PATRICK PURSER Vice President Fluor Corporation Asia/Pacific E&C Operations Manager and Risk Officer © 2015 Fluor Corporation. ML20150128-001.pptx
Fluor Corporate Overview
C Case St Study d
Why talk about Risk Management?
Benefits of a Risk Management Program
Fluor’s Approach to Risk Management
Risk Matrix Sample
Keyy Take-Aways y
©
2015 Fluor Corporation.
One of the world’s leading publicly traded engineering, procurement, construction maintenance, construction, maintenance and project management companies
#109 on the FORTUNE® 500 list in 2014
Over 1,000 projects annually, serving more than 600 clients in 81 different countries
40,000+ employees executing projects globally
Offices in Offi i 33 countries t i on 6 continents
103-year company legacy
Fluor Corporate Headquarters Dallas, Texas
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Americas
Europe/Africa/Middle East
Asia/Australia
Aliso Viejo, California A h Anchorage, Al Alaska k Arlington, Virginia Baton Rouge, Louisiana Buenos Aires, Argentina Calgary, Alberta, Canada Caracas, Venezuela Charlotte, North Carolina Clarksville, Tennessee Dallas, Texas Greenville, South Carolina Houston, Texas Idaho Falls, Idaho Lima, Peru Long Beach, California Mexico City, Mexico Port of Spain, Trinidad Richland, Washington San Francisco, California San Juan, Puerto Rico São Paulo, Paulo Brazil Santiago, Chile Vancouver, B.C., Canada Washington, D.C.
Aberdeen, Scotland Ab Dhabi, Abu Dh bi U U.A.E. AE Ahmadi, Kuwait Al Khobar, Saudi Arabia Amsterdam, The Netherlands Antwerp, Belgium Asturias, Spain Bergen-op-Zoom, Bergen op Zoom, The Netherlands Birmingham, England Doha, Qatar Dublin, Ireland Durban, South Africa Farnborough, England Gliwice, Poland Johannesburg, South Africa London, England Madrid, Spain Maputo, Mozambique Moscow, Russia Rotterdam, The Netherlands Secunda South Africa Secunda, Tarragona, Spain
Atyrau, Kazakhstan B Bangkok, k k Thailand Th il d Beijing, China Brisbane, Australia Cebu, Philippines Jakarta, Indonesia Kuala Lumpur, Malaysia Manila, Philippines Melbourne, Australia New Delhi, India Perth, Australia Seoul, South Korea Shanghai, China Singapore Tokyo, Japan
Years of Experience in Region North America
South America
Europe
Africa
Middle East
Asia
Australia
103
78
67
55
68
64
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Design
Conceptual Design
Estimating
Feasibility Studies
Engineering
Fabrication
Construction
Cost Control
Contract Staffing
Detailed Engineering
Contracts Management
Contractor Management
Construction Management
Material Control
Fabrication
Front-end Engineering
Modular Construction
Contractor Management
Permitting
Modular Construction
Process Simulation
Project Financing
Routing
Scope Definition
Siting
Safety Planning
Technology/ ec o ogy/ License Evaluation
Systems Integration
Procurement
Planning & Scheduling Process Simulation
Equipment, Tools, and Fleet Services
Expediting
Fabrication
Logistics
Low Cost Country Sourcing
Craft Staffing & Training
Equipment & Tools Supply
Purchasing
Quality Control
Safety Programs
Self-Perform Fabrication
Sourcing
Commissioning
Engineering Support
Asset Performance Improvement
Contract Staffing
Initial Production
Plant Readiness
Equipment, Tools, and Fleet Services S
Precommissioning
Facility Management
Systems Checkout
Turnover
Operational Readiness
Validation
Plant Engineering
Plant Operations & Maintenance
Small Capital Projects
Turnarounds, Outages & Shutdowns
Field Mobilization
Material Control
Modular Construction
Materials Management g
Project & Program Management g
Purchasing
Quality Control
Requirements Planning
Rigging
Safety Programs
Sourcing
Scaffolding
Supplier Quality
Warehousing
Self-Perform Construction
& Maintenance
Operations
Start-up
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The Energy & Chemicals business line serves the global oil and gas production/processing chemicals, production/processing, chemicals and petrochemicals industries.
