Identify risks early, before they threaten the success of your investment project


In today’s business climate, completing a new investment project (or expanding your existing facilities) can feel like swimming in a hungry shark tank. New technologies, tight money and schedules, an inexperienced management team, aggressive competitors, and government regulations are just a few of the risks that can threaten the success of your project.

Failure to anticipate and manage risks can not only have an impact on the current project, but also damage a company’s overall reputation and harm its financial health. Over the past year, large companies and entrepreneurs have struggled financially and even gone bankrupt after major projects missed important schedule and cost targets. In addition to business impacts, members of a management team who do not proactively identify and mitigate project risks may suffer damage to their personal and professional reputation.

While most businesses assess risk as part of their normal work process, I recommend a more organized and disciplined effort that includes standardized roles and responsibilities, work processes, and tools. This effort promotes communication, visibility and ownership of potential risks and will create a risk culture within your organization that supports continuous improvement.

“The process of identifying and mitigating risk should begin during the initial plan development effort for a new capital project. “

Start assessing project risks early in your planning phase

The key to successful risk management is to assess potential risks early on. The risk profile of any project will change through the stages of design, detailed engineering, procurement, construction, start-up / commissioning and full operation. During design, the risk will be very different from that of the commissioning phase. The process of identifying and mitigating risks should begin during the initial plan development effort for a new capital project. If you do not thoroughly assess and reduce risk during each phase of your project, the cost and schedule to complete installations will be affected. You are also likely to experience a longer than expected ramp-up time, higher lifecycle O&M costs, excessive downtime, quality issues and potential safety issues, health and environment.

A successful risk management program requires the support of senior management to drive the risk culture that should exist throughout the life of the project. As part of the strategic planning of a new plant or facility, this management commitment can be demonstrated by requiring an operational risk assessment that identifies risks to the new operation early enough to confirm strategy and put actions in place. timely and cost-effective mitigation measures that will reduce risk, improve on-time performance, and lower the total cost of ownership over the long term. The risk assessment process should continue to monitor and manage risks throughout the life of the project.

Here are some examples of risk categories that can be problematic if questions are not asked – and not answered – early in your planning process:

Risk related to corporate strategy

Do the business objectives and strategies of the company determine the objectives and strategies of the project? Do the project goals and strategies focus the project team on core business concerns such as cost, schedule, performance, or security? Is there a process to monitor and measure the achievement of goals?

Brand / reputation risk

Have you taken into account the risk of not achieving the goals and objectives of the business or project? How might failure to meet cost, schedule, or performance targets affect customers, suppliers, and other stakeholders? What business commitments could be affected by the failure of key milestones?

Risk of the project management team

Do you have the right resources allocated to the project management team? Are team members part-time? Do they have the right experience (engineering, procurement, construction, start-up, operation)? Does the project team have the full support of senior management? If the project spans several months / years, are the team members committed for the long term? If not, what is the impact of team turnover?

Competition risk

There could be existing or new competitors which could alter market demand and customer expectations. Will your project produce the expected financial returns by providing more value to the client? Will it help you stay competitive by improving quality, increasing productivity or reducing costs?

These risk categories represent just a few of the areas explored with an operational risk assessment. Of course, risk assessment is not a one-time exercise to be performed in the early planning stages of a capital project. The size, complexity and criticality of your project will determine the detail and frequency of your risk assessment program. As you go through the different phases of your project, different risks will need to be identified and mitigated. Monitoring progress should be a priority for the project team and will allow the team to better control the costs and schedule of the project.

If you want to protect your project, your business and your professional reputation against this reservoir of hungry sharks, now is the time to start identifying and managing your risks, while this new investment project is still in the planning phase.


Comments are closed.