HAWKE’S BAY REGIONAL
COUNCIL
Corporate
and Strategic Committee
Wednesday 10 June 2020
Subject: Risk Maturity Roadmap
Reason for Report
1. This item outlines a proposed long-term pathway towards a
culture of consistent and transparent risk intelligent decision making across
every Council function and summarises the current state of
Council’s Enterprise Risk Management programme; seeking Council’s
support to initiate the risk maturity work programme in accordance with the proposed
roadmap.
Officers’ Recommendations
2. Council officers recommend that the Corporate and Strategic
Committee endorses Phases I and II of the proposed risk maturity roadmap with
key decisions items to be finalised by the Executive Leadership Team and the
Finance, Audit and Risk Sub-committee (FARS) and formal adoption by the Council
during the 2020-21 financial year.
3. Council officers further recommend that the Committee endorses
Phases III and IV of the risk maturity journey on a longer-term horizon,
recognising the need to create a fundamental cultural shift towards risk
intelligent decision making across all functions of the Council.
Executive Summary
4. The ultimate
purpose of a robust Enterprise Risk Management (ERM) programme is to provide
assurance to the Council and oversight to the Executive Leadership Team that risks are managed, and risk opportunities are seized. Risk
intelligent, or risk informed decision making ensures the ongoing efficient and
effective achievement of HBRC’s operational and strategic objectives.
5. To that end, this item seeks the Committee’s endorsement of
certain foundational elements of the proposed ERM work programme with defined
deliverables to enable achievement of the longer-term goal of implementing a
robust ERM framework to define, develop, deploy, measure, monitor, and report
upon a culture of risk intelligent decision making in support of
Council’s vision, mission, and strategic objectives.
6. The
item’s recommendations are supported by:
6.1. An initial risk maturity assessment from external auditors driven by
Council’s 2019-2020 Audit work programme
6.2. An external
independent cursory risk maturity assessment, and
6.3. Staff’s
commitment to seek and adopt industry best practices to create a more
resilient, risk-intelligent organisation better positioned to deliver outcomes
consistent with Council’s mission, vision, and values.
Background
7. Initially
established as part of the Finance team within the Corporate Services umbrella,
Council’s risk management functions included identifying, reporting and
quantifying Council’s key enterprise risks across functions.
8. With a dotted
line reporting to the Office of CE and Chair (OCEC), Council’s Group
Accountant shared a variety of risk management responsibilities including risk
workshops, risk training, and risk reporting in addition to the role’s
primary Finance functions.
9. As the risk
management program matured organically within the Council coupled with turnover
within the Finance team, staff realigned the risk management function entirely
under OCEC’s portfolio of responsibilities in May 2019. This resulted in
a complementary OCEC portfolio which included adjacent enterprise functions
such as governance and audit.
10. Acknowledging
Council’s diverse nature of services in an increasingly dynamic
environment, staff established a full-time, permanent Risk and Assurance lead
role to further develop Council’s Enterprise Risk Management (ERM)
capabilities.
11. Council’s
function-specific risk management activities are currently being undertaken
across the organisation. Council’s current risk management programme
includes centralised risk reporting on a six-monthly basis in the form of a
risk register outlining Council’s enterprise risks. HBRC’s risk
register was last presented to the FARS at the meeting held on 12 February
2020. As part of the risk maturity transition plan staff propose that the risk
register ordinarily scheduled to be presented to FARS at the 12 August 2020
meeting will include the revised enterprise risks.
12. Worthy of
note, since the 12 February 2020 risk report Hawke’s Bay has been
impacted by two significant events, being the Covid19 response and a declared
regional drought.
13. New
Zealand’s response to Covid19 took effect at velocity. As a result,
HBRC’s operating model was disrupted. During this time of business
interruption, the ongoing risk focus has been ensuring enterprise risks
directly and materially impacted by the Covid19 response continued to be well
managed. These risks included:
13.1. Health and Safety
13.2. People and Culture
(including wellbeing)
13.3. Community Sustainability
(welfare and resilience - CDEM), and
13.4. Financial.
14. The impact of the declared
regional drought has also meant additional scrutiny applied to similar risks
including:
14.1. Community Sustainability
(welfare of farmers and closer oversight of water related resources), and
14.2. People and Culture (our
staff capacity particularly given additional Covid19 restrictions and
CDEM’s involvement in Covid19 regional coordination).
