INNOVATION January-February 2016
Figure 2. Project Risk Matrix Figure 2. Project Risk Matrix Figure 2. Project Risk Matrix
Consequence/Opportunities
Consequence/Threats
Project Risk Matrix
Consequence/Opportunities Consequence/Opportunities Consequence /Opportunities
Consequence/Threats Consequence/Threats Consequence /Threats
5
5
4 5
4 5
5
5
3 4
3 4
4
4
2 3
2 3
3
3
1 2
1 2
2
2
Likelihood
1
1
–5
–4
–3
–2
–1
1
2
3
4
5
Likelihood Likelihood 1
1
–5
–4
–3
–2
–1
1
2
3
4
5
–5
–4
–3
–2
–1
1
2
3
4
5
Risk Rating
Threat Definition
Very High Risk Rating Risk Rating High Very High Very High
Threat D fi ition
Risk that has a serious negative effect on objectives that cannot be endured. Urgent management attention is required to reduce likelihood and consequence. If the risk cannot be mitigated, it may invalidate the relevant project objectives. Risk that has major negative effect on objectives. Management attention is required to reduce likelihood and consequence. If the risk cannot be mitigated, it may have serious implications in relation to the project objectives. Risk that has a moderate negative effect on project objectives that can be managed. Management attention should be applied to reduce the likelihood and consequence. However, for those risks with high-consequence, low-likelihood ratings, robust fallback/contingency plans, plus early warning mechanisms to detect increases in likelihood so that appropriate management actions can be taken, may suffice. Risk that has a minor negative effect on project objectives. These risks are unlikely to warrant specific management action, because they are usually addressed through good housekeeping. However, they should be reviewed periodically to confirm no change has occurred. Risk that has a negligible negative effect on project objectives. These risks are unlikely to warrant specific management action, because they are usually addressed through good housekeeping. However, they should be reviewed periodically to confirm no change has occurred. Threat Definition Risk that has a serious negative effect on objectives that cannot be endured. Urgent management attention is required to reduce likelihood and consequence. If the risk cannot be mitigated, it may invalidate the relevant project objectives. Risk that has major negative effect on objectives. Management attention is required to reduce likelihood and consequence. If the risk cannot be mitigated, it may have serious implications in relation to the project objectives. Risk that has a moderate negative effect on project objectives that can be managed. Management attention should be applied to reduce the likelihood and consequence. However, for those risks with high-consequence, low-likelihood ratings, robust fallback/contingency plans, plus early warning mechanisms to detect increases in likelihood so that appropriate management actions can be taken, may suffice. Risk that has a minor negative effect on project objectives. These risks are unlikely to warrant specific management action, because they are usually addressed through good housekeeping. However, they should be reviewed periodically to confirm no change has occurred. Risk that has a negligible negative effect on project objectives. These risks are unlikely to warrant specific management action, because they are usually addressed through good housekeeping. However, they should be reviewed periodically to confirm no change has occurred. Risk that has a serious negative effect on objectives that cannot be endured. Urgent management attention is required to reduce likelihood and consequence. If the risk cannot be mitigat d, it may invalidate the r levant project objectives. Risk that has major negative effect on objectives. Management attention is required to reduce likelihood and consequence. If the risk cannot be mitigated, it may have seri us implications n relation to th project objectives. Risk that has a moderate negative effect on project objectives that can be managed. Management attention should be applied to reduce the likelihood and consequence. However, for those risks with high-consequence, low-likelihood ratings, robust fallback/contingency plans, plus early warning mechanisms to detect increases in likelihood so that appropriate management actions can be taken, may suffice. Risk that has a minor negative effect on project objectives. These risks are unlikely to warrant specific management action, because they are usually addressed through good housekeeping. However, they should be reviewed periodically to confirm no change has occurred. Risk that has a negligible negative effect on project objectives. These risks are unlikely to warrant specific management action, because they are usually addressed through good housekeeping. However, they should be reviewed periodically to confirm no change has occurred. Risk that has a considerable positive effect on project objectives that could enable outstanding benefits to be realised. Urgent management attention is required to ensure that the potential opportunity is maximised and attained. Risk