The Value of Water

What is the value of water?  March 22^nd is World Water Day and a good time to reflect on this question.  

For most businesses, the price of water remains relatively inconsequential compared to other operating costs. The real value of water for business is tied to intangibles such as brand, reputation, license to operate, business continuity and as a driver for innovation.

But there is another aspect of the value of water for business -- arguably the most important aspect -- that is tied to the social dimension of water.

Currently, some 1.1 billion people lack access to clean water, and more than 2.5 billion people lack access to safe sanitation.  The implications of these statistics for a steepening scarcity curve are staggering, particularly as demand for water increases globally in many major sectors – industrial, agricultural and domestic.  The business implications are similar to the implications for society:  increased competition for water and a workforce that lacks access to a basic resource.

Based on innovative ideas presented at the Hult Global Case Challenge, solutions can be identified to help solve the water scarcity issue. I participated as a judge a few weeks ago in the second annual Hult International Business School Global Case Challenge (courtesy of Jack Russi and Cathy Benko from Deloitte).

The competition is focused on addressing the global clean water crisis in partnership with Water.org, an organization founded by Gary White and Matt Damon, and The Clinton Global Initiative (CGI). In competitions held in Boston, San Francisco, London, Dubai, and Shanghai, the international competition “crowd-sourced” innovative ideas from some of the world’s top students. The Hult Global Case Challenge, as a CGI member, has committed to working with fellow CGI members to solve one of the world’s most pressing resource issues.

The winners of each Regional competition will compete in the Global Final in New York City on April 30, 2011, co-hosted by the CGI. At the final event, the participating teams will present their refined solutions to a panel of executive judges. Water.org will receive a USD $1 million donation from Hult International Business School, which can be used to help see the winning team’s solution implemented.

The Hult competition draws attention to the alarming and indefensible lack of access to clean water and sanitation among many populations.  It is driven by a global business school competition, and social issues can no longer be artificially divorced from economic and environmental issues. (The cornerstone of sustainability is, in fact, the integration of economic, social and environmental risks and opportunities.) 

Based upon the passion, creativity and commitment of the students participating in the Hult Global Case Challenge, I am confident new pathways to solving the water scarcity challenge will be identified.

William Sarni
Director, Deloitte Consulting LLP

Will Sarni is a Director with Deloitte Consulting LLP and leads Enterprise Water Strategy for Deloitte Sustainability Consulting.  He is an internationally recognized thought leader on sustainability and is the author of the book, Corporate Water Strategies (Earthscan 2011).

Risk: In Business Project Management, it isn’t a game

For me, the word risk used to invoke images of the classic board game, where players competed for world domination by building armies and invading opponents’ territories.  Players would draw cards to divide the global regions, and then roll the dice when attacking and defending the game’s political borders.  Developing a strategy – such as fortifying your borders, forming alliances and avoiding being spread too thin – is an important element of the game.  For instance, knowing that Oceania is the safest continent to protect and that Europe is the most difficult (a lesson we learned from Kramer and Newman) can give you an advantage over the other players.   While the outcome of the game of Risk is largely dependent on luck – luck of the draw, roll of the dice, and playing your cards right - it is still important to have a good strategy.

Now, when I think about risk, I think about the risk management challenges my clients, and those my Deloitte colleagues, face every day.  I think about the uncertainty and complex problems organizations must overcome when conducting business and planning for the future. 

I moderated a Dbrief this month on the strategies related to large-scale capital project management and investment.  A recurring theme my colleagues (Charles Alsdorf, Glen Justis and Joe Messick) and I identified during the development of the Dbrief was the risks impacting capital planning.  Such risks include:

• Market Risks (e.g., volatile GDP, inflation, commodity pricing, rising interest rates)
• Climate Risks (e.g., global climate change, seasonal weather patterns)
• Regulatory and Policy Risks (e.g., federal budget uncertainties, political unrest, and changes to environmental, infrastructure, healthcare, education and tax policies, priorities and funding)
• Competitor Risks (e.g., actions and responses)
• Customer Risks (e.g., demand, willingness to pay, managing expectations)
• Technical Risks (e.g., effectiveness, reliability, new technologies, standard protocols, R&D)

As you can see, there is a lot for organizations to think about relevant to risk when planning large-scale capital expenditures.  Fortunately, Deloitte’s capabilities go beyond simply listing the risks an organization must account for.  Deloitte has an “army” of leaders, skilled practitioners, industry specialists and game changers focused on risk management strategies.  Deloitte has developed models and identified key attributes for organizations to manage their risks, including:

• Organization and Governance: Leadership, standards, policies and defined team roles
• Business Process: Scheduling, work flow, reporting, project controls, and quality assurance
• Communication: Documentation, report dissemination, feedback, KPIs, progress tracking

Risk management is only a single aspect to successful capital project management.  Benefit analysis, quantifying project robustness, modeling and simulation, portfolio optimization, funding and defining strategic value are other key factors to large-scale capital project management decision making - factors you’ll see outlined in our Dbrief.  Successful risk management can facilitate successful project execution.  And in business, risk is not a game.

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Marlene Motyka
Principal
Deloitte Financial Advisory Services LLP Power & Utilities Leader

As used in this document, “Deloitte” means Deloitte Financial Advisory Services LLP and Deloitte & Touche LLP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.  Certain services may not be available to attest clients under the rules and regulations of public accounting.