze) , EUnited Utilities (2017): United Utilities’s approach to affordability & vulnerability

(Silver), FUnited Utilities: ‘Customer engagement’presentation




Engaged stakeholders

Current and

Ongoing

Activities

United Utilities has an industry-leading approach to mapping, managing and engaging stakeholders. The key elements of United Utilities’ leading approach are4:

• a single centralised database of stakeholders at a regional and national scale;

• comprehensive mapping of priorities across the business and relevant stakeholders;

• an owner for managing key relationships at a local, regional and national level;

• good engagement with multiple relevant stakeholders on both short-term issues and longer term strategies

• managing and reducing reputational risks over time

There was work undertaken last year to identify and understand the priorities of different organisations in the north west stakeholder landscape, including detailed research

for key individual stakeholder groups to inform how United Utilities engages them, and the impact of their plans on United Utilities’ priorities, impacts and proposalsD. In

addition, United Utilities engages in multi-agency work in relation to emergencies and incidents1, including with Lead Local Flood Authorities, and local resilience forums

across the five police force areas in United Utilities’ regionA. In single agency incidents United Utilities keep partners informed using Resilience Direct, a Cabinet Office

secure extranet for sharing updates.

The business is engaging with economy and business through the Local Enterprise Partnerships (LEPs), environmental groups (e.g. Local Nature Partnerships) and

social/community organisationsc. To ensure the type and format of this engagement is effective, this is informed by applying knowledge from the stakeholder database and

mapping of relevant business priorities with stakeholder groups4.

United Utilities has learnt from lessons gained following the Franklaw incident and applied this to renewed customer and stakeholder engagement. In terms of stakeholder

engagement, this includes daily liaison with stakeholders including Trading Standards, Food Standards Agency and Public Health England during an incident, which is vital

to help the business send out a consistent messageA.

Level 1: Unaware

Communication with stakeholders is rare and only occurs

when it is required by regulation.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company plans, manages and undertakes regular and clear communications with stakeholder groups and

organisations. Collaboration is determined through multi-agency participation with tangible outputs that

improve the resilience to customers and the business.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Niall Clarke, 2Keith Haslett; 3Andy Pennick, 4Chris Matthews and Gaynor

Murphy

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze); BUnited Utilities (2017): Draft Water Resources Management Plan 2019; CUnited Utilities

(2017): Engagement with regional stakeholders, summary of key points; DUnited Utilities

(2017): engagement with regional stakeholders, Greater Manchester Local Enterprise

Partnership and Combined Authority




Engaged stakeholders

Current and

Ongoing

Activities

The Draft Water Resources Management PlanB is an example of good stakeholder engagement practices. United Utilities established an approach to conduct extensive

and regular stakeholder engagement activities. Activities have included: engagement on a bi-monthly basis with the Environment Agency alongside fully participating in an

WRMP19 Technical Advisory Group; including Natural Resources Wales and Natural England in updates and/or key meetings; Holding two engagement meetings with

Ofwat; Updating the Drinking Water Inspectorate on planned development and approach to protecting water quality; Working collaboratively with stakeholders, particularly

Natural Resources Wales, and other organisations as part of the River Dee Technical Group on climate change assessments.

In the wastewater sector, the assessment found that stakeholder engagement has been limited by the lack of funding2. However, some activities have been undertaken,

and include Making Space for Water; involvement with the Greater Manchester Flood Group; and engagement with LEPs.

Planned for

AMP7 and

beyond

Looking forward, in addition to continuing the current practices, a number of plans and ambitions have been identified. There is an ambition to increase stakeholder

engagement at a strategic level, including dialogue about United Utilities priorities that are relevant to other agencies, such as systems thinking, innovation, affordability

and vulnerability, and catchment approaches. The recent reviewC identified that United Utilities needs to show not only how they are engaging stakeholders, but actively

listening and bringing them into business decisions. There is also a need to be led by stakeholders on topics which they want to engage United Utilities, which will improve

understanding of the priorities and challenges of each stakeholder4.

United Utilities has expressed a desire to improve collaboration across stakeholders as part of Manchester and Pennine Resilience4 and are currently developing strategies

to use power outside of the peaks3, however this assessment did not see any evidence of what these strategies may include and how they were engaging with relevant

stakeholders.

Interviews: 1Niall Clarke, 2Keith Haslett; 3Andy Pennick, 4Chris Matthews and Gaynor

Murphy

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze); BUnited Utilities (2017): Draft Water Resources Management Plan 2019; CUnited Utilities

(2017): Engagement with regional stakeholders, summary of key points; DUnited Utilities

(2017): engagement with regional stakeholders, Greater Manchester Local Enterprise

Partnership and Combined Authority




Active role in the regions and community

Current and

Ongoing

Activities

United Utilities has a range of initiatives that demonstrate a desire for the organisation to have a positive role in the local community and region, and in many areas is

playing a leading role in bringing stakeholders together. The business is committed to measuring and monitoring its carbon footprint against a target which is aligned to

investment cycles. By the end of AMP6, the business is aiming to reduce carbon emissions by 50% on the 2005/06 baseline, which it believes it is on track to achieve, with

a reduction of one third to date D.

One of United Utilities’ business principles is ‘actively supporting our local communities’ and within this there are commitments and targets for 2020 which they annually

measure performance against B. Some of these targets are relatively modest, for example the commitment to ‘provide access and recreation at our sites where it is

appropriate’ has a 2020 target to maintain the current level of footpath and associated infrastructure open to public access on United Utilities land. Investment in activities

within the programme to ‘actively support our local communities’ was £3.6 million in 2016/2017. United Utilities encourages employee involvement in these activities by

covering their time to participate, for up to 3 days of paid volunteering leave per yearB. There is support from a senior level in United Utilities, which is demonstrated

through the Board’s Corporate Responsibility Committee, which has stakeholder engagement and reputational issues a standing agenda item at meetings2.

United Utilities has a ‘World Class’ rating in the Dow Jones Sustainability Index D. Environmental initiatives include United Utilities’ support of the ‘LOVEmyBEACH’

campaign for improving quality of beaches and bathing waters in the North West C and pilot projects on natural capital1. A key project that United Utilities are involved in is

the EU Life funded project ‘Natural Course’ with partners including the Environment Agency, Natural England, the Association of Greater Manchester Authorities and the

Rivers Trust. This project is seeking to identify more cost effective, collaborative techniques to meet good ecological statements. One example of this is a project United

Utilities are undertaking with Business in the Community to look at how non-domestic customers can use green infrastructure to reduce their overheads and improve the

natural capital of their communities. This project will also deliver demonstration sites at a school and an NHS site1. A range of social initiatives include education lessons

and STEM programmes for primary and secondary school children, for example a water efficiency workshop, and a partnership with Teachfirst.

United Utilities has a programme of activities to address social issues in the communities it serves by supporting customers facing vulnerability, debt and affordability

issues A. The Priority Services programme identifies and supports customers in vulnerable circumstances, and United Utilities offers a range of focussed and flexible

support schemes to address financial challenges that customers face and ensure the affordability of their bills. United Utilities has also supported local initiatives including

the Greater Manchester Mayor’s ‘Green Summit’ and the 100 Resilient Cities initiative1.

Level 1: Unaware

The company does not undertake activities to benefit the

wider community or have plans to do so.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company undertakes activities which have wider benefits to the communities that are served allowing

them to grow and develop through enabling sustainable growth, both at a regional and local level

demonstrating corporate citizenship in the process. The company is establishing goals to meet the carbon

challenge contributing to their global and local impacts.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Chris Mathews, 2Chris Mathews and Gaynor Murphy

Documents reviewed: AUnited Utilities (2017): United Utilities’ approach to affordability &

vulnerability (Silver), Bhttps://www.unitedutilities.com/corporate/responsibility/communities/community-

performance/ , Chttp://lovemybeach.org/about-us/, D United Utilities (2017): 2016/17 Annual

report

https://www.unitedutilities.com/corporate/responsibility/communities/community-performance/

http://lovemybeach.org/about-us/




Active role in the regions and community

Planned for

AMP7 and

beyond

There are plans to continue with the current initiatives and renew the targets and commitments under the business principle relating to communities beyond 2020. There

are plans to improve the quality and scale of offerings through Priority Services.

By 2035, the end of AMP9, the business is aiming to have reduced its carbon emissions by 60%. This target could be more ambitious, by stretching further into the future

and aligning with commitments to achieve the goal of the Paris Agreement. This could build on the progress and pace that UU have already established, rather than

slowing the pace of reductions from 50% in 15 years to 10% in 15 years.

Interviews: 1Chris Mathews, 2Chris Mathews and Gaynor Murphy

Documents reviewed: AUnited Utilities (2017): United Utilities’ approach to affordability &

vulnerability (Silver), Bhttps://www.unitedutilities.com/corporate/responsibility/communities/community-

performance/ , Chttp://lovemybeach.org/about-us/, D United Utilities (2017): 2016/17 Annual

report






Comprehensive health, safety and wellbeing

Current and

Ongoing

Activities

United Utilities has a robust health and safety strategy that is based on three pillars, Health & Safety Wellbeing, Process Safety and Personal Safety.. and has processes

which look at both current and emerging H&S risks, and plan for these. United Utilities are measuring industry-leading KPIs for process safety and this approach could be

applied to the other pillars to move toward an overall ‘Leading’ approach.

Reviewing health and safety risks is aligned to the process of corporate risk management review1,2 Health and Safety performance is reported monthly to the Wholesale

BoardC, comprising information on both staff and contractors. The business’s Health and Safety Risk Management system is accredited to OHSAS 180001. United Utilities

also obtained their fifth consecutive RoSPA (Royal Society for the Prevention of Accidents) Gold Award in 2017. A recent health and safety risk workshop was held to

review risks and activities for AMP7 and beyond, however due to the timing this assessment has not reviewed the findings and actions arising from this workshop.

