Incorporating Risk into Financial Management
Abstract:Water and wastewater utilities currently face more stakeholder demands than ever. Regulatory agencies continue to implement more stringent regulations that require significant investment in new infrastructure and increased operation costs; customers and elected officials demand increased transparency, accountability, and cost controls; and the financial community requires additional disclosures to evaluate the credit worthiness of current and future utility operations. To support general operation and financial planning efforts, Fairfax County's Wastewater Management Program (“WWM”) has utilized a financial planning model for the last twenty years. Fairfax uses the financial model to develop its current and projected financial position, support decision making on such critical areas as establishing rates and capital charges; establish operations, maintenance, and capital budgets; and reserve management/debt issuance.
To address increasingly complex and sometimes competing stakeholder requirements, WWM has incorporated consideration of financial position risk by conducting a systematic identification of risk elements. The incorporation of risk management into the financial position and associated financial decision making has provided numerous benefits, including implementing a more efficient framework for financial budgeting, reducing costs associated with uncertainty in planning decisions, and realizing efficiencies associated with managing risks on a pooled basis. Fairfax is currently focusing on integrating this approach into supporting active stakeholder outreach and communication efforts.
Document Type: Research Article
Publication date: January 1, 2012
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