This Presentation Uses Two Case Studies
to Show How Risk Can Be Used as a
Discriminant in Decision Making for Key
Decisions, in:
Key
Areas of a Corporation,
Selecting
Alternatives,
Evaluating
Projects
In the second Case Study, a method that
eliminates the pitfalls of NPV is presented.
CDA / ESM eliminates the pitfalls of NPV, an obsolete
financial concept still used by many.
The evaluation of a project with CDA/ESM includes:
the
annual risks potentially afflicting the project,
construction
risks,
risks
of malfunctioning, and possibly also the
demolition/
reclamation costs.
Copp 4 Profit:How to reduce operating costsNigelDawes
This presentation shows that insufficient resources are being used to reduce costs compared to sales. Cost reduction makes as much (if not more) NAV (Net Added Value) to the "bottom line" profits of an organisation
We need to be creative and utilize our innovations as a means to build our way out of this global crisis. here is a step by step plan on how to build a creative economy.
This is a presentation of a simplified model to evaluate the probability of exceedance of any project, in any industry. More complex and sophisticated, custom tailored approaches are available, but this is the simplest first approach to avoid financial fiascoes of new projects.
Copp 4 Profit:How to reduce operating costsNigelDawes
This presentation shows that insufficient resources are being used to reduce costs compared to sales. Cost reduction makes as much (if not more) NAV (Net Added Value) to the "bottom line" profits of an organisation
We need to be creative and utilize our innovations as a means to build our way out of this global crisis. here is a step by step plan on how to build a creative economy.
This is a presentation of a simplified model to evaluate the probability of exceedance of any project, in any industry. More complex and sophisticated, custom tailored approaches are available, but this is the simplest first approach to avoid financial fiascoes of new projects.
Assessment of Risks in International EPC Projects Reference Current Global Ec...HIMADRI BANERJI
Assessment of Risks in the present global economic environment for projects and especially projects that deal with EPC contracting for large scale infrastructure. A review of some of the major projects that have changed the rues of the game for Project Risk Assessment, management and mitigation forms a significant part of the prentation
The word contingency has been given a completelynew meanin.docxarnoldmeredith47041
T
he word contingency has been given a completely
new meaning since it was introduced to heavy oil and
gas energy construction industry. Perhaps it is one of
the most confusing concepts in project cost and
schedule management systems. More often than not, the
contingencies are simply hidden in the base estimate, causing
chaotic results [7]. Now, with the historical cost data becoming
illusory, the efforts of benchmarking will be misleading and
meaningless. Lack of structured transparency has led to the
misconception that the contingency fund is a phenomenon of
wide utility as a catch-all to cover project extra costs which
otherwise can not be legitimately accounted for.
J.P. Morgan has been quoted as saying that “the market will
fluctuate” [2]. This claim also applies to project cost forecasts.
Contingency forecasts fluctuate as well, following the project
progress and overall project risk shifts. One of the most effective
ways to avoid the catch-all syndrome is to break down contingency
into risk affected components. The level of detail shall be driven
by a well established work breakdown structure (WBS), which
shall be inherently built into a contingency risk model. When the
contingency amount is derived, it will be automatically dispersed
into appropriate accounts based on the risk levels and cost weigh-
ing factors.
Allocating contingency instead of a single liner provides a
great advantage to the management of the contingency. By using
moderate cost breakdown details, the cost engineer knows exactly
how the contingency model is put together and the amount each
account deserves, and the timing when the amount is exhausted.
Hence, the cost engineer can easily generate a contingency draw-
down plan, and manage the depletion of contingency in a
controlled manner.
PROJECT COST OVERRUN PHENOMENON
Fifteen years after the economic recession of the 1990s—a
result of a world-wide oil price drop, the Oil Sands in northern
Alberta of Canada became a hot spot, attracting numerous
investors from the United States and other parts of the world.
Scarcity of oil and its current high price were the catalysts for a
booming oil and gas construction industry in the province of
Alberta. Between 2005 and 2013, a total amount of 63.5 Billion
Canadian dollars [6] will be invested in the exploration, mining,
crude refining and transportation of bituminous oil sands.
However, the heavy construction in the energy industry has been
plagued with a history of poor performance, budget overrun and
significant schedule delays, according to the Construction
Owner's Association of Alberta (COAA).
Various attempts have been made by the COAA and other
interest groups to improve the reputation of the industry with
little success to date. Perhaps there is no easy way to save the
industry's notoriety for cost overruns. However, one method to
avoid further cost slippage—the implementation of a stringent
risk management process, including adequate cost and schedule
conting.
This presentation shows how Risk Based Decision Making was performed on a real project (which won an international call for bids), using Riskope's CDA/ESM project evaluation methodology.