Currently, United Utilities is measuring leading KPIs for process safetyD. The leading indicators in the board report for health and safety (Investigations Closeout,

Investigations Closeout within timescale, Action Closeout and Action Closeout within timescale) are a good example of how to measure leading and lagging indicators and

trends. United Utilities has a dedicated training facility which is accredited by City and GuildsA to ensure staff receive appropriate training to perform their roles safely. From

multiple sources in this assessment, there was a concern of H&S not being fully embedded operationally, with it being more of a focus within corporate offices (e.g.

Lingley)B and H&S operational hazards not being identified and removed during design phase of assets2. A more holistic view of H&S issues across the lifetime of an asset

would be a positive indication of a good understanding and approach within the organisational culture. A company-wide safety culture improvement programme is due to

be launchedE which could offer an opportunity to improve this. United Utilities’ Wellbeing strategy was recently accredited by the Business in the Community (BiTC)

Working Well standardsB. There are various programmes to improve mental and physical healthB including gym membership and on-site facilities, online nutritional

programmes and challenge-based activity trackersE. During 2017, the business produced two courses, ‘Stress awareness’ and ‘Building Resilience’. United Utilities is

beginning to train mental health champions, and has signed the ‘Time to Change’ pledgeE.

Level 1: Unaware

There are limited or no plans for health, safety and

wellbeing. Any that are undertaken are required by

regulation. Limited or no health and safety culture.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has reliable and robust plans for health, safety and well-being which will make significant and

measurable improvements to the lives of the workforce. There is a strong health and safety culture, where

behaviours are over and above what is required.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Paula Steer; 2Marc Willacy

Documents reviewed: A United Utilities (2017): Health, Safety & Wellbeing policy; BUnited

Utilities (2017): ‘Health and Wellbeing overview’ presentation; CUnited Utilities (2018):

Wholesale board health and safety report, March 2018; D United Utilities (2017): ‘Process

safety indicators update’ presentation, October 2017; Ehttps://www.unitedutilities.com/corporate/responsibility/employees/health—safety--wellbeing/




Comprehensive health, safety and wellbeing

Planned for

AMP7 and

beyond

United Utilities is looking to integrate the operational risk management and Health & Safety risk management systems within the next 12 months.

As part of joining the Workplace Wellbeing Charter, United Utilities has identified a number of areas to focus on in the future, including more initiatives relating to mental

health, healthy eating, and combatting sedentary workB. There is scope to improve on learning by the end of AMP6, and the outcomes of the risk workshop recently

conducted will be taken into account in AMP72.

A new programme is being launched in September this year including a H&S refresher. Senior leadership will do the training first and spearhead the rollout.

Interviews: 1Paula Steer; 2Marc Willacy

Documents reviewed: A United Utilities (2017): Health, Safety & Wellbeing policy; BUnited

Utilities (2017): ‘Health and Wellbeing overview’ presentation; CUnited Utilities (2018):

Wholesale board health and safety report, March 2018; D United Utilities (2017): ‘Process

safety indicators update’ presentation, October 2017; Ehttps://www.unitedutilities.com/corporate/responsibility/employees/health—safety--wellbeing/




Collaborative organisational culture

Current and

Ongoing

Activities

This assessment has observed both positive and negative examples of a collaborative and adaptive organisational culture in United Utilities. In some areas of the

organisation, there is a customer focussed approach and innovative and collaborative practices. However, this focus on customers and the environment could be

developed more consistently across departments and teams, and there are examples of different thinking developed between different teams which could be more

integrated. There is a good understanding of the resilience concept within the organisation, although there is an opportunity to develop a consistent focus on the

environmental aspects. United Utilities is monitoring performance against its goals to improve diversity and gender balance within the organisation4.

United Utilities’ customer focus is evident in HR organisational practices, such as the induction process, the performance review process, and the leadership capability

framework4, however this customer focus is not always carried through and evidenced in the practices of all departments and teams3. The assessment has noted some

teams working in silos, and some expressed the need for a more integrated approach6, the need for an enhanced connection between operational and strategic levels of

the organisation5 and further clarity of roles and responsibilities regarding risk and resilience at a senior level7.

There is evidence of United Utilities’ ability to deliver proposed changes, for example the ‘future concept of operations’ and systems thinking approach has led to the ICC

and the rollout of the MARS programme to improve operational performance. United Utilities has a clear process and experience in recognising emerging technology

trends, moving them to proof of value (e.g. trial and business case), and establishing new organisational roles and embedding these within the business; a recent example

being the application of robotics for process automation1. The business has an innovation strategy, made up of four key elements: Accessing the innovation system;

prototyping breakthrough technology; working with academia; and inspiring innovation. In line with this strategy, United Util ities has established ‘Innovation Lab’ that

provides a mechanism for the business to work with SMEs and other collaborators (who may be outside of water sector) to solve business problems. To date, this has set

5 challenges around the future of water and health and safety and has attracted significant interest1. Seven successful partners have been selected and are now co-

located with United Utilities to develop and demonstrate their ideasA.

Level 1: Unaware

The organisational culture has no or limited recognition of

the importance of collaboration and change in service of

customers, community or the environment.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

A notable organisational culture that puts collaboration and change at the heart of all they do. This is

apparent in the values, policies, plans and working practices of all employees who understand the

fundamental roles they play in the service value chain.; working together across boundaries in the service of

the customer and community. Empowered and engaged staff, with the capability, capacity and mandate to

learn and adapt to events and change, is evident in the short, medium and long-term management of the

operation; not simply one-off innovations and in response to major ‘events’. The organisational approach to

collaboration aligns with ISO044.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Simon Chadwick, 2David Ogden, 3Ben Nadel, 4Lesley Bellis, Julie Newton and

Matthew Heaton, 5Craig Percival, 6Jorge Grifo, 7Jo Harrison

Documents reviewed: Ahttps://www.unitedutilities.com/innovation




Collaborative organisational culture

Current and

ongoing

activities

United Utilities has recently undertaken a process to embedding workforce changes, which includes involving a cross section of people and demographics in pilot projects,

providing additional training and support, and a debrief and feedback survey after changes are implemented4. Feedback following the implementation of the MARS

programme to digitise the operational workforce practices has been positive4. United Utilities conducts an annual ‘employee voice’ survey: this year has seen the best

results regarding change4 which illustrates United Utilities employees overall have a positive view of the culture of innovation and change in the organisation.

Planned for

AMP7 and

beyond

In the near future, there are plans to review and revise the employee performance review process and the change agent roles4. There is ongoing development of

leadership capabilities, including plans to define a list of qualities in a metric and align these with the OCR process4.

Organisational design changes will be required to deliver change in line with United Utilities’ systems thinking approach, however this will be a challenge for United Utilities

and in particular senior leadership in the future2. Currently, through this assessment, we have not seen plans for how these changes will be embedded with employees

across the organisation.

Interviews: 1Simon Chadwick, 2David Ogden, 3Ben Nadel, 4Lesley Bellis, Julie Newton and

Matthew Heaton, 5Craig Percival, 6Jorge Grifo, 7Jo Harrison

Documents reviewed: Ahttps://www.unitedutilities.com/innovation



Operational resilience: maturity assessment



Current and

Ongoing

Activities

United Utilities understands how and when disruption to specific assets will impact the continuity of service to the customer through its asset criticality assessment1,D. The

business has benchmarked against other water companies, and has developed a ‘Supply Interruptions Strategy’E to help improve asset performance and reduce customer

service interruptions. This strategy considers historic trends and forecasts performance requirements out to 2025, setting out the required controls prior to and following an

eventF.

The creation of the Integrated Control Centre (ICC) in 2015 is widely regarded as a positive change to improving operations efficiency. The ICC brings together teams and

directorates, improved real-time data access, and good communications with stakeholders and customers when there is an interruption or incident A. The ICC is being

expanded to include a specialist network team, to ensure incoming information is interpreted correctly during times of an event (e.g. burst)E. The business’s Distribution

Operational Maintenance Strategy adopts a 3 tier process as part of a broader WRAP (Wholesale and Asset Risk Planning) process to understand (1) day-to-day and (2)

monthly trends and issues (e.g. colour, taste, leakage), derived from customer contact data linked through the ICC, which can then be (3) escalated to the asset manager if

required; there is a longer-term ambition to combine hydraulics modelling with the customer contact process5.

Significant capabilities of operational staff have been developed, including clear responsibilities and decision making hierarchy, and a range of contingency plans to ensure

appropriate response and recovery following disruption1 with contingency plans reviewed annually. Operational exercises are undertaken each year, and staff are

accredited training in building capabilities to lead and act effectively during incident response situations1. The business is increasing its tanker fleet (from 12 to 24), and will

have a 24/7 response capability, and are currently considering the most appropriate strategic locations for siting them5.

The process used for the selection of the Manchester and Pennines Resilience scheme represents an excellent approach to ensuring continued customer supplyH. The

process set out an effective methodology for customer engagement, where the business consulted on options selection, impact on bills and ensured that value for money

was understood in a transparent way.

