The document discusses risk management in StatoilHydro. It defines key terms like risk, threat, and opportunity. It outlines StatoilHydro's values and risk picture, including different types of risks. It describes the risk management process, which includes risk identification, assessment, response actions, and control. Tools for risk management include a risk module in PIMSWeb for input, use, and output of risk data. Risk management is important throughout a project's lifecycle to understand uncertainties and their potential impacts.

1. Risk Management in project
Prepared and presented by
Mads Hembre, discipline advisor
Risk Management
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Content
• Our Values
• Risk Picture StatoilHydro
• Risk Management in StatoilHydro
• Tools Risk Management
• Risk and Quality Management
• Risk Management Process
• Risk module
– Input
– Use
– Output
• Why Risk Managment

3. 3
- threats and opportunities !
We in StatoilHydro – Our Values
• Courageous
• Open
Courageous
Our values:
• Hands-on
• Caring
• Be imaginative, ambitious and stimulate new ideas
• Use foresight, and identify opportunities and challenges
• Challenge accepted truths and enter unfamiliar territory
• Make clear demands on each other and push for
constructive change
• Understand and manage risk

4. 4
Risk picture - StatoilHydro
• Market risk Described in:
o Strategic market risk • FR08
o Tactical market risk • FR08
o Credit risk • FR08
• Operational risk
o technical risk • FR02, FR03, FR06
o project risk • FR05
o reservoir risk • FR01
o health, safety, security and the
environment (HSE)
• FR10
o administrative risks • FR09, FR14, FR15, FR16.
o Country risk • FR08
o Reputational risk • FR08
o Code of conduct • FR18

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Definitions
Risk:
Any uncertainty that, if it occurs, would affect one or more
objectives. Risk is the product of probability and consequence.
Threat:
Any uncertainty that, if it
occurs,
would affect one or more
objectives negatively
Opportunity:
Any uncertainty that, if it
occurs,
would affect one or more
objectives positively

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Risk Management – CVP-Process

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Risk Management (ref.FR05)
• Risk Management shall be used actively throughout the project
development:
• Prior to DG 1, management of risks shall be established and
maintained as a continuous management process throughout the
project development process.
• Risk management shall be an integrated part of the management of a
project, where all project units shall contribute actively in the process.
• Requirements for Risk management shall be included in contracts and
purchase orders.

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Risk Management
Risk Analysis
Probability simulation based on:
- UM Top 10 List
- Economic planning assumptions
• Cost estimate
• Schedule estimate
• Total value chain
$ $
Risk Management
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1. Identification
2. Assessment
3. Response Action
4. Response Control

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Tools – Risk Management
Quality Management

10. Risk actions and quality control activities/PIMSWEB
Project Subprojects Contracts
Risk Identification Risk Action
Quality System
Audit
Contract/discipline
Examination
Assignment Notify Prepare Execute Report
Observation
s
Close-outFollow up
Risk Areas
Risk Assessment Risk Control

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2. Assessment
• Risk are ranked over dimensions: probability of occurrence,
potential consequences, manageability of outcome
• Specify cash impact
• Project core teams review sub-groups main risks and define
Project Top 10 List
• Raise Red flags when critical exposures identified
1. Identification
• Identify risks during functional brainstorming sessions
• Conduct analysis through total value chain for full project lifecycle
• Encourage and facilitate cross-learning trough similar projects
• Nominate RM coordinator to ensure QA and secure use of PIMS Web
4. Response Control
• Define and clearly communicate UM process so all
projects are aligned with corporate requirements,
regulations and integrate public expectations
• Reporting system allows leadership to be aware of main
uncertainties and enable control of work quality
• Third party knowledge is leveraged to develop Statoil
expertise
3. Response Action
• Define for each top 10 Risk mitigating actions & back-up plans
• Track response action in by responsible person or by action deadline
• RM coordinator reports progress to core team and ensure compliance with process
• Functional experts control quality of RA during CAR’s
Risk Management - Process
RM – Process

12. Risk areas
• Country / Politcal
• HSE, fraud and corruption
• Market / Contractual
• People / Organization
• Project execution / Operation
• Reserve base
• Strategic / Financial
• Technology / Technical

