INNOVATION January-February 2016

Table 1. Project Risk Criteria i ns igh t

Project Risk Criteria

ar

Likelihood

Consequence

definition of risk assessment. This comprises risk identification, risk analysis and risk evaluation (figure, page 29). Risk Identification The aim of risk identification is to generate a comprehensive list of risks based on risk events that might enhance, prevent, degrade, accelerate or delay achievement of project objectives. Risks for the Al-Zour Project are identified primarily by means of risk

Cost/Kuwaiti Dinars

Time/Days on Critical Path

Descriptor

%

Opportunity

Threat

1

Very Unlikely

<1

–1

Minor

<1M

<5

1

Negligible

2

Unlikely

1–20 –2

Limited

1–4M

5–30

2

Marginal

3

Fairly Likely

20–50 –3

Substantial

4–10M

30–60

3 Substantial

4

Likely

50–85 –4

Very Substantial

10–40M 60–120

4

Severe

5

Highly Likely

>85

–5

Exceptional

>40M

>120

5

Disaster

Stage 1: Establishing the Context In establishing the project’s situational landscape, the external and internal context for the PMC and the context of the risk management process itself are taken into account. In addition, key trends and possible drivers of change in Kuwait are identified, and external stakeholder relationships are summarised. The risk criteria for the project are also developed at this stage— including scales for likelihood and consequence—and taking into account the risk tolerance or acceptance of the client (tables, this and next pages). In terms of risk tolerance, all project risks, for example, that are rated high or very high by the client require development and monitoring of a documented risk treatment plan. Stage 2: Assessing Risk Following a breakdown of project risks into various types by category and subcategory, Amec Foster Wheeler uses the ISO 31000

workshops that are attended by project team subject matter experts. Risks are also identified during face-to-face meetings with project managers for the Al-Zour EPC packages. The primary output from the risk identification process is the project risk register. Risk Analysis Risk analysis provides input for making decisions when choices must be made and the options involve different types and levels of risk. For the Al-Zour Refinery project, a qualitative risk assessment approach is being used to obtain a general indication of the level of risk and to reveal the major project risks. This involves ranking project risks as a combination of the perceived likelihood of a risk event (threat or opportunity) occurring and the potential worst- or best-case consequence. In the case study used here, quantitative risk analysis is completed using Primavera Risk Analysis ® software. Risk Evaluation Risk evaluation involves comparing the level of risk found during risk analysis with the project’s risk criteria. If the level of a project risk exceeds a “medium” ranking, the risk is treated to reduce the level of risk to “medium.” Stage 3: Treating Risk Risk treatment involves selecting and implementing one or more options for modifying risks. Once implemented, risk treatments provide new risk controls or modify existing controls. Risk treatment plans are integrated with the PMC team's project management processes and communicated to appropriate project stakeholders. The residual project risk is documented in the project risk register and is subjected to monitoring, review and, where appropriate, further treatment. Stage 4: Communicating and Consulting on Risk Because stakeholders can significantly affect the success of a project, the PMC team identifies, records and takes into account the perceptions of both external and internal stakeholders throughout the project decision-making process. Communication and consultation with project stakeholders is critical. Stage 5: Monitoring and Reviewing Risk Monitoring and review activities for the project involve regular periodic checking or surveillance of the effectiveness of the risk management plan. Progress in implementing the risk treatment plan provides a performance measure for the project. Results are incorporated into the overall project performance management, measurement, and external and internal reporting activities.

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