Level 1: Unaware

There are no or limited understanding of outage impacts,

consideration of vulnerable customers and dependent

critical services.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

Company operations focus on providing a continuity of service to customers and avoiding critical service

failures, such as supply interruptions and internal sewer flooding. It takes into account the different needs of

customers, particularly those who are vulnerable. Service interruptions only occur in the most unforeseeable

situations. Asset condition and criticality is understood and all critical aspects of the network have

redundancy built in. Mechanisms to regularly review and update all plans are in place.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: Niall Clark1 , Jo Harrison2, Charmain Abbott3, Andy Pennick4; Tom Allen5; Dave Ogden6;

Ed Dalton7

Documents reviewed: A United Utilities (2017): PR19 resilience supplementary (Bronze), BUnited

Utilities (2017): Draft Water Resources Management Plan 2019, United Utilities (2017): C United

Utilities' approach to affordability & vulnerability (Silver); D United Utilities (2018): ‘MGG criticality’

presentation; EUnited Utilities (2016): Supply interruptions strategy; FUnited Utilities (2017): ‘Supply

interruptions’ presentation; G United utilities (2018): Plans for the provision of Essential Water Supplies

and Sewerage Services at all times, 19/01/2018; H United Utilities(2018): Manchester and Pennines

resilience draft


Continuity of service to customers



Current and

ongoing

activities

The business also established performance commitments to ensure customers get the best value both prior to and following completion of this particular schemeH. United

Utilities’ customer strategy has an innovative immersive research approach to understand customer views on supply interruptionsA. To ensure appropriate services are

provided to vulnerable customers, the business has combined multiple information sources to launch a ‘Priority Services’ init iative in partnership with AgeUK, MIND,

Alzheimer's Society, and Citizens Advice BureauC.

Approximately 20,000 customers are on a ‘Back on Track’ tariff, capping household bills and 14,000 customers are on the ‘WaterSure’ tariff, direct vulnerable customers to

specially trained staff. The business maintains a list of ‘sensitive customers’ registered under this scheme, with Category 1 responders also being used to identify and

reach vulnerable groups during an emergency G. A formal MoU is also in place with the British Red Cross to provide support to customers during an emergency.

Planned for

AMP7 and

beyond

United Utilities long term ambition is for ‘no customer interruption’, through further investment in systems thinking and machine learning and improvements in the ICC.

The business is taking a multi-faceted approach to controlling the risk of sewer flooding in AMP7 with preventative maintenance, working with customers to avoid sewer

misuse and blockages etc; with an ambition to reduce internal flooding by 23% in AMP7. The business is also planning to undertake trunk mains transient monitoring, and

targeted replacement/reinforcement of critical mains. Additionally, contingency planning and enhancing network modelling capability will be expandedF.

By 2020, the business will install UV treatment at high risk water treatment works and pipework.

The business will develop an ODI that aims for an ambitious target of 65,000 vulnerable customers to be included on the Priority Services Initiative.


Continuity of service to customers

Interviews: Niall Clark1 , Jo Harrison2, Charmain Abbott3, Andy Pennick4; Tom Allen5; Dave Ogden6;

Ed Dalton7

Documents reviewed: A United Utilities (2017): PR19 resilience supplementary (Bronze), BUnited

Utilities (2017): Draft Water Resources Management Plan 2019, United Utilities (2017): C United

Utilities' approach to affordability & vulnerability (Silver); DUnited Utilities (2018): ‘MGG criticality’

presentation; EUnited Utilities (2016): Supply interruptions strategy; FUnited Utilities (2017): ‘Supply

interruptions’ presentation; GUnited utilities (2018): Plans for the provision of Essential Water Supplies

and Sewerage Services at all times, 19/01/2018; HUnited Utilities(2018): Manchester and Pennines

resilience_draft



Current and

Ongoing

Activities

United Utilities is working towards being leading for its draft 2019 Water Resources Management PlanA (WRMP). The WRMP not only considers the business’s approach

over a statutory 25 year horizon, but has also stress tested its proposed plans out to the 2080s to ensure their long-term robustness. Stress testing comprised multiple

supply-demand scenarios, under severe patterns of drought (greater than those in the historic recordD) alongside understanding of potential population growth and climate

change impacts; UKCP09 projections from a medium emissions scenario, for the 2080s were used in the analysis. Potential costs to mitigate particular supply-demand

scenarios out to 2045 have been put forwardA,D.

The WRMP has, for the first time, adopted a multi-hazard approach. This extends beyond a typically drought focused hazard assessment to include flooding, freeze-thaw,

contamination, malicious damage, fire, cyber failure, asset failure, power failure and human factors. The WRMP has obtained full board assurance, and includes a

statement to the Drinking Water Inspectorate that drinking water quality is fully protected under this planA. The corporate audit team have overseen assurance activities,

supported by an independent third party audit undertaken by CH2M.

United Utilities sought wide and early engagement on WRMP development. Pre-consultation with regulators and stakeholders started in 2016 and engagement has been

ongoing throughout the plans development. Customers were engaged using innovative methods such as an interactive session called the ‘build your own plan’ game which

improved customer awareness of available options and how this could affect them long-term. Moreover, the business has produced a customer-focused WRMP summaryC.

The business is collaborating with other water companies, and is a member of the Water Resource North Group. This group promotes collaborative working on water

resource management across organisations in the North of England to support future resilience beyond United Utilities’ area. The WRMP has also been produced

collaboratively with the Environment Agency, and environmental regulators to identify and account for sustainability changes through the Water Industry National

Environment Programme (WINEP); however, this still requires further investigations scheduled from 2020 onwardsA. The WRMP follows the principles set out by Defra in

its ‘Guiding principles for water resources planning’.

Level 1: Unaware

Water resources management planning is limited to a

short term approach and does not facilitate sustainable

approaches to water management. Plans are not aligned

across the business and do not incorporate collaborative

projects and engagement.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

Water resource management planning and drought planning has been undertaken for the long-term and

integrated into business planning to ensure that the company can meet their supply obligations and facilitate

sustainable growth. Plans are produced collaboratively with the EA and regional planning groups to ensure

best value for customers with respect to cross-company, regional and national supply options. The approach

looks at a full range of hazards based on a robust evidence base. Water resource management planning looks

80 years into the future and develops adaptive pathways for delivering in the long-term.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: Mark Smith1

Documents reviewed: AUnited Utilities (2017): Draft Water Resources Management Plan

2019; C United Utilities: From Source to Tap: Our Water Resources Management Plan summary

guide to keep the North West flowing; DUnited Utilities (2017): Draft Water Resources

Management Plan 2019– Options appraisal


Robust long-term water resource management

planning



Current and

ongoing

activities

The WRMP identifies limited supply issues within the business’s resource zones. Therefore, focus is on further demand reductions, levels of service, water supply

resilience and potential water trading. Through consideration of water trading, United Utilities is demonstrating that it is looking to play a wider role in national resilience.

The business has undertaken a joint project with Thames Water that considered the impact of climate change across the two regions, and to understand how their system

would cope in a water trading scenarioD.

The 2015 WRMP was used to identify and procure a new water treatment works and pipeline from Thirlmere Reservoir to West Cumbria, which is ongoing and due to be

completed by 2022. This scheme will make West Cumbria part of one of the UK’s largest water resource zones.

Analysis of the impact of the plan on the environment (i.e. deterioration of catchment) in the future will be undertaken following risk and options identification.

Planned for

AMP7 and

beyond

On having their draft WRMP confirmed, United Utilities would be seen as a leading business for water resources management planning. The business, due to having

limited water supply issues, is focusing the outcomes of their WRMP on consideration of further demand reductions, levels of service, and water supply resilience. The

business will continue to work towards future trading from their region, due to the recognised surplus. However, the business has not yet carried out all hazard system

resilience assessments against the proposed water trading optionsA.

Further investigations are planned from 2020 onwards to support WINEP, although specific activities have not been clarified at this time.


Robust long-term water resource management

planning

Interviews: Mark Smith1

Documents reviewed: AUnited Utilities (2017): Draft Water Resources Management Plan

2019; C United Utilities: From Source to Tap: Our Water Resources Management Plan summary

guide to keep the North West flowing; DUnited Utilities (2017): Draft Water Resources

Management Plan 2019– Options appraisal



Current and

Ongoing

Activities

United Utilities has produced a Business Strategy Wastewater Network+, setting out the business’s approach for wastewater out to 2025C. The business is aware of

potential future long-term stresses that could impact on wastewater provision, and is focusing on the potential impacts of population change, urban creep and climate

change on wastewater provisionA. The North West of England is one of the wettest parts of the country, and increased surface run-off is a key issue. ‘Wastewater network

failure’ and ‘failure of wastewater assets’ are in the top 10 group-wide business risksB. The business is recruiting a new Drainage and Wastewater Manager2, helping to

ensure continued focus on long-term wastewater planning.

The 21st century drainage programme outputs shows that more areas of United Utilities’ network are at capacity than anywhere else in the UK. This results, at least in part,

from the business having a better understanding of its network with verified network models covering an exceptional 99% of the wastewater networkE. This programme is

providing the business with an understanding of where their future wastewater issues will become apparent. However, the business is aware that it cannot simply build its

way out of this issue. The current wastewater strategy is therefore to: remove surface water; deploy sustainable drainage schemes (SuDS); optimise wastewater assets

utilising technology; and embed a systems thinking approach to understand how their systems work and to predict and manage outcomes (Piloting predictive ways to

manage wastewater network)A.

United Utilities has developed the Integrated Drainage Area Study (IDAS) approach, which has enhanced the previous drainage strategy framework. IDAS is a risk-based

approach using network performance data, modelling and operational feedback to assess incidents and develop prioritised catchment interventionsD. To date, IDAS has

been applied across 18 drainage catchments, containing 803,493 propertiesE. Previously, the United Utilities drainage areas were defined as a north and south region, but

are now 6 defined drainage areas3.

The business has consulted with customers through the ‘Your Choices’ research. This found that customers were most concerned about sewer flooding, capacity for

additional population/housing growth, and preventing drain blockagesA. United Utilities aspires to combine risk data relating to their wastewater network with other

stakeholders key risks to understand common areas of concern, which will help ensure maximum potential scheme benefits. The business is developing surface water

management plans in collaboration with Lead Local Flood Authorities (LLFAs), such as the Greater Manchester Flood Group3, and the Environment Agency.