15. As
Council’s risk reporting functions have evolved, it is considered good
practice to further develop Council’s culture of risk by formalising a
risk maturity roadmap. An
integrated and embedded risk management system ensures effective execution of
objectives by identifying and addressing risks and uncertainties, therefore
supporting operational excellence. A key value of Council being excellence, the
timing is considered optimal to consciously advance the Council’s current
risk practices via an accelerated path to risk maturity.
16. It is
imperative to note that this accelerated path to risk maturity is a journey
requiring a long-term commitment to risk management to create a fundamental
cultural shift. As with any programme that seeks an enduring cultural
transformation, a steadfast commitment from the Council and the Executive Leadership
Team is a crucial component for success in the long term.
17. With the appointment of an
in-house permanent Risk and Assurance Lead position effective 18 May 2020,
Council aims to formalise the role of risk management as an enabler of
strategic and operational objectives.
A Primer
on Enterprise Risk Management frameworks
18. All Council managers,
employees, and stakeholders currently manage risk on a daily basis. Proposed
ERM efforts are designed to link risks and risk opportunities to objectives.
This enables cross functional aggregation of what may appear to be disparate
risks. This also provides the ability to embed risk management into
everyday decision making for all staff.
19. A mature and dynamic
approach of ERM is tailored to the organisation’s size, scale, and
mandate, as well as integrated and standardised across all levels of the
organisation. This tailored approach to ERM enables the Executive Leadership
Team and the governing body to:
19.1. Effectively prioritise
resource allocation for management of risks that most significantly impact the
Council’s overall strategic plan and mission
19.2. Stress-test
Council’s strategic and operational objectives against the interests of
key stakeholders
19.3. Define, develop, and
cultivate a culture of operational excellence that is effective in identifying
all risks, which enables the streamlining of processes and controls across the
organisation.
20. Council’s risk
maturity can be benchmarked against a number of well-recognised risk management
models. Staff have undertaken an evaluation of these models. This
evaluation considered Council’s size, scale, mandate, and operational
practices for benchmark suitability.
21. After careful
consideration, staff have agreed to utilise the principles of the International
Standard for Risk Management (ISO 31000:2018), while also adding certain
prescribed elements outlined in the All-of-Government’ (AoG) enterprise
risk maturity assessment framework propagated by Local Government New Zealand
(LGNZ).
22. ISO 31000:2018 provides
the ability to tailor risk processes, so they are right sized for
Council. In addition, the ISO model allows for better alignment to
Council’s other structured management systems such as Quality Management
Systems (ISO 90001) and therefore provides the ability for future management
system integration.
Current
Risk Management Efforts – Assessed by Shash Davè, External Consultant
23. At the request of Staff
and Council to provide a “quick risk maturity assessment against
best-in-class programmes,” Council retained an independent external
consultant to:
23.1. Swiftly undertake a
subjective risk maturity assessment, and
23.2. Interview the Executive
Leadership Team to collect, collate, prioritise, and report top Council risks
on a standardised 1-page dashboard (heatmap). A brief summary of each of these
efforts is provided following.
24. Preliminary risk
maturity assessment: Key highlights from an independent preliminary
risk maturity assessment are outlined below in detail and graphically summarised
in the attachment as Exhibit A – HBRC Risk Maturity Cursory Assessment
below (and attached to this report).
25. Key highlights from this
preliminary risk assessments are outlined following.
25.1. Risk as a value
driver – Council and the Executive Leadership Team recognise the
value of utilising risk management as an enabler of strategic objectives well
beyond the traditional model of risk aversion.
25.2. Tone at the top
– Council and the Executive Leadership Team have established a clear
“tone at the top” with high levels of engagement to drive a
long-term cultural shift towards perception of risk. Council and the
Executive Leadership Team desire a focussed approach to empowering Staff in
making smart, risk-informed choices within a yet-to-be-defined tolerance
framework (i.e. risk appetite).
