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PROJECT RISK ANALYSIS
DESIGN / OPERATIONAL RISK MANAGEMENT & CONTROL REVIEW
INSURANCE SPECIFICATION / PLACEMENT
CONSTRUCTION PHASE
COMMISSIONING STAGE
OPERATIONS
DECOMMISSIONING
Major Capital Projects are complex initiatives involving multiple stakeholders and
can represent challenging risk management issues that encompass;
- Financial security
- Protection of Assets and Liabilities and stakeholders interests
- Understanding of all parties rights and obligations
- Appropriate Risk mitigation and insurance programmes that
address the issues above.
Stakeholders whom AAUM represents include :
- Project Owners / Sponsors
- Banks / Financiers / Funders
- Professional service providers
- Contractors and Suppliers
The following illustrates a typical life cycle of the phases from conception and
feasibility through design, construction commissioning of a major project - and
ultimately to operation and decommissioning.
PROJECT RISK ANALYSIS
Once the project scope and direction have been established and the engineering
design phase begins, a project risk analysis can flush out the hazard and operational
risks that could impact not only the construction and commissioning phases of the
project ( i.e. the on time on budget completion of the project ) but also assess some
of the broader operational risks. By initiating this risk analysis at the early design phases
it is easier to incorporate risk control or mitigation strategies into the procurement and
logistical plans before construction begins, or in the worst case operations have
commenced.
It is important that on-going risk identification and mitigation be incorporated
throughout the design, construction and commissiong phases to identify new
risks that arise due to changes ( both internal and external ) that can affect the
project. These can take the form of mini risk analyses ( HAZOP, etc. ) on small
components of the project as on-site reviews during construction.
DESIGN / OPERATIONAL RISK MANAGEMENT & CONTROL REVIEW
As part of the design process, risk issues associated with the completed operations
should be identified, evaluated for their relative risk management Cost vs. Return, and
incorporated into the detailed design activity. This helps to limit costly re-work or
retrofit during the latter stages of the project, or during commissioning / operation.
Typical risk management control considerations should include:
- Process, control, systems to reduce the risk of process upset /
failure / accident
- Fire protection & security systems
- Reliability and redundancies for critical utilities & infrastructure
- Identification and procurement of critical spares
- Appropriate risk mitigating construction (e.g. spacing of hazards, design for
earthquake / windstorm, fire segregation, etc. )
INSURANCE SPECIFICATION / PLACEMENT
Utilizing selected risk management and control system information from the
risk analysis process can be effectively leveraged to support insurance
placements to:
- Communicate exposure and risk management and control system
information to underwriters.
- Assist in developing coverage specifications to address the project specific risk profile.
- Aid in ensuring indemnity issues are addressed during contract
negotiations and contract reviews.
CONSTRUCTION PHASE
During the construction phase, new risks can arise that were not foreseen at the
initial project risk analysis, due to re-design, necessary adjustments to the critical path, or emerging issues related to logistics, labour, site disruptions, etc.
To avoid potential accidents or upsets during construction, a comprehensive
construction phase risk management program should be in place to further identify
/ address key construction risks such as:
- Contractor / subcontractor health & safety
- Ensuring appropriate security and fire protection systems are
in effect as construction evolves
- Ensuring construction risks ( i.e., critical lifts ) are planned and
managed appropriately
COMMISSIONING STAGE
Commissioning can be a critical stage in a project since an unforseen loss at this
time may significantly delay start-up. In many instances, the rush to test / commission
equipment is done before the control systems are fully functional which can
magnify the extent of the loss.
The findings from the risk analysis can help to pre-plan items such as pre-start
loss control review to ensure the management systems and controls ( i.e. fire
protection ) are in place to prevent or mitigate any unexpected events during this
stage of the project.
Process design control parameters can be confirmed along with verification of
protection system (S) performance.
OPERATIONS
The up-front planning and design risk work helps transition the completed
operational risk management programs. Ongoing operational risk control in
the form of site reviews / audits, ERP planning, etc. ensures that risks are
consistently controlled.
DECOMMISSIONING
Where possible, anticipating and planning for future decommissioning requirements
should be considered in the initial design of the project. ( e.g. construction features,
environmental controls, equipment life cycle, etc. )
In summary, an effective and integrated risk management strategy deployed
consistently throughout the life of the project can help to:
- Inform and improve decision tracking
- Optimise risk mitigation approaches
- Support risk-adjusted performance measurement
- Raise risk awareness throughout the organisation, the project team
and key stakeholders
- The key to success is effective planning of the risk management programs
and assuring appropriate resources are available, as is access and time for
project leaders, managers, consultants, and contractors to engage in risk
discussions that encompass the full life cycle of the project.
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