Level 1: Unaware

The wastewater management plan is limited to a short-

term approach and does not facilitate sustainable

approaches to wastewater management. Not aligned

across the business. Any planning does not include

stakeholder engagement or collaborative projects.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has undertaken drainage and water recycling planning for the long-term enabling sustainable

growth in the region without impacting existing customers. Wastewater plans are developed with

stakeholders and integrated into their business plans. Plans are published and shared. They focus on critical

service failures such as internal sewer flooding and pollution incidents. Best practice from the 21st Century

Drainage programme is followed.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Jo Harrison; 2Paul Tipper; 3Keith Haslett; 4Chris Matthews

Documents reviewed: AUnited Utilities: Resilience presentation (Jo Harrison); BUnited

Utilities (2018): Group Board review of risk profile; CBusiness strategy wastewater network+; DUnited Utilities (2017): Integrated Drainage Area Strategies (IDAS); EUnited Utilities:

Wastewater network failure (sewer flooding);


Robust long-term water recycling planning



Current and

ongoing

activities

Focus is on developing plans for Sustainable Drainage Systems (SuDS) in collaboration with Defra, DCLG, LLFAs and developers. United Utilities is one of three

companies in England that charge businesses for wastewater provision based upon their surface area. Therefore, there is an incentive for business customers to adopt

SuDS approaches. In terms of deployment, only limited trial SuDS schemes have been installed to date at a school and NHS hospital site2,4. United Utilities is also looking

to reduce sewer flooding through defect identification using CCTV and incidence-based maintenance targetingA.

Planned for

AMP7 and

beyond

United Utilities has a number of priorities in terms of Wastewater for AMP7 and beyond. For controlling sewer flooding, this will take a multi-faceted approach that includes

preventative maintenance, customer campaigns to prevent sewer misuse, system optimisation through enhanced monitoring and control and promoting sustainable

drainage with developers and local authoritiesE. The business wants to attain 100% compliance for failure to treat wastewater, and for pollution incidents, the business

wants to use better monitoring and control to deliver a step change in its approach. Moreover, by the end of AMP7, United Utilities will have completed IDAS plans for all

catchments with individual populations of greater than 2,000.

United Utilities continues to develop it’s longer term sludge management approach considering the deregulation plans. When th is happens United Utilities’ regulated

business will no longer be responsible for treatment and disposal. Key considerations landbank availability through changing future use and technology changes will

become the responsibility of a separate business enterprise. This aims to create broader cross water boundary opportunities. UU is developing strategies for this to ensure

they are sustainable into the longer-termF.

With the imminent appointment of a senior role to develop a Drainage and Wastewater Management Plan2, we have evidence that UU is taking the need to develop a

holistic, long-term approach to wastewater planning and have therefore awarded this as a level 4: response actioned in the future.


Robust long-term water recycling planningInterviews: 1Jo Harrison; 2Paul Tipper; 3Keith Haslett; 4Chris Matthews

Documents reviewed: AUnited Utilities: Resilience presentation (Jo Harrison); BUnited

Utilities (2018): Group Board review of risk profile; CBusiness strategy wastewater network+; DUnited Utilities (2017): Integrated Drainage Area Strategies (IDAS); EUnited Utilities:

Wastewater network failure (sewer flooding); F United Utilities: sludge review for PR19



Current and

Ongoing

Activities

United Utilities has a combination of tools (e.g. Pioneer B) to identify and categorise asset risks, and their potential consequences (e.g. Optimatics B) which can then inform

prioritised investment and options selection (i.e. Optimus and Wholesale Risk and Asset Planning (WRAP))1. Asset risk assessments have a short-to medium-term outlook,

although the business has the ability to incorporate new and emerging risks into its enterprise risk management system, RADAR2,. Additionally, there is a monthly review of

Totex investment that considers emerging risks2. The business’s asset management approach is aligned to ISO55000D.

The business has developed a Base Asset Health Indicator (BAHI) to monitor remaining asset life, that has been audited by Jacobs B. BAHI outputs are visualised through

in-house interactive mapping and dashboard applications. The BAHI is implementable across the entire asset base, and uses a combination of asset age, performance and

condition to provide a BAHI score. United Utilities is able to combine BAHI with asset criticality to obtain a view of operational risk A, that supports decision making around

maintenance and renewal prioritisations. Pioneer is used to model over 5 million sewers and lengths of water main and over 400,000 pumps, tanks, instruments, and other

equipment. It is used to establish from asset condition whether a failure is an asset-derived issue or a customer-driven issue. This can then help the business to target

customer behaviour initiatives around better use of wastewater services B. The myRisk Register is able to bring asset health information directly from Pioneer to undertake

risk calculation. For distribution mains, ‘Event Recognition on the Water Network’ (ERWAN) has been developed as a machine learning approach to assess normal and

abnormal systems signatures from array of sensors across network D. United Utilities has a good practice approach to dam safety, driven by legislation and through a

comprehensive understanding of risks due to their large portfolio of impounding structures. The business has a long term plan to address the risks associated with dam

and impounding assets5.

United Utilities has developed a methodology for assessing asset criticality, but currently only 20-30% of above ground assets (wastewater and bioresources) has been

assessed with water. The remaining 70-80% is due to be completed by mid 20185. However this is currently only used to assess above ground assets5. The BAHI

methodology and improving confidence in asset modelling has been tested on a small area in Preston to target proactive CCTV monitoring B. The Franklaw incident in

2015 led United Utilities to develop the Hazrev approach 6. Hazrev is a methodology for assessing each treatment process step-by-step and understanding associated

risks from which to prioritise mitigation actions6. To date, Hazrev has only been applied to water treatment works, and is a more operational engineering risk assessment

approach applied to identify water quality risks, and therefore requires further embedment within business operations. The Manchester Pennine Resilience scheme

undertook a comprehensive assessment of asset risk, and had a number of assurances from third parties. Furthermore, it also worked with a third party to help effectively

communicate asset risk to customers in order to enable customers to make a more informed decision on options selection.

Level 1: Unaware

There are limited or no asset health measures in place.

Focus is on short term, high-likelihood risks. Asset

management best practice is not followed. There are no

regular updates or reviews of asset management strategy.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has undertaken a comprehensive assessment of asset health and asset risk, including long-term

low-likelihood risks, having detailed and accurate information on the state of all assets, the way they are

configured and the way they are operated. Focus is on criticality, protecting customers and the natural

environment from exposure to known risks, and reducing vulnerability to future uncertainties. There is a

region wide asset strategy which is adaptive, regularly reviewed and considers changing requirements in the

long-term (25 years). They follow best practice for asset management, e.g. ISO 55000.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: Simon Boyland1 , Jo Harrison2, Craig Percival3, Jorge Grifo4; Ed Dalton5;

Charmain Abbott6

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze), BUnited Utilities (2017): Asset health, version gold; Business Risk Management: Horizon

ScanningC; DUnited Utilities(2018): Business Plan_Chapter 4 (Silver Gateway)


Reflective risk-based approach to asset health



Current and

ongoing

activities

Most critical assets and sites are equipped with telemetry systems, which are managed centrally through the Integrated Control CentreB. which has seen significant recent

investment and improved access to asset data and operational information.

The recent deployment of MARS adds to the ability to not only utilise better information out in the field but add to contemporary asset health information digitally.

Planned for

AMP7 and

beyond

United Utilities has set out future developments for Asset Health in its ‘Asset Health’ documentB. These are mainly focused on further embedding BAHI within the

business’s processes and entire asset lifecycle assessment. BAHI will be used to inform widespread wastewater network inspection program for AMP7A, following

validation in Preston, with an ambition to move to a data-driven approach for assessment of asset health. There is a long-term ambition for the business to assess criticality

across the entire asset base5. United Utilities identified that they will continue to develop and improve on health models and condition-based monitoring across multiple

asset groupsB. Assuming that UU is able to successfully implement these plans, we recognise that they will move to a leading approach within the industry.


Reflective risk-based approach to asset health

Interviews: Simon Boyland1 , Jo Harrison2, Craig Percival3, Jorge Grifo4; Ed Dalton5;

Charmain Abbott6

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze), BUnited Utilities (2017): Asset health, version gold; Business Risk Management: Horizon

ScanningC; DUnited Utilities(2018): Business Plan_Chapter 4 (Silver Gateway)



Current and

Ongoing

Activities

Based on evidence seen as part of this assessment United Utilities has a number of initiatives around innovative and collaborative catchment-based approaches, which

they have begun to test and trial. In addition, the business is encouraging the adoption of water meters, with automated reading technology, through their ‘Price Promise’

incentive, where bills can be capped to match customer’s previous annual billsE.

United Utilities has consulted with customers on catchment-based approaches, identifying that a majority are willing to pay more for sustainable land management,

contributing to protection of the environment and water supplies for future generationsA. The business is using its core ‘Systems thinking’ approach to move towards

integrated catchmentsC, in an attempt to understand outcomes required by customers and regulators can be delivered in a more efficient and sustainable way through

partnership working.

In AMP4 (2005), the business established the Sustainable Catchment Management Programme (SCaMP). This set out to improve the 57,000 hectares of land owned by

United Utilities, of which approximately 30% by area is defined as SSSI sites, and to benefit both wildlife and raw water quality. SCaMP has also had wider benefits

including increased carbon storage through restoration of upland peat moors.

In the first period (AMP4) £10.8m was invested in SCaMP1, and £11.6m during AMP5 (SCaMP2); this provided tenant farmers approximately £4m in grants to implement

appropriate measuresH. Cost-benefit analysis for AMP6 considered a 60 year period for catchment management approaches, from 2015-2074I. The SCaMP programme is

undertaken in partnership with the RSPB and Rivers Trusts. The RSPB and United Utilities has developed a Haweswater Reservoir catchment management plan, where

funding for vegetation and hydrology monitoring is planned to continue until 2020D,J.