25.3. Current state –
Operational risk management efforts are routinely undertaken by business
units in an ad-hoc and episodic manner with risk prioritisation occurring via
traditional channels of managerial escalation. Routine Executive
Leadership Team meetings are an informal forum where mitigation plans are
discussed and resource-allocation is prioritised. The output of this
exercise is communicated in the form of a risk register to the Finance Audit
and Risk Sub-committee.
25.4. Risk tolerance
dissonance – Functional units have a varying perception of acceptable
risks and risk tolerance resulting in differing degrees of resource-allocation
for identified risks. Formalised, analytically sound risk appetite statements
aligned with strategic objectives is necessary to empower Staff in making
risk-informed decisions.
25.5. Audience-appropriate,
clear risk reporting – With a proposed standardised reporting relying
on a predefined framework, Council’s risk identification and reporting
methodology requires refinement in order to tailor audience-specific portfolio
view of key risks (e.g. risk heatmap with top 5 / 10 / 15 risks).
25.6. A need for
standardisation – An enterprise-consistent and standardised
identification, reporting, and escalation framework is required in order to
effectively deploy resources. Council’s current format of
enterprise consistent risk-based resourcing is largely subjective.
Standardised scales of Impact (Severity) and Likelihood (Frequency) were
recently proposed as a draft for further refinement by Staff.
25.7. Incongruous adoption
and roll-out – Council’s risk management practices are
incongruously adopted across the enterprise with limited focus on risk
interoperability and limited alignment with strategy.
25.8. Resiliency – Risk
resiliency evaluations are primarily driven by audit-based, siloed
stress-testing, although, recent appointment of a dedicated in-house resource
serves as a foundational platform for embedding risk management deeper within
the Council.
25.9. Integrated response
management – Function specific crisis response processes are well
defined. However, routine cross-functional crisis simulations tied to emerging
risks can further bolster development of a rapid reaction task force.
25.10. Scenario planning and political
volatility – Long-term scenario planning exercises can be undertaken
to refine and clarify top strategic priorities, driven by a standardised
strategic risk framework, insulating Council’s strategic objectives from
triennium-driven political volatility.
26. While it
is premature to provide detailed written risk maturity on this matter,
Council’s current state of subjective risk maturity is included above
(attached as Exhibit A – HBRC Risk Maturity Cursory Assessment).
Council’s current risk maturity is roughly approximated between
“ad-hoc” and “defined” on an evolutionary path towards
risk intelligence.
Executive Leadership Team Risk
Interviews
27. At the direction of staff
and members of the Finance, Audit and Risk Subcommittee and Corporate and
Strategic Committee, an independent, executive-focussed risk assessment has
been commissioned to identify key enterprise risks across each Group of
Activity to be assessed on a standardised scale of Impact (Severity) and Likelihood
(Frequency). A proposed draft copy of standardised scales is attached to
this report as Exhibit D – HBRC Likelihood and Impact Assessment Matrix
for Operational Risks. Staff continue to evaluate these standardised
scales which are subject to revision prior to review and eventual adoption by
the Council.
28. Outputs from the executive
risk assessment interviews are currently being evaluated for presentation to
Council in the form of a one-page, portfolio risk heatmap for top enterprise
risks before 30 June 2020. This output is designed to act as a
springboard for formalised risk heatmap reporting. This exercise will
inform staff’s current risk management efforts in formalising the
Council’s ERM framework and key enterprise risk for reporting and
determining risk appetite parameters and risk tolerances.
29. Executive risk assessment
interviews conducted to date indicate broad consensus among the Executive
Leadership Team of key Enterprise Risks. This consensus for creating a
robust and standardised risk management framework to drive operational
excellence points to a culture of humility and is consistent with
Council’s values of collaboration, transparency, accountability, and
excellence. As an example, the following emerging risk in the current operating
environment is outlined below for reference. All reported risks will be subject
to Executive Leadership Team harmonisation prior to final dashboard (heatmap)
reporting to the Finance, Audit, and Risk Subcommittee (FARS) by 12 August
2020:
29.1. An
increasingly volatile economic environment precipitated by COVID-19 has
manifested in several financial risks adversely impacting Council’s
funding strategy, operating income from rates revenue, and sources of non-rates
revenue (e.g. interim dividend suspension by Napier Port to its shareholders).