World Deepwater Market Forecast 2016-2020 Leaflet + ContentsDouglas-Westwood
Sustained Low Oil Price Sinks Deepwater Projects, with 2016-2020 Deepwater Spend to Total $137 Billion
Douglas-Westwood (DW) forecasts deepwater expenditure to total $137 billion (bn) between 2016 and 2020. This represents a 35% decline compared to DW’s previous edition of the deepwater forecast issued March 2015.
Risks Assessment Matrix and its importance in Oil Shale Mining Projects Sergei Sabanov
Risks Assessments in oil shale mining projects are based on technical, operational, financial, economic, environmental and social criteria. The Risk Assessment process is used to ensure that risks are suitably quantified and mitigation plans put in place where necessary. Risk classification provides a context for the level of evaluation required for instance at detailed oil shale mine design and oil shale mine planning processes. Issues of weathering and the typification thereof impacted the accuracy of mining modifying factors in dilution and recovery such that the classification was downgraded to mainly Probable from an entirely Measured resource. This can potentially affect confidence, valuation and financing.
A risk analysis model is used to evaluate the risk level of a cost estimate; for example to reflect the anticipated total cost based on an acceptable probability of completing the project for the estimated value. This has to be considered in sufficient detail so that it could reasonably serve as the basis for a final decision by investors or financial institutions to finance projects.
A properly undertaken Risk Assessment can determine that all risks have been appropriately mitigated and appropriate design measures implemented prior to construction. For example if appropriate measures are not incorporated into design, a project on a long-term basis could be costly. SRK’s experience shows generally that certain risk factors, such as the accuracy of the resource estimate, may be low and that other factors over the projected life of the project, such as selling price and future changes in environmental legislation, are less predictable and higher risk.
Grey and Green Infrastructure Benefit Cost, Return on Investment Analysis for...Robert Muir
This presentation was made to the Southern Ontario Municipal Stormwater Discussion Group on September 27, 2018 in Brantford, Ontario. It describes benefit-cost analysis to show the return on investment (ROI) of infrastructure improvements to reduce flood damages (insured and total), and to achieve other benefits including erosion mitigation and water quality improvements. Earlier benefit cost analyses for projects ranging from the Winnipeg floodway to the Stratford, Ontario storm system master plan are shown. The benefit-cost ratio of an Ontario flood control study is shown including a comparison of grey and green infrastructure cost effectiveness - analysis shows the grey infrastructure solution can meet the current Disaster Mitigation Adaptation Fund (DMAF) benefit/cost threshold of 2:1 required to be eligible for federal funding. In addition, city-wide analysis of grey infrastructure storm and sanitary system upgrades and green infrastructure / low impact development infrastructure strategies is summarized.
Results show that the grey infrastructure solution can meet the DMAF benefit/cost threshold of 2:1 but that the benefit/cost of green infrastructure is substantially below it considering flood reduction benefits. When other benefits are considered, and targeted implementation of green infrastructure is considered (e.g., representing 25% of the urban area with limited overland drainage design standards) and considering additional benefits including a substantial 'willingness to pay' estimate for water quality improvements, costs continue to exceed benefits. The insurance industry and some affiliated research groups have suggested that natural infrastructure or green infrastructure should be considered to improve climate resilience and reduce flood damages - this analysis would suggest that approach is misguided and could misdirect scare resources to ineffective strategies.
More Related Content
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Assessment of Risks in International EPC Projects Reference Current Global Ec...HIMADRI BANERJI
Assessment of Risks in the present global economic environment for projects and especially projects that deal with EPC contracting for large scale infrastructure. A review of some of the major projects that have changed the rues of the game for Project Risk Assessment, management and mitigation forms a significant part of the prentation
The word contingency has been given a completelynew meanin.docxarnoldmeredith47041
T
he word contingency has been given a completely
new meaning since it was introduced to heavy oil and
gas energy construction industry. Perhaps it is one of
the most confusing concepts in project cost and
schedule management systems. More often than not, the
contingencies are simply hidden in the base estimate, causing
chaotic results [7]. Now, with the historical cost data becoming
illusory, the efforts of benchmarking will be misleading and
meaningless. Lack of structured transparency has led to the
misconception that the contingency fund is a phenomenon of
wide utility as a catch-all to cover project extra costs which
otherwise can not be legitimately accounted for.
J.P. Morgan has been quoted as saying that “the market will
fluctuate” [2]. This claim also applies to project cost forecasts.
Contingency forecasts fluctuate as well, following the project
progress and overall project risk shifts. One of the most effective
ways to avoid the catch-all syndrome is to break down contingency
into risk affected components. The level of detail shall be driven
by a well established work breakdown structure (WBS), which
shall be inherently built into a contingency risk model. When the
contingency amount is derived, it will be automatically dispersed
into appropriate accounts based on the risk levels and cost weigh-
ing factors.