Level 1: Unaware

Limited or no consideration of naturally resilient

approaches to risk mitigation.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

There is a robust approach to considering a wide range of options to risk mitigation. Approaches are

collaborative, innovative and embrace technological change and the role of the natural environment. A

system-wide approach is taken. Collaboration is integrated into business plans, working with customers,

other companies, and wider stakeholders to deliver solutions. Approaches considered include encouraging

customers behavioural change through smart customer engagement, and use of smart technologies to

improve asset performance, customer information, leakage management and water efficiency, natural

solutions, such as catchment management to improve raw water quality, and blue-green infrastructure to

manage storm water and reduce flooding and pollution incidents. Catchment solutions are considered across

the whole catchment, integrating water and wastewater needs.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: Simon Chadwick1, Chris Matthews2,

Paul Tipper3

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze), BArcadis (2017): Measuring resilience in the water sector; CUnited Utilities: Resilience

presentation (Jo Harrison); DUnited Utilities (2018): Manchester and Pennines resilience_ draft; EUnited Utilities (2017): Draft Water Resources Management Plan 2019; FUnited Utilities:

Chapter 2 – Voice of the customer: our approach to engagement; BITC (2016); GWater resilient

cities: building resilience and saving money through better surface water management; HPR19

SCaMP Case Study; ICost-benefit analysis of AMP6 catchment-management schemes; JFarming with Nature at RSPB Haweswater: The plan for Haweswater 2015-2020; KUnited

Utilities: Safeguard Zones


Innovative, collaborative, naturally resilient

approaches to risk mitigation



Current and

ongoing

activities

In AMP6, United Utilities is promoting water ‘Safeguard Zones’, that are areas defined by the Environment Agency as having declining water quality. United Utilities is

therefore implementing catchment-based approaches to help prevent a future need to spend money on improving water treatment facilities and reduce operational

expenditure while importantly benefitting the natural environment and raw water quality K. This initiative is in partnership with the Environment Agency, which itself is

helping United Utilities to further strengthen its relationship with stakeholders.

A number of pilot projects for natural capital accounting and approaches have been carried out with a view to upscaling them during AMP7, which include A:

• Trial of ‘EnTrade’ reverse auction platform for pesticide mitigation - 12% of eligible farmers took part in reverse auction and saved a total of 7500kg of nitrogen use.

Impacts of this in 2017/18 winter will inform next steps - if shown to be efficient way of reducing nitrogen in longer term could be upscaled.

• Partnership with National Trust and Green Alliance exploring how a 'natural infrastructure scheme' might work. Involving paying upstream landowners for downstream

benefits, for example ‘slow clean water’.

• Undertaking corporate natural capital account to capture value of current land under United Utilities ownership and inform future management

• An EU Life ‘Natural Course’ funded project collaborating with charitable partner, City of Trees, to develop understanding and map of ecosystem services and develop

multiple benefit investments and activities.

• River Petteril catchment - developed a Natural Capital Integrated Catchment Optimisation Tool

• Wastewater: the business is procuring Jacobs to look at SuDS options and prepare a business case.

The business is also working with Business in the Community and the Water Taskforce (including Arup, Costain, MWH and United Utilities) within Greater Manchester, to

understand how sustainable drainage approaches can be adopted by non-domestic customers to save them money on their bills G; an initial trial is ongoing at Moorland’s

Junior School.

United Utilities has developed and published a proposed common resilience metric and framework, in partnership with Arcadis, for operational resilience for the water

industry. This demonstrates a commitment to work collaboratively and engage with other water utilities to help improve the sector as a whole B.

Planned for

AMP7 and

beyond

For SCaMP, the business will continue ongoing monitoring, modelling and research of issues and approaches for addressing raw water quality. For Natural Capital

approaches, the business will be implementing next steps of pilots conducted in AMP6. Moreover, in addition to the Petteril catchment, a further 13 catchments will be

assessed.

We understand that the business will begin to integrate some of the trials implemented in AMP6 into business as usual over time, hence a score of level 4, ‘response

actioned’ in the future.


Innovative, collaborative, naturally resilient

approaches to risk mitigation

Interviews: Simon Chadwick1, Chris Matthews2,

Paul Tipper3

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze), BArcadis (2017): Measuring resilience in the water sector; CUnited Utilities: Resilience

presentation (Jo Harrison); DUnited Utilities (2018): Manchester and Pennines resilience_ draft; EUnited Utilities (2017): Draft Water Resources Management Plan 2019; FUnited Utilities:

Chapter 2 – Voice of the customer: our approach to engagement; BITC (2016); GWater resilient

cities: building resilience and saving money through better surface water management; HPR19

SCaMP Case Study; ICost-benefit analysis of AMP6 catchment-management schemes; JFarming with Nature at RSPB Haweswater: The plan for Haweswater 2015-2020; KUnited

Utilities: Safeguard Zones



Current and

Ongoing

Activities

United Utilities has a ‘category management’ approach to supply chain managementC,1, where categories representing similar commercial considerations and supply

markets have a specific manager responsible for strategy and the risk identification process. The business states that this approach takes a long-term holistic view of the

business’s demand, specifications and the supplier marketC, but long-term was not defined. The business recently reviewed their supply chain to understand critical links

where a single supplier, point of infrastructure or other constraint could lead to a vulnerabilityA. Where weak points were identified, the business is now in the process of

reviewing existing contract and contracting processes, which will be modified where possible to eliminate potential risksA. The business has identified ensuring security of

supply and capital programme delivery partner failure as their principal supply chain risksA. Six monthly BURA meetings are held between Director, Risk Lead and

representative of corporate risk team to review risks that are escalated in half and full year reporting, which includes supply chain risks and associated mitigationsF. United

Utilities also meets with all water companies on a quarterly basis to share risks and arising issues1.

The business has several controls to mitigate supply chain risks, including: supplier relationship management, contract assurance, strong governance, business continuity

plans, alternative suppliers, market monitoring, benchmarking and price hedging. The Achilles system is used for procurement, and at tender stage the business uses the

‘Sourcing Strategy Gateway Approval’D that detail a suppliers prequalification and how it will ensure supply throughout the contract (e.g. market risks), with additional

annual health checks being undertaken for Tier 1 suppliers1. The business typically has long-term supplier relationships, and tends to work with large suppliers that ‘can do

everything’1. There is good succession planning at the end of contract to ensure knowledge is retained by the business and that the skills market for recruitment is healthy1.

The Franklaw incident in 2015 showed excellent and adaptive supply chain performance, where ultraviolet rigs were sourced at short notice from multiple global locationsB.

This incident also prompted the business to work with its supply chain to identify contractors who are able to respond quickly and those which the business needs to work

with to improve the overall company response to future potential incidents1. 3,000 contractors and employees have also completed online Calm network training, which is

focused on reducing human error in how valves and pumps are operated across a network, and a technical training centre has been established to enhance future

awareness.

Level 1: Unaware

The company has not considered the impact of energy,

resource and skills supply chains on their operations.

There is limited or no consideration of potential shocks

and stresses and their effect on supply chains. No

alternative source of supply is considered.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company considers the impact of energy, resource and skills supply chains on their operations and

ensure diverse and competitive supply chains that deliver the best outcomes for their customers. Supply

chain needs are considered in the long-term, based on horizon scanning. Collaborative relationships are

developed with the supply chain, to avoid boom and bust cycles. The company also considers the flexibility

of their supply chains, particularly during shock events. Internal processes are in place to keep this under

review, sharing knowledge and developing solutions with others. The supply chain is considered as a

network. The company also considers how they can effectively utilise options beyond their boundaries to

mitigate their risks, e.g. use of water trading and bio resource trading markets.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: James Riddick 1, Andy Pennick 2

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze); BUnited Utilities: Resilience presentation (Jo Harrison); United Utilities(2018): CBusiness

Plan_Chapter 4 (Silver Gateway); Sourcing strategy gateway approval, 2017D;

https://www.unitedutilities.com/corporate/media-centre/press-releases/largest-nereda-plant-in-

the-uk-will-be-operational-next-year/E; United Utilities (2017): Business Risk Management

Framework


Robust and flexible supply chain management



Current and

ongoing

activities

The business is concerned by long-term chemical availability1. An external review in December 2017 considered future availability for the period 2017-20372. It is a long-

term aspiration for the business to reduce its chemical reliance, and parts of the business have begun to implement non-chemical options (e.g. Nereda process plant)E. To

manage chemical risk, United Utilities cooperates and meets at board levels through the ‘Buyer group’ which includes Scottish Water and Northumbrian Water1. The

business has a good understanding of its energy supply security.

Generators are installed at critical sites as defined by the water/wastewater business, and where not installed, the business has contracts with third parties to ensure

generators delivery during an event2. The business generates a significant proportion of its own energy, equating to 153GWh/yr of the 800GWh/yr it typically uses

annually2. However, there is awareness that an increase in renewables nationally results in unstable voltage with localised imbalances. United Utilities is working with

Distribution Network Operators to minimise their impact on the grid, and are increasingly entering into contracts to be the last to be turned on, to minimise the upgrades

required on the local grid.

Planned for

AMP7 and

beyond

United Utilities identified an opportunity to undertake longer-term planning for their supply chain1, however, through this assessment, we were not made aware of clear

implementation plans to do so.

The business is planning to increase energy generation capacity to a third of overall consumption. Using the Demand Side Response (DSR) market, accessing wholesale

markets and virtual power plants for 2020. United Utilities would like to contribute to solving the imbalance in the voltage by helping balance the network.