With FY 2019-20 financial impacts anticipated to be well above the $2.5 million
scale for severity (impact scale 5) and a likelihood of near certainty
(likelihood scale 4 / 5), these risks will appear on Council’s overall
ERM risk dashboard / heatmap as one of the top enterprise risks with associated
downstream impact to Council’s ability to execute on its core functions
and undertake its statutory obligations.
29.2. Similarly,
each member of the Executive Leadership Team has highlighted their top 2-3
function-specific risks across the standardised likelihood and impact scale to
be prioritised by staff to arrive at a clear, enterprise-consistent dashboard
(heatmap) reporting to the Finance, Audit, and Risk Subcommittee (FARS) by 12
August 2020.
Proposed
Risk Maturity Roadmap
30. As a
result of risk maturity discussions with input from staff, members of the
Executive Leadership Team, and some members of the Finance Audit and Risk
Sub-committee, and the external risk consultant, staff propose the attached
risk maturity roadmap; with the first phase scheduled for completion on or
before 30 June 2020. Exhibit B below and attached outlines Council’s risk
maturity roadmap in a phased approach.
Exhibit B – HBRC Risk Maturity
Roadmap (Proposed)
31. Phase I of this
roadmap to risk maturity aims to standardise Council’s risk management
framework. This tailored risk management framework will be customised to suit
Council’s, size, scale, and mandate (strategic, operational, and
financial objectives). Staff aim to complete the following three
deliverables proposed in Phase 1 of the roadmap for presentation at 12 August
2020 FARS meeting. These four deliverables include:
31.1. Council endorsement for
the high-level roadmap to risk maturity (this item)
31.1.1. A
detailed graphical representation of six components that comprise Phase I
of this roadmap are attached to this report as Exhibit C – Key Artefacts
and Decisions for Phase I of Risk Maturity Roadmap.
31.2. Finalised purpose-built
risk management framework consistent with International Standards (i.e. ISO
31000:2018) for Council adoption.
31.3. Standardised scales for
Impact and Likelihood (Severity and Frequency) allowing for risks to be
identified and ranked on a consistent scale for Council adoption
31.3.1. Proposed
draft copy of standardised scales is attached to this report as Exhibit D
– HBRC Likelihood and Impact Assessment Matrix for Operational Risks
draft copies of these scales are included as an Appendix to this report.
31.4. Revised
enterprise risks.
32. Phase II of the
roadmap proposes a review of the draft risk appetite statements aligned to
Council’s strategic, financial, and operational objectives. Additionally,
HBRC’s enterprise risks will be ratified using the Council approved risk
management framework. Ratified enterprise risk context and risk controls
will be determined by applying ‘bowtie’ risk methodologies. Within
this phase, routine risk reporting to the governance committees will also be
formalised
33. Phase III of the
roadmap intends for the Executive Leadership Team to ratify Council’s
risk appetite statements across strategic, operational, and financial
objectives and proposes adoption by the Council. Staff also intend to present a
draft version of Council’s risk management policy, framework, and
reporting standards for Council review, feedback, and eventual adoption
34. Phase IV of the
roadmap is designed to operationalise risk appetite statements deeper within
the organisation further refining the quality of risk reporting pipeline.
Efforts include creating qualitative and quantitative processes for risk
aggregation with the eventual goal of developing Key Risk Indicators (KRIs) and
Key Control Indicators (KCIs). KRIs and KCIs when used in conjunction
with Key Performance Indicators (KPIs) should drive proactive and
forward-looking risk-intelligent decision making across the Council. This
phase is a longer-term deliverable.
35. Staff intend to provide
detailed updates for each phase of this proposed roadmap as the Council
continues this journey of evolution towards risk intelligence. Providing
the continued commitment to risk maturity and risk maturity resourcing, Staff
expects to seek formal adoption of key governance and risk oversight processes
and policies within Phases I, II, and III before the end of FY 2020-2021.
36. Phase IV requires
significant commitment and buy-in across all functions and levels of the
organisation. Numerous aspects of Phase IV are designed to further embed
and operationalise a culture of risk intelligent decision making across the
Council and its varied stakeholders.
