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Assets are increasingly being pushed beyond their design specifications. The risk of failure — and the financial impact on asset owners — is growing.
The world is filled with infrastructure that pre-dates modern design specifications. Buildings, bridges, airports, power stations — you name it. Take a look inside most public or private infrastructure portfolios, and you'll probably find at least half of the assets were built sometime before the turn of the century
That's not necessarily a bad thing. It's not unusual to find bridges, roads — even power plants — with design lives of 50 or even 100 years. And well-built and maintained assets often exceed their design lives while continuing to deliver both financial and societal value. Why would you replace something that is still operating effectively, efficiently and safely?
Yet design specifications have changed. And for good reason. Climate events are becoming more frequent and severe. Every year we are seeing record weather events across the globe. From floods to fires, unprecedented snowfalls to extreme heat — for an asset built in the early years of this century, the conditions in which it must operate are vastly different than when it was designed just 25 years ago, and potentially only 25 percent into its lifespan.
Why would you replace something that is still operating effectively, efficiently and safely?
In some cases, maintenance is not funded appropriately. According to the New Zealand Infrastructure Commission (and endorsed by the Institution of Civil Engineers in the UK), systems should generally reserve 60 percent of their funding for maintenance.1 At the same time, many asset owners are looking to extend the operational life of their assets as a result of short-term financial pressures.
Regardless of the reason, a failure of an infrastructure asset could be catastrophic. On the human side, power failures across a grid during a flood, or a water system during a fire, will likely lead to increased damage, disruption and most importantly, an increased risk to life and nature. The risk is also very relevant for the private sector, where the loss or disruption of business-critical assets will impact productivity, market presence and brand reputation, in the worst cases leading to insolvency.
Places once considered prepared are finding themselves exposed to significant risk. For example, despite ever-increasing preparation and preparedness for weather events, weather-related deaths in the US have increased by 20 percent since 2019, with a 120 percent increase in injuries over the same period.2
Reset 2025
In just the first month of 2025, we saw devastating wildfires in California (causing damages estimated at US$135 billion),3 record floods in Australia (causing the collapse of a major bridge) and unprecedented winds
A failure of an infrastructure asset could be catastrophic.
This year, expect the business case for resetting our understanding of our assets to become perfectly clear.
hit Ireland and the UK (leaving over a million homes without power). Unfortunately, we are likely to see more events this year that impact critical infrastructure across the globe. Each will spark introspection and difficult questions from those affected.
Critical infrastructure is being impacted due to age, condition, lack of investment, maintenance and possibly underlying design issues. The Genoa bridge collapse, the Orville dam spillway failure, the Flint water crisis, power instability in South Africa, and the loss of 19 percent of the UK's clean water during distribution,4 are just a few examples highlighting the issue. Some assets will have been pushed beyond all the reasonable principles of their original design, are no longer economically viable to maintain, and ultimately are at risk of failure.
The problem is that the world is primarily engaged in reactive measures, where risk mitigation only occurs after risks have been realized, the damage is done, and the unplanned (and often significant) costs are pushed onto a combination of shareholders, insurers and taxpayers. This year, expect the business case for resetting our understanding of our assets to become perfectly clear. And that will encourage asset owners to ensure they understand the capabilities and limitations across their portfolios today and are effectively prepared for the challenges of tomorrow.
Where asset degradation leads to the erosion of service levels, pressure to renew and protect assets will rise. This should encourage both public and private infrastructure portfolio managers to reassess their risk across their assets. Particular focus should be placed on assets commissioned prior to the turn of the century and those deemed critical to service delivery. That will likely lead many to reassess the timing of their replacement plans and end-oflife schedules to prioritize those assets that face the greatest risk. Investment plans should be updated and new developments sequenced accordingly.
Our predictions and advice
KPMG professionals suggest asset owners should perform a pulse check across their current portfolio to assess and understand their risks and define their ambition for operational resilience. This would set the foundation for a change program articulating the case for change and defining where transformation or targeted interventions are needed. This can be used to develop a future state blueprint and change requirements to both develop asset resilience and unlock value from assets in parallel, summarized into an actionable and achievable plan.
With a clear understanding of the change requirements, a strategic delivery partner can help you transform to a resilient and sustainable asset base and safeguard your value. A strategic delivery partner framework provides a complete strategic delivery system, methodically designed and optimized to meet the needs of your organization. Focus on using a connected structure of best practice, innovation and cutting edge thinking to deliver complex projects and programs, sequenced appropriately to help ensure optimal value and resilience across your asset base, and fully integrated into your supply chain.
What is clear is that complacency and reliance on previous assumptions about your assets could lead to catastrophic events significantly impacting your organization. Is your asset portfolio resilient enough?
Perform a pulse check across their current portfolio to assess and understand their risks and define their ambition for operational resilience.
Footnotes
1 Build or maintain? New Zealand Infrastructure Commission, February 2024
2 Weather-related deaths and injuries, National Safety Council, 2024
3 LA wildfire damages set to cost record $135bn, BBC World News, 9 January 2025
4 More action needed to protect future water resources, UK Government Press Releases, 7 October 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
