Risk Management in Large Capital

Projects - Lessons learned

Risk management - proactive projects for profitability
Bucharest - May 23
rd
, 2013
Ovidiu Bradin
2 Risk Management in Large Capital Projects - Lessons learned
Content
1. Risk and Opportunity
2. Known and Unknown
3. Risk Management Culture
3 Risk Management in Large Capital Projects - Lessons learned
Petrom - the leading oil and gas player in SEE
4 Risk Management in Large Capital Projects - Lessons learned
Petrom - the leading oil and gas player in SEE
5 Risk Management in Large Capital Projects - Lessons learned
Petrom aims to invest ~ EUR 1 bn p.a. on average
*
*
assuming an investment-friendly environment
6 Risk Management in Large Capital Projects - Lessons learned
Risk and Opportunity
1.Terms relating to risk
1.1. Risk = effect of uncertainty on objectives
NOTE 1
An effect is a deviation from the expected POSITIVE and/or NEGATIVE.
ISO GUIDE 73:2009 - Risk management Vocabulary
(in allignment with ISO STANDARD 31000:2009)
7 Risk Management in Large Capital Projects - Lessons learned
Risk and Opportunity
Response to RISK with :
NEGATIVE IMPACT ( THREAT ) POSITIVE IMPACT ( OPPORTUNITY )
Avoid: ammend project plan to bypass
that path
Capture: incorporate the opportunity into
project deliverables and align plan
accordingly
Transfer: assign the risk to another team
that can mitigate the risk
Transfer: assign the risk to a dedicated
team to exploit the opportunity
Reduce: take action to reduce risk
likelihood and/or impact
Enhance: take action to increase risk
likelihood and/or impact
Assume: keep the risk with no further
action other than to watch for a change
Ignore: keep the opportunity with no
further action other than to watch for a
change
8 Risk Management in Large Capital Projects - Lessons learned
Risk and Opportunity
OPPORTUNITY Response Example
Capture: incorporate the opportunity into
project deliverables and align plan
accordingly
Accelerate Schedule
Transfer: assign the risk to a dedicated
team to exploit the opportunity
Initiate New Project ( Subproject )
Enhance: take action to increase risk
likelihood and/or impact
Allocate more resources
Ignore: keep the opportunity with no
further action other than to watch for a
change
Kodak: Inventors of digital camera in
1975; another 1,000 digital-imaging
patents almost all digital cameras rely
on; filed for bankruptcy protection in
January 2012
9 Risk Management in Large Capital Projects - Lessons learned
Known and Unknown
Unknown
Unknowns
Known
Unknowns
Known
Knowns
Unknown unknowns: issues that can
impact the project, but cannot be
identified and quantified to any degree
Known knowns: issues that can
impact the project and can be
identified and quantified to some
degree for likelihood of
occurrence and consequences
Known unknowns:
issues that can impact
the project and can be
identified, but cannot be
quantified for likelihood
of occurrence and
consequences
10 Risk Management in Large Capital Projects - Lessons learned
Known and Unknown
Known knowns:
Initial assumptions
Standard requirements
Known unknowns:
Weather impact
Bid procedeeings
Rising costs due to inflation
11 Risk Management in Large Capital Projects - Lessons learned
Known and Unknown
? Unknown unknowns:
Ignore subject to Management Reserve
Include allowance:
Cost Risk Analysis
Schedule Risk Analysis
Source: Yuri Raydugin, Risk Services & Solutions Inc.,Calgary, Alberta, Canada
12 Risk Management in Large Capital Projects - Lessons learned
Risk Management Culture
culture
Pronunciation: kl-chr
Function: noun

3 : improvement of the mind, tastes, and manners through careful training

Source: www.wordcentral.com
13 Risk Management in Large Capital Projects - Lessons learned
Risk Management Culture
Source: Taking control of organizational risk culture, Mckinsey&Company, 2010
Communication
Tolerance
Level of Insight
Confidence
Challenge
Openness
Level of care
Speed of response
Cooperation
Adherence to rules
High Risk Low Risk
Transparency
Acknowledgement
Responsiveness
Respect
14 Risk Management in Large Capital Projects - Lessons learned
Risk Management Culture
Space shuttle Challenger was destroyed 73
seconds after take-off on January 28, 1986
because of flawed O-ring. He failed to close
one hinge, which allows the outside air
pressure in the gas. cause the external tank
for liquid hydrogen spill that caused a big
explosion.
NASA managers had known contractor Morton Thiokol's design of the SRBs
contained a potentially catastrophic flaw in the O-rings since 1977, but failed to
address it properly. They also disregarded warnings from engineers about the
dangers of launching posed by the low temperatures of that morning and had
failed in adequately reporting these technical concerns to their superiors.
Thank You!