Robust and flexible supply chain management

Interviews: James Riddick 1, Andy Pennick 2

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze); BUnited Utilities: Resilience presentation (Jo Harrison); United Utilities(2018): CBusiness

Plan_Chapter 4 (Silver Gateway); Sourcing strategy gateway approval, 2017D;

https://www.unitedutilities.com/corporate/media-centre/press-releases/largest-nereda-plant-in-

the-uk-will-be-operational-next-year/E; United Utilities (2017): Business Risk Management

Framework



Current and

Ongoing

Activities

An Organisational Capability Review (OCR) in 2015 identified the organisation’s need to continue operations in an increasingly volatile, uncertain, complex and ambiguous

world. The OCR review identified key risks and critical business needs, that has led United Utilities to develop a strong recruitment process1. The OCR considers roles and

alignment with the business’s strategy, identifying the talent pipeline, and identifying future skills and capabilities.

The three key challenges faced by the business are current skills shortages, a ‘brain drain’ leading to future skills shortages, and the impact of technological change1. The

OCR methodology considers both current and up to 5 years ahead, and is undertaken by each directorate, and is reviewed annually, with an update to Board twice yearly1.

The business monitors workforce trends to build into OCR processes and attends conferences on future workforces to aid development. United Utilities has recruited a

dedicated training team, focusing on new starter training, and ongoing competence and mandatory training. The business is active in the apprentice market, and provides

apprentices with appropriate and extensive training. The Head of HR recently chaired the Northwest Apprentice Ambassador network, and sits on the National Apprentice

Forum. The business has a good and growing graduate programme, and has identified skills gaps within the business while recognising the challenge in recruiting suitable

engineering and science graduates. The business understands a need for leader development, and in 2016 introduced the ‘Aspiring Manager’ programme to identify

emerging talent in middle management roles. United Utilities recognises that it has an aging workforce, with 40% of employees being eligible for retirement or who are

planning to retire in the next decade based on analysis of workforce age profiles, pension arrangements and previous leaver dataA,1. United Utilities is considering a range

of options to mitigate this issue, with one solution being to train and develop people internally, and this is a key driver for the apprentice programme.

UU recognises the challenge of technological integration, particularly with the development of the Integrated Control Centre and the Mobile Asset Resourcing Schedule

(MARS) programmes. To aid integration, the business has developed a ‘People Change Capability’, which highlights its adaptive culture. This capability builds upon recent

lessons learnt to help managers support their teams through change, as well as the business providing specific training. The business undertakes annual performance

reviewsE which identifies areas for development and a ‘Team Development’ approachF has been set out. The business is taking a more centralised and automated

approach to operations, with reduced focus on manual site operative interventions1,A. It is recognised that diversity doesn’t reflect customers served, and that there is an

opportunity to improve. Moreover, there are very low levels of people with a declared disability, and white males fill most of the fieldwork and senior leadership rolesB.

Level 1: Unaware

The company has limited or no long-term thinking

regarding labour availability. There is limited or no

workforce continuity plans or an attempt to identify skills

gaps between current and future workforce.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

The company has identified the capabilities and skills required to deliver outcomes for customers in the long-

term, based on robust horizon scanning. Robust people plans have been developed to fill any current or

emerging gaps to support these business needs, identifying recruitment, training and development,

knowledge management, succession planning and increasing diversity. The company works across the water

industry and utility sector to address these skills gaps. The company is seen as the first choice for highly

skilled individuals, and valued employees recognise it as a great place to work. The company encourages

diversity through a range of programmes, such as employee network groups and leadership role models.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Lesley Bellis; 2Julie Newton, 3Matthew Heaton.

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze); BUnited Utilities (2017): Gender pay report; CUnited Utilities (2018): Diversity and inclusion in

United Utilities, CR panel update February 2018; DSocial mobility pledge; EUnited Utilities:

My performance review document; FUnited Utilities (2015): Team development participant

journey


Inclusive and skilled workforce



Current and

ongoing

activities

The business has signed the Social Mobility PledgeD, that considers partnerships, access to work, and open recruitment practices which will help to help develop their

approach. The business has set out its actions for improved inclusion and diversity, and has established metrics to evaluate success but there are currently no targets for

where the business would like to beC. Gender pay gap and workforce issues are being addressed through a number of means, for example working with Teach First to

encourage women into STEM-based roles, alongside encouraging and promoting ambassadors within the organisationB.

We have awarded a level 3 ‘response developed’ as many of these initiatives are just beginning to be implemented, and there remain opportunities to continue to review

the capability the business needs in the long-term.

Planned for

AMP7 and

beyond

We have reviewed a number of plans that are due to be implemented in AMP7 and beyond, United Utilities will continue to roll out their apprenticeship and graduate

programs, which they consider as an effective way to address their ageing workforce. The business has planned a knowledge review for 450 staff to understand their

training requirements, and to then provide bespoke training. This is now under way, and is a response to the impact of future technological changes, increased automation

and monitoring and the impact on employee roles and skill sets, and responding to these.

The MARS programme will be fully reviewed to understand lessons learnt and what still needs to be done. United Utilities will continue to strive towards planned objectives

to improve diversity and inclusivity, through gender balance and Black, Asian and Minority Ethnic community recruitmentC . Moreover, the business is looking to

demonstrate commitment from the top, raise awareness and promote employer brand both inside and outside of United Utilities, review how the business recruits,

influence and challenge industry perception, and measuring and reporting on progress.


Inclusive and skilled workforce

Interviews: 1Lesley Bellis; 2Julie Newton, 3Matthew Heaton.

Documents reviewed: AUnited Utilities (2017): PR19 resilience supplementary (Bronze); BUnited Utilities (2017): Gender pay report; CUnited Utilities (2018): Diversity and inclusion in

United Utilities, CR panel update February 2018; DSocial mobility pledge; EUnited Utilities:

My performance review document; FUnited Utilities (2015): Team development participant

journey



Current and

Ongoing

Activities

Systems thinking is at the core of United Utilities’ operating strategy, and brings together multiple parts of the business from operations to customer contact through

improved integration of information, operational and engineering technology (IT/OT/ET)E,3. An initiative in AMP5, Future Concept of Operations (FCO) started a highly

ambitious change program for optimising technology use in the business. This created the core strategies for AMP6 as well as exploiting quick wins in AMP5. The majority

of the initiatives today stem from this strategic piece of thinking driven by the CEO. The Integrated Control Centre (ICC) was an important part of this, and is an excellent

systems-based approach to integrate IT/OT/ET across the business, delivering customer focused real operational gains, and wider systems remote operation and control.

The business has established an Operational Technology team3. The wholesale technology approach is aligning business and technical capabilities across wholesale.

Capabilities are defined and worked toward i.e. where United Utilities wants to be, not how they get there. This approach considers until the end of AMP7, and is aiming to

achieve a single integrated framework for OT/IT/ET to act as an end-to-end process for achieving capabilitiesA. Pilots are currently ongoing to define condition based

maintenance strategy and solutions.

The Wholesale Technology Governance Board oversees OT, IT, Engineering, and Data & Innovation, and is regularly updated to emerging technology (e.g. satellites)1.

United Utilities is benchmarking their approaches and technologies against other water utilities, sectors (e.g. Shell, IBM, Network Rail), and attending relevant conferences.

PWC have undertaken an independent business data maturity assessment4, informing the development of United Utilities’ Data and Information Capability Roadmap for

AMP6 and AMP7C; the objective being ‘to be more innovative and realise greater benefit from generation of insight’. The business has built tools to facilitate data

management and visualisation that have been well developed and received. The data strategy and operational information being made available on self service systems

(e.g. Libra, Tableau etc.) is a positive step and has improved efficiency. The business is currently undertaking a Standards review for remote monitoring and control.

The Mobile Asset Resourcing Schedule (MARS) is the businesses biggest transformation programme, involving over 2,500 operational and back office staff. MARS is

changing how operational staff work through using hand-held devices to schedule daily tasks. However, it has proven challenging to ensure these are being used

consistently across different teams and areas of the business. During interview, it was conveyed that the IT department are a service provider and don’t currently play a

central role in the business. IT provide advice, but aren’t responsible for managing third-party contracts, which can potentially lead to duplication in different departments2.

Cyber security is important to the business, and the potential impacts on the water industry and the north-west of England have been documented in ‘Drivers for Change’D.

Level 1: Unaware

The company does not use technology intelligently.

Fragmented networks with no system cohesion. Primary

focus on physical security.

Level 2:

Aware

Level 3:

Response

developed

Level 4:

Response

actioned

Level 5: Leading

Technology is used intelligently to deliver real operational and strategic gains. Data-driven decisions are the

norm, using both real-time data to adapt and respond, as well as using data for robust long-term decisions.

Systems are integrated, including operational technology and information technology systems.

Interoperability and integration with systems in other sectors has been considered. Cyber security is

paramount, with redundancy built into systems, and processes in place to continually review and improve

this. People are at the centre of how technology is designed and implemented, both customers and staff.

Current and ongoing

activities



Planned for AMP 7

and beyond



Interviews: 1Kieran Brocklebank; 2Jorge Grifo; 3Dave Ogden; 4Simon Chadwick

Documents reviewed: AUnited Utilities (2018): ‘Wholesale technology approach’ presentation; BUnited Utilities (2018): Group Board review of risk profile; CUnited Utilities: Capability

definitions: definitions, attributes, measures and test questions; DUnited Utilities (2017): Part 3

United Utilities Future cost pressures - Drivers for change; EUnited Utilities: Operating

strategy; FUnited Utilities (2018): Business Plan_Chapter 4 (Silver Gateway)


Robust, integrated and flexible technology



Planned for

AMP7 and

beyond

United Utilities is planning on further integration of IT/OT/ET; it is planning to deliver on its ‘capabilities approach’ with an integrated plan in place for defining and realising

the 'capabilities' required for IT, OT, and ET. The Data and information capability roadmap sets out the business’s plans to further improve data and information

management in AMP7D. This includes the development of analytical models to predict asset failure and embed in capability processes, alignment of asset data to corporate

system and self service integrated reporting.