37. Driving a fundamental
cultural shift of this scope is a voyage requiring steadfast commitment to risk
management as an enabler of strategic objectives rather than an
assurance-focussed tick-the-box exercise. As a result, it is premature to
editorialise on a time-constrained approach for an evolution beyond Phase III.
38. Effective 18 May 2020,
Helen Marsden has been appointed as a dedicated in-house Risk and Assurance
lead with overall responsibility of managing and leading Council’s risk
and assurance activities across the four proposed phases. Helen brings over
15 years of risk management experience that is supported by an MBA from
Massey University. As an in-house employee, Helen led risk management
maturity across a diverse range of organisations, including large banks,
finance companies, and critical infrastructure. In addition, as an employee of
PwC, Helen provided external risk management consulting services to a range of
other organisations and has worked as a trusted risk advisor to a variety of
Executive Leadership teams and governing bodies.
39. Recognising
that reducing risk to zero would prohibit any form of Council activity, Phase I
to III of the risk maturity roadmap is designed to provide the Executive
Leadership Team and the governing body a foundation for robust discussion
surrounding Council’s risk framework, risk appetite, and
tolerances. Therefore, a number of risk artefacts and decisions will be
required to finalise HBRC’s risk framework. Draft copy of key
artefacts and decisions within the first phase of this journey are attached to
this report as Exhibit C – Key Artefacts and Decisions for Phase I
of Risk Maturity Roadmap.
External audit efforts on Council’s current risk
maturity assessment
40. As outlined in
Council’s current 2019-2020 Audit Programme, Crowe has been retained as
an external auditor to evaluate Council’s risk maturity in context of the
All of Government (AoG) risk maturity model promoted by Local Government New
Zealand (LGNZ).
41. An initial assessment by
the auditors indicates that Council’s current risk management practices
are lacking a foundational framework with inconsistent and ad-hoc risk
management functions being performed in silos. It is expected that the
final audit report will likely outline areas of improvement to further drive
risk maturity within the organisation. This proposed pathway to risk
maturity intends to address not only the matters anticipated in the audit
report but to also create a lasting culture of risk-intelligent decision
making.
42. Staff intend to respond to
the audit findings with this proposed risk maturity roadmap while addressing
non-conformance and findings from the auditors with regards to risk maturity.
43. It should be noted that
staff intend to create distinct and separate frameworks for the risk management
function and for the assurance function. The LGNZ All of Government (AoG)
risk maturity model recognises assurance as a function of risk maturity.
However, to enable a phased approach to risk maturity, it is recommended that
Council maintain a distinction between risk management and assurance maturity
programmes.
44. Risk management maturity
intends to drive and foster a cultural change in risk intelligent decision
making by all staff while an assurance framework provides confidence that
consistent systems are effectively applied across the organisation.
Enterprise-wide development and application of one overarching risk framework
enables consistency in the application of risk intelligent decisions which in
turn provides a higher level of assurance to the Executive Leadership Team and
the Council.
Options Assessment
Option 1
– Do Nothing
45. In an increasingly dynamic
environment, opting to maintain the status quo with Council’s current
state of risk maturity may adversely impact operational excellence and
effectiveness in the short term, and may adversely impact Council’s
ability to achieve its strategic objectives in the long term.
46. Current practice of
functional, ad-hoc, and siloed identification, management, and mitigation of
risks will make risk aggregation challenging resulting in suboptimal outcomes.
47. Council’s
incongruous adoption of risk practices across the organisation may limit
Council’s resiliency due to lack of portfolio risk visibility and
prioritisation.
Option 2 – Endorse the proposed risk maturity framework
48. With
broad Staff consensus for creating a robust and standardised risk management
framework to foster a culture of risk intelligence across all functions of the
Council, Staff recommend that the Committee endorse Option 2 empowering Staff
to commence Phases I and II of the proposed risk maturity framework. Endorsing
the proposed risk maturity framework will help achieve Council’s
strategic and operational goals by:
48.1. Prioritising resource
allocation for management of risks that most significantly impact the
Council’s overall strategic plan and mission
48.2. Stress-testing
Council’s strategic and operational objectives against the interests of
key stakeholders
48.3. Defining, developing,
and cultivating a culture of operational excellence and risk intelligent
decision making across all functions.