Ranks No. 1 on ENR (Engineering News-Record) magazine’s list of Top g Firms in the Petroleum sector Design
Full range of services including design, engineering, fabrication, procurement, construction, and project management
Consulting g services for feasibility y studies and project financing
Global office platform optimizes execution of all sized projects including mega-projects in remote locations with challenging environments
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♦ Client: Reliance Industries Limited ♦ Project: Refinery & Petrochemical Project Expansion ♦ TIC: US$ 15 billion ♦ Project Location: Jamnagar, India ♦ Scope of Work: PMC + Pet Coke Gasification EP ♦ Project P j t Description: D i ti – PMC for addition of Petrochemical Plants at existing Jamnagar refinery, including world’s largest Coal / Petcoke Gasification Paraxylene plant, Gasification, plant a large Ethylene Cracker and multiple downstream units – Engineering & Procurement Services for Coal / Petcoke Gasification Plant ♦ Completion Date: 2018 ♦ Implemented Reliance’s Risk Management Program
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The Titanic
Titanic - 14th April 1912 ◦ Sea dotted with hundreds of ice flows…no extra lookouts posted ◦ Smith received up to 6 warnings of ice field from ships in area ◦ No binoculars available in crow’s crow s nest …early warning nearly impossible ◦ Very hazy conditions…lookouts confused in what they saw ahead of them Ref: ‘The Riddle of the Titanic’, Gardiner et. al. Orion, 1998
◦ Titanic sped toward ice field at 22.5 knots (10 knots recommended for conditions)
Sea dotted with hundreds of ice flows – This identified risk would have had mitigation strategies such as extra look outs, better communication with other ships p in the area, etc… No binoculars available in crow’s nest – Further to the above risk, the mitigation strategy would have also included proper equipment Titanic sped toward ice field at 22.5 knots (10 knots recommended for conditions) – Mitigation strategy would have ensured proper speed for bad conditions as the baseline plan for the voyage. Lifeboat count reduced from 64 to 22 to enable more expansive promenades – Mitigation strategy would have developed alternative safety measures for passengers. passengers Officers not trained in lifeboat use and were unsure of lifeboat capacity – Mitigation strategy would have ensured proper training for officers Risk Mitigation is about being proactive in addressing these risks before they occur
In a 2014 survey of companies with significant capital investments (greater than $250MM) 70% h $250MM), had d projects j t over run costt and/or schedule targets Projects are becoming more complex Not identifying risks up front can lead to undesirable outcomes Current approaches involve intuition or adad hoc judgment Risk management is a proactive approach in identifying obstacles that will prohibit project success
Better execution resulting in increased awareness and self confidence Vehicle to focus attention, resulting in better resource allocation Visible indicator of the p problems,, challenges g and issues Documentation of management agreement with the plan of action Provides basis for communicating key project issues E bl llessons llearned Enables d tto b be captured t d and d shared
Improved decision making through clarifying responsibilities, authorities and ranges of acceptable t bl outcomes t att allll llevels l Disciplined framework for systematically guiding the process of managing risk Thought stimulator to proactively identify and manage risks that may not otherwise be considered Reduced large losses as well as the frequency of small losses
Improved allocation of resources More fact-based decisions through the entire project cycle Improved confidence of various stakeholders, including g analysts y and rating g agencies g Corporations make money by taking risk and lose money by not effectively managing risk
Risk Management becomes an integral component of the “Baseline Documents” Provides Framework for “Managing the Risks” Identifies potential risks Document strategies g and actions required q for mitigation Quantifies Event Contingency Proactive disciplined review Risk review / communication reduces surprises R Results lt iin iincreased d project j t successes ffor allll stakeholders
FROM Fragmented Negative Reactive Ad hoc Historical Historical-looking looking Narrowly-focused Functionally-driven
