Business Risk Management

EPCONSULT is expert in identifying, assessing, mitigating and managing risk. We have developed an efficient risk management framework which is applied when we are commissioned by our clients to help manage business and project implementation risk.

Our business risk management service is effective at any stage of the project cycle. To maximize the benefits from business risk assessment, we recommend conducting a risk workshop and risk assessment a few weeks into each new project phase. This is in addition to using risk management as a project control tool throughout a project. An assessment could typically be carried out at the conceptual engineering stage and towards completion of FEED, before sanction, in order to secure that the project has been "risked", giving confidence to stakeholders, shareholders and partners.

Business risk is usually managed qualitatively in the earlier stages of an assessment, and this is normally initiated with discussions, document review and a business risk workshop facilitated by EPCONSULT. Beyond the early stages, business risk may be managed qualitatively or quantitatively. EPCONSULT divides risks into the following main categories:

	Technical risks (safety, environmental, asset, availability, technology, etc.)
	Economic risks (CAPEX, OPEX, financial, schedule, asset, etc.)
	Commercial risks (alliances, contractual, stake holder, etc.)
	Organizational risks (organizational structure, resources, skills, management, quality, IT, etc.)
	Political risks (legislation, governmental, reputation, community, sabotage, etc.)

Typically, clients want specific areas of the above to be analyzed. However, to establish a complete understanding of business risk, all the above risks should be considered. Moreover, technical risks such as safety and environmental risks would usually be covered by specific studies such as HSE Studies and QRA.

Economic Risk

Economic risk can be carried out on a life cycle cost model by estimating uncertainties in the schedule, CAPEX, OPEX, interest rates, etc. The risks would be expressed in terms of e.g. P10, P50, P90 on the net present value (NPV) or other financial indicators.

Economic risk can also focus on Project Execution, i.e. the capital project. Risks are then expressed in terms of project milestone completion (P10, P50, P90, etc) and project expenditure (P10, P50, P90, etc). Our calculations are made on the basis of educated estimates of the uncertainties in durations for completing specific project activities and the associated uncertainties in the cost of project tasks. We use Monte Carlo simulation to carry out schedule and economic risk assessment.

Other Risks

Commercial, organizational and political risks will usually be identified in the risk workshop, during documents review and also on the basis of past experience. These risks would be covered qualitatively by, for example, using a risk matrix to present the estimated likelihood and consequences of different events. Mitigating risks from this group would typically be associated with cost initiatives, schedule initiatives and/or organizational recommendations.

Having identified risks and assessed their level, the Boston Square approach is an efficient tool to help prioritize risks, not only on the basis of level of risk but also with regards to manageability. It is necessary to establish adequate mitigation measures and put in place strong control mechanisms which are the next crucial elements in a Business Risk Assessment.