Option 3 – Explore alternatives to the proposed risk maturity
framework
49. The Committee may opt to
explore alternatives to the proposed risk maturity framework. Staff do not
recommend this option because the proposed risk maturity framework integrates
principles of numerous well-recognised international and New Zealand standards
for risk management framework providing the ability to tailor risk processes
that are right sized for the Council. In addition, the proposed risk
maturity model allows for better alignment to Council’s other structured
management systems therefore providing the ability for future management system
integration driving operational efficiencies.
50. Alternative options are
also likely to be inapplicable to Council’s size, scope, and mandate
resulting in inappropriate resource utilisation.
Financial and Resource implications
51. Staff
confirm that the foundational elements of the proposed work programme are
accommodated within existing budgets as set by the 2018-28 Long Term Plan,
however if the Committee wishes to commission additional work, budget
allocations may require reconsideration.
Strategic Fit
52. A mature
and dynamic ERM programme that is tailored to the Council’s size, scale,
and mandate, as well as integrated and standardised across all levels of the
Council enables the Executive Leadership Team and the Council effectively
prioritise resource allocation for management of risks that most significantly
impact each of the Council’s four strategic priority areas of:
52.1. Water Quality, Safety
and Certainty
52.2. Smart, Sustainable Land
Use
52.3. Healthy and Functioning
Biodiversity, and
52.4. Sustainable Services and
Infrastructure.
53. Council’s proposed
ERM maturity framework utilises risk management as an enabler of strategic
objectives well beyond the traditional model of risk avoidance by providing a
standardised, enterprise-consistent, and all-encompassing portfolio view of
Council’s risks and risk opportunities.
Conclusions
54. Staff will provide timely
and meaningful updates to all relevant Committees along each Phase the risk
management programme maturity.
55. The proposed evolutionary
risk maturity roadmap outlines a path towards risk intelligent decision making.
It is important, however, to note that creating, fostering, operationalising,
and propagating a culture of risk across all functions of the Council is a
process of continuous improvement. As such, “best-in-class”
achievements are mythical. Consequently, Council’s risk maturity roadmaps
must also remain dynamic and subject to routine evolutionary reviews.
Decision Making Process
56. Council and its committees
are required to make every decision in accordance with the requirements of the
Local Government Act 2002 (the Act). Staff have assessed the requirements in
relation to this item and have concluded:
56.1. The decision does not
significantly alter the service provision or affect a strategic asset
56.2. The use of the special
consultative procedure is not prescribed by legislation
56.3. The decision is not
significant under the criteria contained in Council’s adopted
Significance and Engagement Policy
56.4. The decision is not
inconsistent with an existing policy or plan
56.5. Given the nature and
significance of the issue to be considered and decided, and also the persons
likely to be affected by, or have an interest in the decisions made, Council
can exercise its discretion and make a decision without consulting directly
with the community or others having an interest in the decision.
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Recommendations
1. That the Corporate and Strategic Committee
receives and considers the “Proposed
Risk Maturity Roadmap” staff
report.
2. The Corporate and Strategic Committee
recommends that Hawke’s Bay Regional Council:
2.1. Agrees that the decisions to be made are not
significant under the criteria contained in Council’s adopted
Significance and Engagement Policy, and that Council can exercise its
discretion and make decisions on this issue without conferring directly with
the community or persons likely to have an interest in the decision.
2.2. Endorses the approach proposed by staff to formally
launch the proposed Risk Management Maturity roadmap with the goal of
embedding consistency in risk-intelligent decision making across all levels
and functions of the Council.
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Authored by:
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Shash
Davé
Independent Consultant
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Helen Marsden
Risk & Assurance Lead
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Approved by:
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Joanne
Lawrence
Group Manager Office of the Chief Executive
and Chair
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Attachment/s
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⇩1
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Path to Risk
Maturity Exhibits
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⇩2
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Risk Maturity
10 June 2020 Presentation
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HAWKE’S BAY REGIONAL
COUNCIL
Corporate
and Strategic Committee
Wednesday 10 June 2020
Subject: Water Security
Governance Model
Reason for Report
1. This item
provides an update on the Committee’s direction to staff on 11 March 2020
to further investigate alternative governance models for the Tukituki Water
Security Scheme and the Heretaunga Water Security Scheme that that will identify
and assess a short list of programme governance models for recommendation to
Council for adoption.