Robust, integrated and flexible technology

Interviews: 1Kieran Brocklebank; 2Jorge Grifo; 3Dave Ogden; 4Simon Chadwick

Documents reviewed: AUnited Utilities (2018): ‘Wholesale Technology Approach’

presentation; BUnited Utilities (2018): Group Board review of risk profile; CUnited Utilities:

Capability definitions: definitions, attributes, measures and test questions; DUnited Utilities

(2017): Part 3 United Utilities Future cost pressures - Drivers for change; EUnited Utilities:

Operating strategy; FUnited Utilities (2018): Business Plan_Chapter 4 (Silver Gateway)

Current and

Ongoing

Activities

In 2017, United Utilities staged a cyber attack exercise, run by a third party, and several outcomes are yet to be actioned4. The business also has a Cyber Incident

Response Plan, Information Security Infrastructure Plan, undertakes Cyber Assurance, actively monitors and manages potential threats, and has put in place a ‘Security

Seven’ training programme to increase staff awareness that is based on CPNI guidanceF.

The business actively engages and works with the Centre for the Protection of National Infrastructure, National Cyber Security Centre and Defra to shape sector approach

to security, especially around cyberB. The business is considering its interdependencies with third parties. Particularly regarding the integration between energy

consumption, generation, and electricity network balancing. United Utilities is currently producing ~30% of its energy consumption, while working towards driving down

energy consumption. In terms of energy data analytics, the business is reporting, but not using metrics or data analysis to monitor outages.



Maturity assessment

Summary of the findings



Key findings

Strengths

• Highest credit rating of any FTSE listed water

company

• Simple company structure

• High standards in financial reporting and

monitoring

• First CPI linked loans in the water industry

• Below industry average gearing, with good

access to debt capital market

• Defined benefit pension in surplus

• High-quality considered rolling five-year viability

statements in Annual Reports based on longer-

term analysis covering at least two AMP periods

• Stress testing of Ofwat July 2018 combined

downside scenario – ability to increase gearing

to maintain investment grade rating without other

mitigating options

• Financial risk integrated with wider corporate and

operational approach, including testing of low

probability ‘severe but plausible’ operational

events – even multiple ‘severe but plausible’

eventualities should be manageable

• Significant portfolio of insurance cover in place to

cover many catastrophic scenarios

Opportunities

• Greater consideration of need to gradually

increase asset refurbishment programme in 5-10

years time to ensure that leakage and fault rates

do not start rising

• Consider reporting longer rolling 7+ year Long

Term Viability Statements in Annual Reports

Financial Resilience

Current performance Future plans

Figure 6: Financial resilience assessment – current & future



Corporate Resilience

Key findings

Strengths

• System thinking approach

• Robust and integrated stakeholder mapping,

management, and engagement process across

the business

• Strong risk management processes and

governance

• Inclusive customer engagement

• Good approach to business continuity planning

• United Utilities' track record and the ICC offers

an excellent foundation to build a collaborative

culture within the organisation and exploit the

opportunity of the collaborative and open working

environment to break down siloed working.

• Leading KPIs for process safety

Opportunities

• Board or executive level ownership of resilience

• Single, central strategy document up to date and

communicated internally and externally

• Comprehensive approach to horizon scanning

• Health and Safety - embed stronger reviews in

design stage to reduce operational risks

• Enhanced health and safety culture

• Carbon targets and strong / ambitious

communities goals

Figure 7: Corporate resilience assessment – current & future




Key findings

Strengths

• Water resources management planning

• Ensuring continuity of service

• Customer engagement and understanding of

vulnerabilities

• Systems thinking approaches and IT/OT/ET

integration

• Understanding of asset health and network

location

• Catchment-based approaches, especially for raw

water quality

• Employee retention

• Approach to innovation and collaboration

Opportunities

• Long-term wastewater asset plan

• Wider rollout of sustainable drainage strategies

• Alignment of risk management approaches

• Long-term resilient supply chain approach

• Workforce diversity

Operational Resilience

Figure 8: Operational resilience assessment – current & future




7. Conclusions

Results of the assessment: Current

There are currently multiple areas of good and leading

practice across financial, operational and corporate

resilience. Particular areas of strength include:

- A robust long-term viability statement backed by a

very strong credit rating, and extensive ‘severe but

reasonable’ impact stress testing

- Accessible financial reporting: the company publicly

reports on its financial performance in a transparent

way and with a customer focused orientation;

- Excellent long-term water resource management

planning: the plan has incorporated several

innovative elements which makes United Utilities

stand out;

- Engaged stakeholders: United Utilities has a leading

approach to mapping, managing and engaging

stakeholders.

Areas with opportunity for further improvement are

similar to those in many other water companies in

England and Wales.

- Diverse future-proof workforce: the company is

currently trying to address issues including a diverse

mix, gender pay reporting and aging workforce.

- Flexible long–term waste water planning: the waste-

water planning for the long-term is still at a

comparatively early stage of development.

- Horizon scanning: whilst there are pockets of good

practice, there are further opportunities to embed a

holistic approach across the organisation.

Figure 9 outlines the results of the assessment of the

current situation.

Figure 9: Assessment of the current performance


Private & Confidential – July 2018 71Figure 10: Assessment of the future performance

7. Conclusions

Results of the assessment: Future

Figure 10 outlines the results of the future

assessment.

As United Utilities is already performing well,

there are relatively few areas where there are

really clear plans for significant changes to

processes and systems in AMP7 or beyond.

As with many other water companies plans

for increasing refurbishment rates of assets in

AMP8, 9 and beyond need to be advanced

and costed to avoid increases in leakage

rates and step changes in AMP Totex

requirements.

Nevertheless, if United Utilities wants to

retain a leading place compared to its peers,

it will need to continually evolve and stretch

itself, developing ambitious plans for the

long-term.



8. Opportunities to further enhance United Utilities’ resilience approach

The appointment of a new CEO in 2010 has

led to significant improvements and

reinforcements in United Utilities corporate

and financial resilience.

Additionally, a series of major incidents in

2015/2016 produced some swift and

comprehensive improvements across the

business, with a particular focus on

managing and mitigating short-term risks.

As result, in many areas, United Utilities has

already developed industry leading

approaches to resilience.

This provides a great platform to do more

work to deliver a leading approach in

corporate, financial and operational

resilience.

Based on the findings of this assessment, we

have identified a number of areas where

United Utilities has the opportunity to improve

or highlight areas of leading practice. These

need to be considered in an integrated way

in order to deliver the best value. The

resilience dividend, or resilience in the round,

can be achieved by securing multiple

benefits from each resilience initiative

undertaken.

Financial Resilience

United Utilities regards financial resilience as

one of its key strengths, which is supported

by its financial metrics. We identified a few

areas where United Utilities has the

opportunity to improve to achieve leading

practice:

• Further developing and costing

sustainable longer-term investment plans

for AMP8, 9, 10, 11 and 12 that ensure

maintenance and refurbishment

schedules are met and avoid step

changes in AMP by AMP totex requests.

• As with the first CPI-linked water

company bond, continue to review, learn

and implement new ideas to improve

financial resilience.

Corporate Resilience

In terms of corporate resilience, United

Utilities is characterised by an excellent risk

management culture. Risk principles are

embedded across the organisation and in

board-level decision making. The business

risk management framework follows a wide

ERM approach, with defined and clear roles

and responsibilities in the governance

structure. The company has good response

and recovery plans to cope with extreme

events and the planning and management for

business continuity seems to be robust and

comprehensive. The operational model is

based on a systems thinking approach which

will be characterised by significant

reinforcement during the next 2 AMPs. This

represents a good platform to build a leading

resilient business, with a more clearly

articulated strategic direction linked to the

long-term.

Clear strategic direction

The company should define the strategic

direction for the organisation in a holistic,

single, clear, up to date organisational

strategy document which embeds the

systems thinking approach, underpins

internal plans and decisions, and provides a

single point of reference for external

stakeholders to replace the outdated version

available on the website.

A long-term resilience strategy which

embeds these principles and sets a clear

direction would represent an important

milestone of leading practice.

Strategy and plans should be communicated

internally and linked to a clear plan for

embedding cultural change and improving

collaboration between teams.

From risk to resilience : long- term

horizon scanning

Resilience and risk management are

fundamentally and intrinsically linked. United

Utilities is characterised by a robust

approach to response and recovery and to

risk management which enables the

company to deal with short-term more

predictable hazards. Developing an

overarching approach to horizon scanning,

which feeds into strategies and plans across

the business, and is integrated with the ERM

system, would help to give longer-term

stresses similar consideration to that of short-

term shocks.

Governance and assurance

Embedding the principles of resilience in the

governance and assurance processes,

through, for example, having clear ownership

of resilience, could enable United Utilities to

further embed its systems thinking approach

in the long-term.

Developing clear resilience policies aligned

to the long-term strategy is a further

opportunity to develop industry leading

practice.



Collaboration - reducing siloes internally

Although several projects and actions are in

place to develop a collaborative culture

within the business, the review has identified

some gaps and disconnections in team

integration. The system thinking approach

and the ICC represents a good platform to

bring people together and improve

partnership working. We recommend putting

people at the heart for future change

programmes.

Good practice sharing

To contribute positively to the wider industry

and play a key role in the North West, we

recommend that United Utilities share the

good practice it is demonstrating on

operational resilience with other asset

owners and the water sector.

