Research Presentation

Risk Assessment for

International Projects

CII Annual Conference Orlando, Florida July 29-31, 2003

Research Presentation

Risk Assessment for

International Projects

CII Annual Conference Orlando, Florida July 29-31, 2003

International Risk Project Team
PT 181
Bretislav Borak U.S. Department of State
Charles R. Domanico Abbott Laboratories
Michael Dinneen Washington Group International
Guy Dudley The University of Texas at Austin
Edd Gibson The University of Texas at Austin
Yamile Jackson Ringstones Consulting International
Douglas J. Kaiser EXXCEL Project Management
Libby Lace Jacobs
Egon J. Larsen Air Products and Chemicals
Frank J. Mignoli Kellogg Brown & Root
Matthew Nixon ConocoPhillips
Corrie E. Reid Aramco Services Company
Ellsworth F. Vines Dick Corporation, Chair
John Walewski The University of Texas at Austin
 Our Scope

The Risk Management Process

Enhancing risk Identification

assessment for
international Assessment
Evaluate
projects with Results
Analysis
attention to the risk
management
Mitigation
process.
 Why An International Project
Risk Assessment Tool?

To improve the
ability to assess risk
in an international
environment.
 The Opportunity

• Trillions of project capital.

• Found no standard methodology

for risk assessment.

• CII constituents agreed that a

standardized approach to risk
assessment was needed.
 IPRA Tool and Process

• Focuses on issues that are international

project-specific.

• Includes investor, owner, contractor,

and operations issues.

• Provides a formal method to identify

and assess international risk.
 IPRA Tool and Process
(continued)

• Allows the project team to evaluate

risk elements through the full project
life cycle.

• Provides an assessment to indicate

critical risk factors for mitigation.

• Provides a structure for analysis.

 IPRA Development Process

• Developed Risk Elements and

descriptions.

• Created assessment process.

• Conducted workshops to develop

Relative Impacts.

• Validated using actual projects.

 IPRA Development
Portfolio of Risks
Legal Security Social
System Unrest
Local Customs
Designers . Funds
Infrastructure Sources
Climate
Operations Tariffs Currency
Workforce

Risk Assessment Sheet - SECTION I – COMMERCIAL

CATEGORY Likelihood of Occurrence (L) Relative Impact (R)

Very Low Very High N egligible Extreme Coordinate

Comments
Baseline
N L, R
1 2 3 4 5 A B C D E
NA

PT 181 & Globalization

I.A. BUSINESS PLAN
I.A1. Business case
I.A2. Economic model /
feasibility

Committee input,
I.A3. Economic Incentives/
barriers
I.A4. Market/ Product

interviews, workshops
I.A5. Standards and practices
I.A6. Operations
I.A7. Tax and tariff

with owners, contractors, I.B. FINAN CE/ FUNDIN G

I.B1. Sources & form of
funding

and others I.B2. Currency

I.B3. Estimate uncertainty
I.B4. Insurance
 IPRA Structure

Section I – Commercial

Section II – Country

Section III – Facilities

Section IV – Production/Operations
 IPRA Descriptions
(example)

I. A.5 Standards and Practices

• Definition/explanation that describes

the risk element

• Bullet listings of potential risk

considerations
 IPRA Workshop Results

• Industry experts provided relative

impact of IPRA elements.

• Based their assessment on ~ $23 billion total

project cost.

• Rank-ordered relative risks for owner and

contractors by Section and Category.
• Similar Go/No-Go decision elements for
owners and contractors.
 Risks of Highest Importance

• Determined the 10 most important

Risk Elements to both owners and
contractors.
• The #10 Risk Element is:
Contract type and procedures.

• Come to the Implementation Session

to learn the top 10 list!
Critical Go/No-Go Risk Elements

The Top Five:

1. Sources and form of funding

2. Business case

3. Economic model/feasibility

4. Political stability

5. Contract type and procedures

 How to Use IPRA

• Read Element description and discuss.

• Choose corresponding Likelihood and
Relative Impact.

Likelihood of Relative Impact

CATEGORY Occurrence (L) (R)
N
II.C Cultural A
1 2 3 4 5 A B C D E
II.C.1 Traditions and X X
business practices
II.C.2 Public opinion X X

II.C.3 Religious differences X X

 How to Use IPRA
(continued)

• Plot all risks by Relative Importance.

5
Very High

Im
Re rta
4

po
lat nce
Likelihood 3

ive
2

Very Low 1

A B C D E
Not Applicable Negligible Extreme
Relative Impact

• Key is the population of the Risk Elements.

Potential IPRA Application Points

Program Pre-Project Engineering

Decision Planning & Design Construction Operations

Primary Secondary
Application Application

= Potential application points

 Benefits to Project Teams

• Identifies potential risks not typically

considered.

• Rank orders potential risk areas.

• Insight into risk issues for entire project

life cycle.

• Communicates risk within the team and

with the project sponsors.

• Initiates the mitigation process.

 Benefits to Project Teams
(continued)

• Provides a standardized risk evaluation

process.

• Validated by significant owner and contractor

input.

• Focuses on international project life cycle risk

identification and assessment.
CII Knowledge Structure CII
Knowledge
Area

CII Proposed
CII Best Information
Best Practices —
Practices Areas
Pending Validation

• Tools • Tools • Supporting Products

• Supporting Products • Supporting Products • References
• References • References

Where does our effort fit?

As a Proposed Best Practice, Pending Validation,

in either:
• Knowledge Area 10 − Contracts
Focus Area 10.6 − Risk Management
• Knowledge Area 13 − Globalization Issues
As a new Focus Area
International Risk Publications

CII Research Summary 181-1

(under development)

CII Implementation Resource 181-2

 Implementation Session

• Introduction and research

background
• Key findings overview
• Demonstration on how to apply the IPRA
• Case study results
• Questions and answers
 Implementation Session
Participants

Yamile Jackson Ringstones Consulting, Moderator

Libby Lace Jacobs
Bill Borak U.S. State Department
Egon Larson Air Products & Chemicals
G. Edward Gibson, Jr. UT Austin
Ellsworth Vines Dick Corporation
 Come Join Us!

Location: Grand Cypress A

Times: Wednesday, 4–5 pm Thursday,

11 am–noon