Executive Summary
2. As part of its
Water Security funding agreements with the Provincial Growth Fund, HBRC
undertook to investigate and propose a model for the ownership, structure and
governance of the Heretaunga and CHB Water Security Projects (being the
pre-construction phase of any scheme), that is appropriate for Hawke's Bay and
consistent with the priority of and interests in water. Subject to Council’s
final determination and the approval of the responsible Ministry, the Crown and
HBRC would, if required, transfer their funding agreements and all other
interests to an entity established under such a model.
3. Staff have
written to regional leaders and iwi authorities inviting their feedback on a
short list of governance options. At the time of writing we are yet to receive
feedback from Hastings District Council and Ngati Kahungunu Iwi Incorporated.
Background /Discussion
4. Of the four
projects within the Regional Water Security Programme The 3D Aquifer Mapping
project and the Regional Water Assessment sit as HBRC work streams with
dedicated project management structures and operate according to normal
internal accountability and governance structures.
5. However, for
the substantially larger CHB and Heretaunga projects, the Provincial
Development Unit’s funding agreement directed HBRC to investigate a
broader governance model that is consistent and aligned with the regional
leadership’s support of the application. Specifically, each
agreement proposes that:
5.1. [HBRC]
undertakes to comply with the following additional undertakings:
5.2. In
recognition of the representations made by Hawke's Bay's regional leaders that
water security was the agreed priority they wished the Ministry to consider and
support for Provincial Growth Fund funding, [HBRC] undertakes that it will use
reasonable endeavours, within 6 months from the date of this agreement to:
5.2.1. investigate
and propose a model for the ownership, structure and governance of the Project,
being the pre-construction phase of the Scheme, that is appropriate for Hawke's
Bay and consistent with the priority of and interests in water; and
5.2.2. if
required, transfer this Agreement and all other interests to an entity
established under such a model;
5.3. subject to
the Ministry's approval.
6. It is important
to emphasise that the governance arrangements are restricted to the development
and pre-construction phases of the projects and does not in any way pre-empt or
fetter what will ultimately need to be appropriate ownership and/or operational
models of any successful project that meet the feasibility thresholds necessary
to achieve financial close and construction.
7. HBRC engaged
Bell Gully to develop a shortlist of governance options that could potentially
satisfy this request (Attachment 1) and canvassed the following alternatives:
7.1. Status Quo
i.e. HBRC.
7.2. Hawke’s
Bay Regional Investment Company.
7.3. Charitable
Trust.
7.4. Joint CCO.
7.5. Committees of
HBRC/Joint committees.
8. On May 5 staff
then wrote to the following organisations seeking their feedback on these
options (copy of that letter is Attachment 2). These organisations were
selected based either on their initial support for Water Security being the
region’s number one priority for the PGF’s evaluation of
applications submitted in early 2019, or at the recommendation of the Group
Manager Maori Partnerships.
8.1. Chair &
CE, Te Taiwhenua o Heretaunga
8.2. Chair &
CE, Te Taiwhenua o Tamatea
8.3. Chair &
CE, Heretaunga Tamatea Settlement Trust
8.4. Mayor &
CE, Hastings District Council
8.5. Mayor
& CE, Napier City Council
8.6. Mayor &
CE, Central Hawke’s Bay District Council
8.7. Chair &
CE, Ngāti Kahungunu Iwi Incorporated.
9. Notwithstanding
reminders sent out on 26 May, at the time for writing feedback had been
received from all parties except Hastings District Council and Ngāti
Kahungunu Iwi Incorporated.
Summary of
Feedback
10. Te
Taiwhenua o Tamatea favoured a Charitable Trust option that was specific
and dedicated to Central Hawke’s Bay water security. Local leadership was
considered to be integral to the success of the project. It is worth noting
that Te Taiwhenua o Tamatea engaged with both CHBDC and the Heretaunga Tamatea
Settlement Trust on this matter. No suggestions were made as to their
expectations as to the proportion of representation on a Trust.
