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Nine principles in establishing a risk intelligent major capital project

The Deloitte Risk Advisory practice has written a paper which introduces nine principles to apply to mitigate risk relating to a major capital project.

Why is risk intelligence so important for a major capital project?

Higher expectation

Major capital projects can significantly enhance or erode shareholder value based on how well they are executed. Considering their high impact nature, the levels of oversight, governance, risk management and assurance need to be heightened.

Independent

Due to the size of these projects, many have independent governance structures, processes and a separate chart of accounts. This often promotes a degree of separation from the direct influence of group wide standards and corporate control, resulting in uncertainty from the corporate owners as to how well these standards and controls are being applied across their project.

Increased competition

With millions of dollars in shareholder capital tied up in major capital projects, the competition to secure adequate skills, machinery, materials, operating licenses, contractor support and associated infrastructure has increased, thereby putting pressure on supply and yielding unique exposures.

Complex stakeholder relationships

The typical major capital project is dependent on a broad range of stakeholder groups, both internal and external to the project. Further, ownership may be split between a number of joint venture partners. Such a diverse portfolio of stakeholders normally means a diverse range of expectations need to be managed.

Greater risk

The sheer magnitude and complexity of these projects combined with longer construction times increases the risk profile. Some mega projects even have the potential to bankrupt their parent company.

Greater exposure to risk means a more intelligent approach is required. Such risk intelligence can be achieved through the following principles.

Download the paper . . . .  Nine principles in establishing a risk intelligent major capital project

If you would like to have a more detailed discussion, why don’t you contact one of our specialists below:

Andre Pottas (Partner – Corporate Finance) at apottas@deloitte.co.za

Louis Kruger (Associate - Mining Solutions) at lokruger@deloitte.co.za

Karthi Pillay (Director – Risk Advisory) at kpillay@deloitte.co.za

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Category: Executive Leadership, Finance, Risk Management, Risk Management & Governance

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One Response

  1. Hi Guys,

    Great article. You have outlined a lot of what is key to effective project risk management. I would add that viewing risk and an opportunity driver helps to institutionalize the risk management process within a project. If risk management is only seen as protecting the downside, then it has limited value. When we look at risk management as a value creator, or opportunity identifier within a project, it takes greater importance and involvement from stakeholders.

    Capital projects are about visibility, accountability and confidence. Risk management happens every day, at every level of the project.

    Loren Padelford
    @ERMStrategy

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