The ongoing Hyflux trial has revealed once more that the company’s downfall was not only about debt or financing. At the root of its collapse was a shift in business model that was never properly stress-tested through risk management discipline.
Hyflux, known for its water solutions, built Tuaspring around a large desalination plant. But desalination is energy-intensive. To control electricity costs, Hyflux invested in a 411 MW gas-fired power plant. In theory, the plant would supply power for water production and generate additional profit through surplus sales to the national grid.
Court documents and analyst reports now show that the success of Tuaspring depended less on water revenues than on electricity sales. In other words, a water company became, in practice, an energy trader – exposed to Singapore’s liberalised and volatile electricity market. When power prices fell, the financial model could not hold.
The Silent Drift of Business Model
This is a classic case of business-model drift:
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The core promise (water supply) was stable but low-yield.
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The hidden multiplier (electricity sales) became essential to viability.
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The fragility was that this multiplier was outside Hyflux’s control, creating dependency on a volatile market the company lacked expertise to manage.
What began as a cost-management strategy evolved into a structural exposure that redefined Hyflux’s identity without the safeguards of proper enterprise risk management.
What Was Missing: Sustainable Value Multiplier ERM™ (SVM-ERM™) Framework¹
ARiMI’s SVM-ERM™ was built precisely to prevent this kind of miscalculation. Had Hyflux’s leadership or risk managers applied it, three critical insights would have emerged:
Mapping Value Drivers/Multipliers
The SVM-ERM™ Framework would have surfaced that the project’s real returns no longer came from water but from electricity sales, a different business model altogether.
Testing Business and Operational Sustainability
The framework requires understanding the value multipliers and analysing their impacts on performance and resilience. In this case, electricity sales, subject to market swings, would have been a big question mark on the sustainability test.
Ensuring Alignment or Re-alignment
A water solutions company taking on merchant energy risk represents a strategic business misalignment. SVM-ERM™ would have flagged this drift early, forcing the board to re-examine whether the model still supported Hyflux’s long-term purpose or whether it was making sense economically to expand the business model with proper safeguards.
The Broader Lesson
Hyflux’s collapse is not just another corporate failure; it is a cautionary case of what happens when a business model drift and business risks are not reevaluated. Risk management cannot be reduced to protection, compliance or financial controls. It must be integrated into strategic decision-making to ensure that the value drivers or multipliers, the very levers designed to enhance corporate value, do not turn into liabilities that destroy it.
The Hyflux trial today highlights the need for accountability for disclosure. But the deeper accountability rests with leadership’s duty and ability to understand how value is truly being created and that the foundation it is built upon is sustainable.
Risk Lessons in Practice
Hyflux’s experience shows that without the discipline of a framework like ARiMI’s SVM-ERM™, organisations risk mistaking side bets for core strategies. The result is fragility hidden within the very structures meant to deliver growth.
For leaders, the lesson is clear: sustainable value is not created by chance, but by deliberate design and rigorous risk thinking.
¹Sustainable Value Multiplier ERM™ (SVM-ERM™) is a trademark of the Asia Risk Management Institute (ARiMI). All rights reserved. Unauthorised use, reproduction or misrepresentation is strictly prohibited.
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