Operational Resilience

The last 20 years has seen the system

thinking approach become the core of United

Utilities’ operating model to define trends and

variability across the business. The ICC

represents a central hub for operational

resilience and has already proved to be

really efficient during specific incidents.

The company is leading in terms of its

WRMP and has proven to have a strong

asset health risk orientation and technology

focus. We have identified some potential

areas for improvement.

System thinking approach

In the next 10 years the System Thinking

approach and the significant implementation

of technology in the United Utilities’ operating

model will produce a significant business

change. The company will need to be ready

to embrace this new approach at each level

of the organisation. Our review suggests that

there is a clear strategy and drive towards

the path in place that involves several areas

of the business. However, the approach does

not seem to be incorporated into a clear

organisational strategy. Additionally, it is not

clear how this is communicated and acted

upon by staff.

For this reason, we recommend to allocate

further resources in embedding the system

thinking strategy in the company’s

organisational culture. People should be at

the heart of the system as technology is

implemented and scaled up.

Third parties interdependencies

As mentioned above, United Utilities is

characterised by an excellent risk

management culture. However, our review

suggests that there is an opportunity for

further analysis of interdependent/third party

risks. The partnerships developed with

electricity DNOs in the region including,

Electricity North West and Scottish and

Southern Electricity Networks to develop and

test resilience plans represents an example

of good practice.

We recommend extending this approach to

other businesses and third parties to

understand mutual connections and

dependencies in emergency events.

This process could be supported by the

mapping of third parties interdependencies

service showing the potential mutual impacts

of water and wastewater services.

Supply chain resilience

United Utilities has a number of approaches

in place to maintain its supply chain

resilience, including category management, a

review of specifications and the supplier

market, and understanding critical links

where a single supplier, point of

infrastructure or other constraint could lead

to a vulnerability.

Where weak points have been identified, the

business is now in the process of reviewing

existing contract and contracting processes,

which will be modified where possible to

eliminate potential risks. The business has

identified an opportunity to undertake longer-

term planning for their supply chain1, and we

recommend that the business also considers

the supply chain as a system, recognising its

interdependencies.

8. Opportunities to further enhance United Utilities’ resilience approach



Appendix AInterviewees

Name Role/Title

Mark Small Head of Finance Planning & Performance

Jorge Grifo Infrastructure Solution Architecture Lead

Lesley Bellis HR Business Partner

Jonathan Williams Assistant Company Secretary

James Bullock Strategy and Regulation Director

Charmian Abbott Director of Water and Scientific Services

Keith Haslett Director of Wastewater Network Plus

Ben Nadel Domestic Retail Regulation Manager

Jo Harrison Asset Management Director

James Riddick Head of Regulatory Procurement

Andy Pennick Energy Production Planning Manager

Chris Matthews Head of Sustainability

Simon Chadwick Central Operations Director

Craig Percival Corporate Risk Manager

Niall Clarke Resilience Manager

Simon Boyland Head of asset system and planning

Paula Steer Director of H&S

Marc Willacy Business Partner for H&S

Continued…



Appendix AInterviewees

Name Role/Title

Tom Allen Water Network Strategy Manager

James Taylor Head of Corporate Audit Risk

Gaynor Murphy Head of stakeholders relations

Julie Newton Leadership and Talent Manager

Matthew Heaton Technical Training Delivery Manager

Paul Tipper Head of Wastewater Network & Strategy

Ed Dalton Resilience Strategy Manager

Mark Smith Water Resource Manager

Dave Odgen Wholesale Technology Manager

Liz Morrison Category Manager

Mark Abbott Regulatory Contract Manager

Kieran Brocklebank (email contact) Head of innovation



Appendix BReference documents

List of documents

Ofwat (2018): Expectations for companies in issuing long-term viability statements

United Utilities Water Ltd (2018): 2017/18 Annual report. June 2018

Ofwat (2017): Monitoring financial resilience

EY (2017): Annual reporting in 2016/17

Ofwat (2017): Delivering Water 2020: Our final methodology for the 2019 price review

Ofwat (2017): Company monitoring framework: 2017 assessment

Ofwat (2018): Putting the sector back in balance: Consultation on proposals for PR19 business plans. April 2018

Ofwat (2018): Putting the sector back in balance – summary of Ofwat’s decision on issues for PR19 business plans. July 2018

Ofwat (2018): Review of water companies’ response to the ‘Beast from the East’

United Utilities: Long term strategy (www.unitedutilities.com)

United Utilties: Wholesale PR19 SDS

United Utilities: Business strategy documents:

- Bioresources;

- Water;

- Water resources;

- Wastewater.

United Utilities (2018): ‘Systems Thinking’ presentation

United Utilities (2017): Business Risk Management Framework

United Utilities (2018): Group Board review of risk profile

United Utilities (2018): Corporate Audit planning approach and 2018/19 plan

United Utilities (2017): Annual performance report 2017

United Utilities (2017): AMP6 regulatory reporting assurance framework

United Utilities: Resilience presentation (Jo Harrison)

United Utilities (2017): PR19 resilience supplementary (Bronze)

United Utilities (2017): Part 3 United Utilities Future cost pressures - Drivers for change

United Utilities (2017): Draft Water Resources Management Plan 2019

United Utilities (2015): Adaptation progress report 2015 under the Climate Change Act 2008

Continued…

http://www.unitedutilities.com/




List of documents

https://www.unitedutilities.com/corporate/about-us/performance/yourvoice/

United Utilities (2017): United Utilities' approach to affordability & vulnerability (Silver)

United Utilities: ‘Customer engagement’ presentation

United Utilities (2017): Engagement with regional stakeholders, summary of key points,

United Utilities (2017): Engagement with regional stakeholders, Greater Manchester Local Enterprise Partnership and Combined Authority



United Utilities (2017): Health, Safety & Wellbeing policy

United Utilities (2017): ‘Health and Wellbeing overview’ presentation

United Utilities (2018): Wholesale Board Health and Safety Report, March 2018

United Utilities (2017): ‘Process Safety Indicators Update’ presentation, October 2017

https://www.unitedutilities.com/corporate/responsibility/employees/health—safety-

https://www.unitedutilities.com/innovation

United Utilities (2018): ‘MGG criticality’ presentation

United Utilities (2016): Supply interruptions strategy

United Utilities (2017): ‘Supply interruptions’ presentation

United Utilities (2018): Plans for the provision of Essential Water Supplies and Sewerage Services at all times, 19/01/2018

United Utilities (2018): Manchester and Pennines resilience_ draft

United Utilities: From Source to Tap: Our Water Resources Management Plan summary guide to keep the North West flowing

United Utilities (2017): Draft Water Resources Management Plan 2019– Options appraisal

United Utilities – Catchment Management (https://www.unitedutilities.com/corporate/responsibility/environment/catchment-management/)

Continued…

https://www.unitedutilities.com/corporate/about-us/performance/yourvoice/



https://www.unitedutilities.com/corporate/responsibility/employees/health—safety-

https://www.unitedutilities.com/innovation

https://www.unitedutilities.com/corporate/responsibility/environment/catchment-management/




List of documents

United Utilities (2017): Integrated Drainage Area Strategies (IDAS), November 2017

United Utilities: Wastewater network failure (sewer flooding)

United Utilities (2017) Asset health, version gold

United Utilities: Business Risk Management: Horizon Scanning

United Utilities(2018): Business Plan Chapter 4 (Silver Gateway)

Arcadis (2017): Measuring resilience in the water sector

United Utilities: Chapter 2 – Voice of the customer: our approach to engagement

BITC (2016): Water resilient cities: building resilience and saving money through better surface water management

Sourcing Strategy gateway approval, 2017

https://www.unitedutilities.com/corporate/media-centre/press-releases/largest-nereda-plant-in-the-uk-will-be-operational-next-year

United Utilities (2017): Gender pay report, April 2017

United Utilities (2018): Diversity and inclusion in United Utilities, CR panel update, February 2018

United Utilities: Social mobility pledge

United Utilities: My performance review document

United Utilities (2015): Team development participant journey

United Utilities (2018): ‘Wholesale technology approach’ presentation, January 2018

United Utilities: Capability definitions: definitions, attributes, measures and test questions

United Utilities: Operating strategy

vivideconomics & ARUP (2017): Understanding the exogenous drivers of wholesale wastewater costs in England and Wales

United Utilities: Bathing water technical note v1

United Utilities (2017): ‘Franklaw incident’ presentation_ seminar, November 2017

United Utilities (2017): Corporate Audit & Risk, Annual audit planning day presentation

United Utilities (2017): Annual planning day sides

Arup, City Resilience Index, 2013

https://www.unitedutilities.com/corporate/media-centre/press-releases/largest-nereda-plant-in-the-uk-will-be-operational-next-year



Appendix CAdditional reviewed documents provided by United Utilities

List of documents

CRMF03 - Business Risk Management procedure F v12

CRMF30 - Business Risk Management process v1.1

CRMF46 - Risk Management framework F v2

Business Risk Management assurance model

Summary slides - transformation programme

OCR toolkit updated Feb 2015

Energy services - leadership event - March 2018

Information Quality Management – March 2018

Incident management guidance - Version 1.0 February 2016

Business continuity strategy and tactics 2018

Billing business continuity plan

Business continuity plan domestic retail - Whitehaven

United Utilities generic reservoir plan, November 2017

United Utilities incident and crisis management policy and procedure - Version 10

Annual Performance Report - Customer summary 2016-17

United Utilities horizontal capabilities with BI’s final

Long term vision

External Quality Assessment (EQA) for corporate audit

Group Audit & Risk Board (GARB)_Terms of reference

Business Risk Management – Coordinating Risk Assessment (including BURA)

Arup resilience review - stakeholder engagement and reputational risks

United Utilities Reputational risks - Apr 13



For further information on this report please contact:

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