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Project
Cost
Project
SCHEDULE HSE SCOPE QUALITY Reputation
Minimal
(C1) <5 MNOK < 1 week
Minor Injuries,
Minor
Damages,
No Pollution None None
Small
(C2)
5-25
MNOK 1-2 weeks
Injuries,
Damages,
Minor
Pollution
Minor effects on
capacity/regularity
Local negative talk.
Minor local
Serious
(C3)
25-50
MNOK 2-4 weeks
Accidents,
Damages,
Pollutions
Effects on
capacity/regularity
Minor negative media coverage, some
drop in share price. Warning about
orders*)
from the authorities.
Major Local
Very
serious
(C4)
>50
MNOK >4 weeks
Serious
Accidents,
Serious
Damages,
Serious
Pollution
Major effects on
capacity/regularity
Serious negative media coverage, severe
drop in share price. Orders from the
authorities.
International
Consequences

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Probability
Probability
Unlikely (P1) < 5%
Less likely (P2) 5 - 20%
Likely (P3) 20 - 50%
Very likely (P4) > 50%

15. Reports
ActionsActions
Overview system
SQL-server
Risk
Actions
Online
update•Lists
•Combined
•Graphics
•Statistic
•Excel
•HTML
•PDF
Input
Output
Reminder
e-mail
QM-
module
My PIMS

16. Online update
• Record by record (risks-actions)
• List (risks)
• Action list (actions)

17. Record by record

18. List

19. Action list

20. Identification

21. Assessments

22. Actions

23. Action - dialog box

24. Links/Attachments

25. Reports
• Lists – record by record
• Combined – Risk and action records together
• Graphics – graphical elements in report
• Statistic – frequency of use

26. Report examples (all types)
Risk List

27. My Pims

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Why Risk Management ?
Approach
Action The action
aims to
reduce:
1 Eliminate Underground
cable
Build local power
plant
Probability
2 Reduce risk, pursue
opportunity
Increase gate
Plant small plants
Duplicate lines
Reduced growth
Probability
3 Transfer Insurance
Contract with other
Consequences
4 Accept and prepare Extra power
supply
Indicator light
Consequences
5 Ignore No action

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CAPEX Risk analysis
Estimate
Technical allowance
Facts ”Scope of work”
Experience
Frame agreement prices
Market growth
Phase
Uncertainty
Uncertainties execution
Concept
Identified elements managable
Identified elements not manageable

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• A value chain includes all the variables that affect the cash flow
• Each Risk in the value chain is described with a probability
distribution and linked to the economical model
• Dependencies between variables are taken into account
• Risk in project economy is calculated through Monte-Carlo
simulations
Risk Analysis - RiskMS
Risk Analysis on the value chain

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Model based
on SIAM
Monte Carlo
Simulation
Assessment
Risk
Assessment
Risk
Analysis
Model
development
Dependencies
Distributions
Project scope
NPV Range and
distribution
P(10), P(E) and
P(90)
Sensitivities
Analysis
Output Report
Expected NPV
Cumulative Chart
Certainty is 80,00% from 555,23 to 1 191,03
Mean = 872,37
,000
,250
,500
,750
1,000
0
125,2
250,5
375,7
501
381,94 661,26 940,59 1 219,91 1 499,24
501 Trials 495 Displayed
Forecast: NPV 8%(SIAM)
0,75
0,64
0,00
0,69
0
0,83
0,00
0
0
7,13
1,32
1,51
0,69
1,41
2,0
1,19
1,36
3,0
4,2
15,33
Downside
Upside
Higher Value
Chain Focus
V
A
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E
C
H
A
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N
A
N
A
L
Y
S
I
S
Drilling Risk
Reservoir Risk
CAPEX Risk
OPEX Risk
Transportation
Risk
Market Risk
Other Risk
Tax/fiscal Risk
IDENTIFIED
UNC.
ELEMENTS
R
I
S
K
R
E
G
I
S
T
E
R
Risk Analysis - RiskMS
Risk Analysis – RiskMS

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Remember…
“the essence of project management is risk management”