To Integrated Positive Proactive Continuous Forward Forward-looking looking Broadly-focused Process-driven
Assign…reading A i di material t i l Brainstorm…risks and opportunities Consolidate…ideas Develop…risk / opportunities details Evaluate…risk / opportunities importance Formulate risk mitigation / opportunity Formulate…risk enhancement strategies
Following slides address the identification and p prioritization of potential p risks
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Equipment type
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Sizing and process
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Plant layouts
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Project Site Location
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Electrical facilities
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Routing of major underground systems
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Controls systems and configurations
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Hazops reviews
Select most appropriate contractor to perform the work P id titimely Provide l and d costt effective ff ti decisions and execution Freeze design basis as early as possible Ensure high level of alignment, motivation and teamwork with Engineering Contractor and Owner Ensure periodic independent assessment of execution Be Baseline Centric (Design to the Estimate)
Tight project schedule
Design variations
Excessive approval procedures (client & or government)
High performance expectations
Inadequate program scheduling
Incomplete or inaccurate estimate
Lack of coordination between project participants (Engineering Construction)
Unavailability of sufficient professionals and managers
Unsuitable construction planning
Low management competency of subcontractors
Unavailability of sufficient skilled labor
Accident occurrence (safety)
Scope changes
Inadequate site information
Occurrence of disputes
Price inflation of construction l b and labor d materials t i l
Following F ll i Slides Slid Address Add How H to t Prioritize Risks
High
Secondary Risks
Co onsequences
•
Key Risks
Lower likelihood likelihood, but could have significant adverse impact on business objectives
•
Low Low
Significant monitoring not necessary unless changes in classification Periodically reassess
Critical risks that potentially threaten the achievement of business objectives
Secondary Risks
Low Priority Risks •
•
•
Lesser significance, but more likely to occur
•
Consider cost/benefit trade-off
•
Reassess often to ensure changing conditions (move to high significance)
Likelihood
High
LIKELIHOOD OF OCCURANCE Rating
Likelihood
Criteria
5
Almost Certain
4
Likely
3
Possible
26-75%, Might occur at some time
2
Unlikely
11 25% Could only occur at some time 11-25%,
1
Rare
91-100%, It is expected to occur in most circumstances 76-90%, Will probably occur in most circumstances
0-10%, May occur only in exceptional circumstances
SEVERITY Rating
Severity
Financial
Schedule
5
Critical
>$1MM
One Month
4
Major
$1MM
Two Weeks
3
Serious
$500k
One Week
2
Moderate
$250k
Three Days
1
Minor
$10k
One Day
Risk No.
Risk
Severity
Likelihood
Priority
Remarks
Mitigation Strategy
1
P j t Site Project Sit Location has Poor Soil Conditions
4
4
4
May Require Excessive Piling Increasing Cost
Perform GeoTech Survey
2
Skilled Personnel Risk
4
3
4
Proper Leadership may not be available to manage g p project j
Review personnel requirements with HR and business line management g
3
Architectural Risk
3
3
3
Risk of unknown conditions to the existing building
Perform site survey to validate current conditions Review existing design drawings g
4
Structural Risk to Piperack "A"
4
3
4
Additional loads to existing piperacks could cause damage
5
Schedule Impacts due to bad weather
4
1
2
Abnormal weather could disrupt schedule
Geographic location has mild weather year round
6
Delay in Decisions Risk
4
4
4
R Representatives t ti will ill only be assigned on a part time basis
Close coordination Cl di ti and d advance notice of approvals
Perform site survey to validate current conditions
Engage Risk Management Process early in the project phase
Engage all necessary Functional disciplines in the Risk Review process
Utilize Risk Management g p process & tools to support organized and subsequent project alignment
Leverage the entire project team to maximize risk identification and mitigation
Instill discipline to maintain risk management process from the project inception phase through to close-out
QUESTIONS/COMMENTS