Allocating contingency instead of a single liner provides a
great advantage to the management of the contingency. By using
moderate cost breakdown details, the cost engineer knows exactly
how the contingency model is put together and the amount each
account deserves, and the timing when the amount is exhausted.
Hence, the cost engineer can easily generate a contingency draw-
down plan, and manage the depletion of contingency in a
controlled manner.
PROJECT COST OVERRUN PHENOMENON
Fifteen years after the economic recession of the 1990s—a
result of a world-wide oil price drop, the Oil Sands in northern
Alberta of Canada became a hot spot, attracting numerous
investors from the United States and other parts of the world.
Scarcity of oil and its current high price were the catalysts for a
booming oil and gas construction industry in the province of
Alberta. Between 2005 and 2013, a total amount of 63.5 Billion
Canadian dollars [6] will be invested in the exploration, mining,
crude refining and transportation of bituminous oil sands.
However, the heavy construction in the energy industry has been
plagued with a history of poor performance, budget overrun and
significant schedule delays, according to the Construction
Owner's Association of Alberta (COAA).
Various attempts have been made by the COAA and other
interest groups to improve the reputation of the industry with
little success to date. Perhaps there is no easy way to save the
industry's notoriety for cost overruns. However, one method to
avoid further cost slippage—the implementation of a stringent
risk management process, including adequate cost and schedule
conting.
This presentation shows how Risk Based Decision Making was performed on a real project (which won an international call for bids), using Riskope's CDA/ESM project evaluation methodology.
World Deepwater Market Forecast 2016-2020 Leaflet + ContentsDouglas-Westwood
Sustained Low Oil Price Sinks Deepwater Projects, with 2016-2020 Deepwater Spend to Total $137 Billion
Douglas-Westwood (DW) forecasts deepwater expenditure to total $137 billion (bn) between 2016 and 2020. This represents a 35% decline compared to DW’s previous edition of the deepwater forecast issued March 2015.
Risks Assessment Matrix and its importance in Oil Shale Mining Projects Sergei Sabanov
Risks Assessments in oil shale mining projects are based on technical, operational, financial, economic, environmental and social criteria. The Risk Assessment process is used to ensure that risks are suitably quantified and mitigation plans put in place where necessary. Risk classification provides a context for the level of evaluation required for instance at detailed oil shale mine design and oil shale mine planning processes. Issues of weathering and the typification thereof impacted the accuracy of mining modifying factors in dilution and recovery such that the classification was downgraded to mainly Probable from an entirely Measured resource. This can potentially affect confidence, valuation and financing.
A risk analysis model is used to evaluate the risk level of a cost estimate; for example to reflect the anticipated total cost based on an acceptable probability of completing the project for the estimated value. This has to be considered in sufficient detail so that it could reasonably serve as the basis for a final decision by investors or financial institutions to finance projects.
A properly undertaken Risk Assessment can determine that all risks have been appropriately mitigated and appropriate design measures implemented prior to construction. For example if appropriate measures are not incorporated into design, a project on a long-term basis could be costly. SRK’s experience shows generally that certain risk factors, such as the accuracy of the resource estimate, may be low and that other factors over the projected life of the project, such as selling price and future changes in environmental legislation, are less predictable and higher risk.
Grey and Green Infrastructure Benefit Cost, Return on Investment Analysis for...Robert Muir
This presentation was made to the Southern Ontario Municipal Stormwater Discussion Group on September 27, 2018 in Brantford, Ontario. It describes benefit-cost analysis to show the return on investment (ROI) of infrastructure improvements to reduce flood damages (insured and total), and to achieve other benefits including erosion mitigation and water quality improvements. Earlier benefit cost analyses for projects ranging from the Winnipeg floodway to the Stratford, Ontario storm system master plan are shown. The benefit-cost ratio of an Ontario flood control study is shown including a comparison of grey and green infrastructure cost effectiveness - analysis shows the grey infrastructure solution can meet the current Disaster Mitigation Adaptation Fund (DMAF) benefit/cost threshold of 2:1 required to be eligible for federal funding. In addition, city-wide analysis of grey infrastructure storm and sanitary system upgrades and green infrastructure / low impact development infrastructure strategies is summarized.
Results show that the grey infrastructure solution can meet the DMAF benefit/cost threshold of 2:1 but that the benefit/cost of green infrastructure is substantially below it considering flood reduction benefits. When other benefits are considered, and targeted implementation of green infrastructure is considered (e.g., representing 25% of the urban area with limited overland drainage design standards) and considering additional benefits including a substantial 'willingness to pay' estimate for water quality improvements, costs continue to exceed benefits. The insurance industry and some affiliated research groups have suggested that natural infrastructure or green infrastructure should be considered to improve climate resilience and reduce flood damages - this analysis would suggest that approach is misguided and could misdirect scare resources to ineffective strategies.
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