Project Risk Management
Any large-scale industrial project can essentially be divided into three main phases:
- Concept description, evaluation and selection, including initial design
- Project implementation – detailed design/engineering, procurement, construction and installation
- Ongoing operations
Clearly risk exists throughout a project, but the nature of the risks faced varies according to the phase. Despite the large up-front investment required and the significant risks of time and budget over-runs during the implementation stage, current approaches to risk management at this stage of a project still rely primarily on qualitative approaches, judgement and experience.
RMRI believe that, in order to develop effective means by which to reduce or mitigate the risks faced, it is first necessary to quantitatively assess the impact of decisions, future market conditions and unplanned events on the overall returns that can be expected from the project.
Since any project is undertaken in order to generate future revenues, the assessment must account for expenditures during the project phase (CAPEX), operating costs (OPEX) and revenues generated, as well as the timing of payments and receipts.
Implementation
RMRI’s approach is centred on accounting fully for the economic impact of delays during the implementation phase of a project, by considering the effect of loss of or delays to revenues and hence overall returns. In order to assess this impact, it is necessary to understand the operation, and RMRI do this by first developing an economic model of the planned operations, accounting for operating costs and revenues. The model reflects the cash flows of the operation under the expected ‘base case’ conditions, but is flexible and designed to account for and interpret the impact of hazards and uncertainties identified for the project.
The results of the risk assessment are communicated, via the RiBsheet™, in a clear and easily understood format.