11. Central Hawke’s
Bay District Council supported a dedicated CHB project Charitable Trust
option and indicated its support for equal iwi representation on that entity.
12. Napier City Council
indicated a preference for a Joint Regional Committee under HBRC as a simple
structure for the short term in the early phases of the respective projects. No
comment was made in respect of a need to establish separate governance for each
project.
13. Heretaunga
Tamatea Settlement Trust prefers the Charitable Trust model believes that
Treaty Partnership would be best reflected in 50-50 membership. The Chief
Executive noted the importance of representation on behalf of both Heretaunga
and Tamatea hapū over and above representation by the Trust itself, and
that the structure may require separate groups for each project. The Trust
invites further discussions on the matter.
14. Te
Taiwhenua o Heretaunga responded in relatively strident and wide-ranging
terms and advocated for no governance model on the rationale that the projects
should not proceed. Staff are somewhat confused by some of the feedback
which focusses on “TANK Governance” and re-states that
organisations previously stated opposition to aspects of the TANK Plan change,
TANK consent renewals and HBRC’s role in resource management generally.
15. While feedback has yet to
be received from both Hasting’s District Council and Ngāti Kahungunu
Iwi Incorporated it is worth noting that the latter has previously expressed
strong objections to the Water Security Programme and has on two occasions
proactively made representations to the responsible Minister expressing
its dissatisfaction with HBRC and processes related to the Water Security
programme.
16. In summary, while the
feedback is leaning towards a preference for a Charitable Trust option (three
of the five responses), with further feedback to come and the totality of Te
Taiwhenua o Heretaunga’s rejection of the projects, staff are not in a
position to make concrete recommendations to Council at this point.
17. It is perhaps worthwhile
recording that staff are somewhat vexed by the notion of any governance
structure that affords one group an effective veto over these projects,
particularly given the significant public funding and resources committed to
the project as well as the criticality of water security to the foreseeable
needs of current and future generations in Hawke’s Bay. While not
stated explicitly, part of the PGF’s rationale for suggesting the
exploration of a broader governance model was to protect the project(s) from a
risk of being captured by one or another set of interests. This issue will be
addressed as a part of any final set of recommendations.
18. Furthermore, recall that
any recommendations made by Council are subject to the ultimate approval of the
Crown as a co-funder of the projects.
Next Steps
19. Staff propose that an
updated report be provided either to Council on the 24th June or
EICC on 1 July, depending when feedback is received.
20. In the interim staff
propose to follow up with all parties with and update as a courtesy and to seek
clarification and feedback on the preference by some to have the projects
governed and managed separately. The cost in terms of time and resource of an
even further devolved governance model will need to be understood by the
funding agencies (HBRC and Crown).
Considerations of Tangata Whenua
21. This report relates
directly to tangata whenua’s involvement in critical resource management
issues, long term community wellbeing and climate change
adaptation.
22. Heretaunga Tamatea
Settlement Trust in particular expressed an appreciation for being consulted at
an early stage, acknowledging:
22.1. its legislative mandate
in relation to the hapū of Heretaunga Tamatea, whose influence extends the
entire length of Heretaunga and Tamatea-Central Hawke’s Bay (our tribal
rohe)
22.2. its paramount rights and
interests in both water and water security under our enacting settlement
legislation, the Hawke’s Bay Regional Planning Committee Act 2015 and, of
course, the Resource Management Act 1991; and
22.3. both the Heretaunga and
Ruataniwha aquifers are within our tribal rohe.
Decision Making
Process
23. Staff
have assessed the requirements of the Local Government Act 2002 in relation to
this item and have concluded that, as this report is for information only, the
decision making provisions do not apply.
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Recommendations
That the Corporate and Strategic Committee receives and considers
the “Water Security Pre-feasibility Options and Governance
Models” staff report.
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Authored and
Approved by:
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Tom Skerman
Group Manager
Strategic Planning
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Attachment/s
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⇩1
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Potential
Water Security Governance Models
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⇩2
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4 May 2020
Letter to Mayor Sandra Hazlehurst - HDC re Heretaunga and CHB Water Security
Projects
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