Energy sector offers key lessons to business community to address Project Risk Management
30 July 2007
The business sector is no stranger to risk management. Often as a result of increasing health and safety procedures, many aspects of project risk considerations have become an integral part of day-to-day life for many industries. Here, Paul Foy, senior consultant at Facilitators International LLP says, risk management has much further reaching implications than purely health and safety and, if introduced as an integral part of project planning, can add significant value to activity.
The unique nature of the oil and gas industry has forced it to become a leading expert in all aspects of risk management. The lessons learned by the energy sector offer huge benefits to a whole host of other business sectors such as transport, manufacturing, marketing and leisure industries.
Spending a short time considering what could go wrong or cause delays on either a one-off project or on-going activity will help ensure schemes keep on-track and to budget. Whether it's launching a new flight route, new product line or hotel, planning for the worst will help ensure the best outcomes.
In the high cost, high risk environment of the energy sector, every minute's delay in a project costs operators thousands of pounds, anticipating any potential issue and building these into the project plans have helped save significant costs. The techniques developed in this unique environment can be easily transferred to other business services that could in turn reap the huge benefits that have so helped the oil and gas industry.
Although health and safety is an integral part of the process, risk management should not be confused with the formal HSE risk processes which are now a part of our working lives. Rather, it is an approach to the management of projects that greatly increases the probability of success.
An important first step is to establish the overall drivers and goals of the project. What are the project objectives and what safety, environmental, schedule, cost and quality targets have been agreed? Once these are clearly defined, all factors that may prevent said goals from being achieved are identified. This is done in a workshop environment that usually involves a variety of team members such as engineers, managers and experts in relevant fields. By opening up discussions to include opportunities as well as risks, innovative ideas often emerge which can be used to improve original targets.
Each risk is evaluated, the probability of it occurring assessed and the impact on the project and organisation if it does occur considered. This ensures that focus is placed on the most significant risks and that valuable time and effort is not spent on low value actions.
Even after the workshop, the risk management process continues with regular progress reviews to ensure that agreed actions are getting done. As a project matures so the nature of risk and opportunity changes therefore many managers prefer to arrange a series of risk workshops to coincide with significant project milestones. The greatest benefit is gained however in the early stages of any project.
Risk management techniques give a project team the best chance of a successful outcome. Once a company has experienced good risk management they often don't want to be without it and these days, many organisations within the energy sector will no longer approve spending without evidence of proper risk management.
No matter what the size of the company, risk management adds huge value to companies' activities. Regardless of their size building risk management into core business processes is the smart way to ensure projects are managed efficiently and effectively. And, in this age where business success depends on investments reaching their full potential, a management strategy based on risk and opportunity is vital.
Paul Foy is a senior consultant with performance improvement consultancy Facilitators International LLP. With more than 26 years experience in the oil and gas industry, he is a leading specialist in risk management.
Further Information
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