Risk Management & Decision Analysis of Energy Projects
Assignment 1: A discussion on the application of Risk Management (RM) in an organization
Student: D. Seepersad
Date: 18th February 2014
Risk management is a method that organisations use to address the risks that are involved with their particular activities with the main purpose of achieving their objectives. These objectives form part of the sustainability of the organisation’s activities (Institute of Risk Management 2002). Historically risks were associated with being a negative aspect of an organisation’s activities. However, within recent times, it has been proven that risks also have elements of ...view middle of the document...
Internal risks can arise from supply chain management, recruitment, employees and contracts. For the purpose of this exercise, the risks associated with an electrical contracting company are perused from the point of invitation to tender to the completion of a job. The objective of this paper is to demonstrate the effectiveness of risk management and why it is necessary. A real case scenario will be discussed, taking into consideration the various categories of risk and the role of contingencies in managing the residual risks to an acceptable level. It studies the project planning process from the point of tendering to the completion of the job. This is done to determine the effectiveness of risk management in helping the organisation achieve its objectives and discover the opportunities that present itself during the process.
ECL’s Risk Management Process
The ECL is a Contractor company that supplies electrical and instrumentation services to the upstream energy sector. Their survival as a business depends on their ability to provide a quality service in the midst of many competitors.Clients submit invitations to tender for specific jobs. Upon receipt of such invitation, the Projects Manager, establishes a focus meeting to discuss the project requirements and deliverables such as the costing, limitations, assumptions, resources required and other key deliverables. This meeting is called a Peer Review which is identical to the popular Risk Management Meeting.
The collective experience of the Peer Review Team ensures that all aspects of the proposed project are considered and includes the following expertise:
* Project manager and Supervisor
* Chief executive officer
* Commercial manager
* QHSE Manager and Co-ordinator
* Information Technology (IT) representative
* Financial comptroller or representative
* Potential subcontractors
* Human Resource Manager or representative
Process flow: An invitation to tender for a job is received by the Project Manager/admin assistant of the company together with the scope of works, drawings and specifications. A site visit is then arranged by the client to ensure all stakeholders gain a clear understanding of the project objectives and mile stones. A project lead will then be assigned to lead the particular Request For Quotation (RFQ) and arrange for the relevant internal persons to attend the site visit. Following the site visit, he/she will immediately begin the technical review of the RFQ and consequently delegate areas of the scope to support departments within the company to complement the requests to its entirety. Legal advice is sought from the company’s Legal & Commercial department, to identify any commercial and contractual obligations. A bill of materials (BOM) will be developed, as well as engineering review to identify any flaws in design, materials specifications or any other concerns of the RFQ that can bring in risk to the Company. Pricing for any...