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Enhancing critical infrastructure resilience in New Zealand

Critical infrastructure provides essential services that underpin our society

Because of its fundamental importance, we often assume infrastructure organisations can deliver those services no matter what adversity they face. How realistic is that in today’s complex environment, and what is it executive teams should be looking at to better anticipate and respond to change and disruption?

This article was first published in the second issue of Deloitte's global infrastructure magazine, Infrastructure with impact. Read the full magazine via the button below.

The world is transitioning to a new normal that’s impacting every corner of the globe

New Zealand – also fondly known as Aotearoa, the land of the long white cloud – has long benefited from its geographic remoteness and tight knit society. Historically, the nation has not felt as proximate to world shocks as other developed economies, but that all changed with the onset of COVID-19.

The pandemic resulted in several concurrent shocks worldwide that undermined the ability for many organisations to operate effectively. A severely impacted workforce disrupted supply chains, including access to vital inputs and global logistics, while demand unexpectedly skyrocketed. It created a “perfect storm” that caught everyone off guard, serving to highlight a range of resilience issues that were typically resolved through ad hoc emergency measures, rather than comprehensive contingency planning and foresight.

While the pandemic’s immediate impacts are abating, its longer-term effects are conflating with other factors to create an equally challenging environment. Geopolitical conflicts, climate change, inflation and rising interest rates are a few examples of shocks that continue to upset our journey back to a more stable equilibrium. As we move past the initial destabilisation, it is becoming apparent we are transitioning to a “new normal” that is a long way from the pre-pandemic world in which we once lived. There is no doubt the current environment brings with it numerous complex challenges, each impacting the way critical infrastructure operates. With that comes an increasing requirement from governments and other stakeholders to ensure that a high level of security and resilience becomes part of our corporate fabric.

Does that mean we simply rinse and repeat what has been done in the past, or is it time to reassess and build more appropriate strategies that are better aligned with today?

A holistic, asset-led approach to critical infrastructure resilience

Enterprise frameworks typically consider risk at a macro level, not always capturing some of the more granular or complex vectors that need to be identified and managed. Prioritising an asset-based approach helps balance that situation.

The services of critical infrastructure are delivered through assets. Identifying and mitigating material risks at an asset level can help an organisation to structure appropriate resilience controls. These controls need to support the delivery of core services in the face of multiple market and operational challenges, simultaneously.

Successfully adopting an asset-led approach requires a detailed assessment of all hazards in testing the effectiveness of an organisation’s risk management and continuity plans. This is a practical and effective way of developing robust resilience strategies that are more aligned with the multifaceted threat environment we face today.

One of the most powerful aspects of an asset-led, all-hazards approach is that it transcends traditional silos to focus on core service delivery, which can be applied to aspects of an organisation over time. This makes it far easier to prioritise and build capability in essential business units facing immediate disruption. Organisations can use a sprint-based approach to then uplift other areas at a manageable cadence, rather than trying to run a more daunting and resource intensive transformation of a whole business.

At Deloitte New Zealand, we have seen the success of taking this pragmatic approach, working with clients on supply chain and procurement as the tip of the spear.

Ben Davis, Critical Infrastructure Specialist at Deloitte Australia, says, “The adverse consequences of being at the end of global supply chains has become an issue of national importance. Both New Zealand and Australia sit at the extremity of complex and physically dispersed supply lines that continue to experience significant delays, shortages and cost escalations.”

Guy Finny, Associate Director at Deloitte New Zealand, adds, “New Zealand has a nation-building opportunity to enhance the resilience of our critical infrastructure. The government has recently tasked its officials with reviewing existing regulatory frameworks, recognising a need to ensure legislation is fit for purpose in the current operating environment.”

Recognising these trends, Deloitte drew from Australia’s recent experience with a newly mandated all-hazards framework to assist Transpower, the owner and operator of New Zealand’s national electricity grid, reviews and uplifts its supply chain management practices.

Transpower maintains a national asset base and is a critical enabler of New Zealand’s energy infrastructure. It has to be responsive to the changing dynamics of the New Zealand energy market, including a record number of requests in connecting renewable generation.

Rutger Keijser, Head of Risk and Assurance at Transpower, notes, “Transpower weathered the supply chain disruptions of recent years well. At the same time, we have witnessed levels of disruption we had not encountered before, and this pattern is unlikely to change any time soon. We want to make sure our organisational practices are appropriate for an increasingly volatile and disrupted operating environment.”

Any operating environment that has to perform in the face of adversity needs a framework that gives stakeholders a line of sight on the most critical things that could materially impact the organisation’s core functions.

In achieving that, Transpower and Deloitte applied an all-hazards methodology in evaluating supply chain management practices, focusing on critical assets, their interdependencies, and touchpoints throughout the organisation.

Assessing how the functions of key assets could be disrupted by material factors helped Transpower build on its existing practices. This was done by approaching resilience through a focus on critical components and the internal and external influences on those across the procurement process and along the supply chain.

Dan Robertson, Head of Procurement and Supply at Transpower, says, “Taking an asset-led approach was key in helping bring teams together to ensure supply chain considerations for our critical assets are appropriately factored across asset planning, project delivery, and operations. The approach helped identify areas of strength within the organisation, allowing us to build on that through greater knowledge sharing. While our supply chains held up well during the pandemic, the lessons learned from this review are helping us take steps to further improve our resilience.”

It is no surprise given the desire to uplift national security and resilience, that an all-hazards framework is at the center of whole of nation reforms targeting critical infrastructure in nearby Australia. Recent changes to the Security of Critical Infrastructure Act require responsible entities to create and operationalise a risk management program based on an extensive, asset-level lens.

Ben says, “The positive obligations introduced in Australia were not necessarily welcomed by industry, but after taking the time to work through them systematically and collaboratively, we’re seeing just how transformative a more holistic and asset-driven approach can be.”

Boards and executive leadership teams are facing a horizon where more proactive and informed decision-making is required for the due care and diligence associated with their fiduciary duties. Expectations are increasing around the foreseeability of risks, good governance and mitigation planning.

“In New Zealand, we expect the government will closely consider embedding an all-hazards, asset-based security and resilience approach into legislation. However, even without legislation, we expect this framework will increasingly set the benchmark for organisational best practice and strong leadership.”

John Marker, Partner, Deloitte National Infrastructure Leader for New Zealand, concludes,

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