that has a sizeable positive effect on project objectives that could enable notable benefits to be realised. Management attention is required to increase likelihood and/or consequence. Risk that has a medium positive impact on project objectives. Management attention should be given to enhance the likelihood and consequence. Risk that has a minor positive effect on project objectives. These risks are unlikely to require management action, because the benefits are usually realised through good housekeeping. Risk that has a negligible positive effect on project objectives. These risks are unlikely to require management action, because the benefits are usually realised through good housekeeping. Opportunity Definition Risk that has a considerable positive effect on project objectives that could enable outstanding benefits to be realised. Urgent management attention is required to ensure that the potential opportunity is maximised and attained. Risk that has a sizeable positive effect on project objectives that could enable notable benefits to be realised. Management attention is required to increase likelihood and/or consequence. Risk that has a medium positive impact on project objectives. Management attention should be given to enhance the likelihood and consequence. Risk that has a minor positive effect on project objectives. These risks are unlikely to require management action, because the benefits are usually realised through good housekeeping. Risk that has a negligible positive effect on project objectives. These risks are unlikely to require management action, because the benefits are usually realised through good housekeeping. Opportuni y Definition Risk that has a considerable positive effect on project objectives that could enable outstanding benefits to be realised. Urgent management ttention is requir d to ensure that the potential opp rtunity is maximis d a d attained. Risk that has a sizeable positive effect on project objectives that could enable notable benefits to be realised. Management attention is required to incr ase likelihood and/or consequence. Risk that has a medium positive impact on project objectives. Management attention should be given to enhance the likelihood and consequence. Risk that has a minor positive effect on project objectives. These risks are unlikely to require management action, because the benefits are usually rea ised through good hous keeping. Risk that has a negligible positive effect on project objectives. These risks are unlikely to require management action, because the benefits are usually realised through good housekeeping. Opportunity Definition
High
Medium High Medium Medium
Low
Low
Very Low Low Very Low Very Low
Risk Rating
Very High Risk Rating Risk Rating High Very High Very High
High
Medium High Medium Low Medium Very Low Low Very Low Very Low Low
We use DNV’s Synergi Risk Management ® software for the Al-Zour Refinery project. To be successful, however, risk management must involve the application of a practical, hands- on, commonsense approach that is understood by all members of the project team. Finally, one key lesson is that risk management is not the risk manager’s responsibility: it is everyone’s responsibility. v Dr. Andrew Gillam, P.Geo., CMC, brings nearly 40 years of experience in academic research, management consulting and engineering and environmental services to his current position as Risk Manager for Amec Foster Wheeler’s PMC contract for the Al-Zour Refinery project. Prior to moving to Kuwait in October 2013, he was a Principal with Amec Foster Wheeler’s Environment & Infrastructure Group, based in Burnaby, BC. Dr. Gillam joined Amec Foster Wheeler in 2008 after 10 years as a director with the Global Risk Management Practices of PricewaterhouseCoopers and KMPG in Canada. His areas of specialisation include risk management and assurance, auditing, and due diligence in mergers and acquisitions.
Lessons Learned The risk management process must be embedded in both the overall corporate management strategy and the specific capital project management strategy. Attempts to bolt-on the project risk management function are not usually successful: risk management has to be part of the DNA of a project, Amec Foster Wheeler targets cultural change in a project by focusing on the risk attitudes and behaviours of the project team and the way its members approach and manage all aspects of project uncertainty. All project personnel must understand that project risk management responsibilities need to be taken seriously, and project managers are made responsible for ensuring this understanding occurs. Having a strong risk culture within a project is an important part of risk management for large capital projects. However, our experience indicates that a documented risk management system that conforms to the requirements of ISO 31000 is critical for success. Risk management software is a useful tool for large capital projects with multiple EPC contractors and contractor joint ventures.
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