The Steel industry is being faced by myriad challenges such as volatility, shifting demand centers, complex supply chains, productivity and cost efficiency. As steelmakers have increased their ability to survive in tough times and increased market competition is there in nearly all products due to which they have shifted their focus to high value, higher margin steel products. While steelmakers are most threatened by excess capacity as they strive to maintain their profitability, they are also exposed to cost related threats. All steelmakers are maximizing their cost-cutting and productivity enhancement efforts and seeking to focus on high end Value added products. This is going to significantly increase market competition in nearly all products. One thing is for certain that is steelmakers will have to live through a sustained period of volatility in the short-to medium-term. In order to sustain in competitive market Risk Assessment and Risk Management of steel plants shall help to reduce time, cost and resources. The thesis describes about the risk management process in project environment. This encompasses risk identification, risk analysis, risk evaluation and risk treatment. It incorporates different phases of steel plant projects such as Development phase, Execution phase and Operation phase. The pre and post mitigation measures have been suggested for the same. Lastly three illustrative case studies has been taken which are from IISCO steel plant (Burnpur), Jindal Saw Ltd(Mundra), Sunflag Steel Ltd(Bhandara) and comparative analysis was done for the same risks associated at different phases of steel plant projects.The different risks are compared and as per the data received by experts it has been observed that the major risks are in development and construction phase. The scope of study includes qualitative and quantitative analysis which helps in consolidating decision making under uncertainty. The emphasis has been given in finding the most critical risks which were quantified with the help of @RISK software and as per the tornedo chart the results are interpreted. This helps in identifying major project as a management input and which in turn identifies mitigation solutions to resolve risk oriented issues in steel plant projects.

1. 1

2. STUDY IN RISK MANAGEMENT
OF STEEL PLANT PROJECTS
PRESENTED BY :-
DILPREET SINGH
NICMAR PEM-9 (2013-15)
2

3. OVERVIEW
 INTRODUCTION
 REVIEW OF LITERATURE
 RESEARCH METHODOLOGY
METHOD - I (Quantitative Analysis)
METHOD - II (Qualitative Analysis)
 FINDINGS FROM METHOD I & II
 CONCLUSION
 LIMITATIONS
 REFERENCES 3

4. INTRODUCTION
 The Steel industry is being faced by myriad challenges such as
volatility, shifting demand centers, complex supply chains,
productivity and cost efficiency.
 It incorporates different phases of steel plant projects such as
Development phase, Execution phase and Operation phase.
 The scope of study includes qualitative and quantitative
analysis which helps in consolidating decision making under
uncertainty.
4

5. 5

6. S.No. Company Location State
Current
approximate
Capacity*
1 Steel Authority of India Limited IISCO, Burnpur West Bengal 0.5
2 Steel Authority of India Limited Bokaro Jharkhand 4.36
3 Steel Authority of India Limited Bhilai Chhattisgarh 3.93
4 Steel Authority of India Limited Rourkela Orissa 1.9
5 Steel Authority of India Limited Durgapur West Bengal 1.8
6 RashtriyaIspat Nigam Limited Visakhapatanam Andhra Aradesh 2.9
7 Tata Steel Limited Jamshedpur Jharkhand 6.8
8 Essar Steel Limited Hazira Gujarat 4.6
9 JSW Steel Limited Vijayanagar Karnataka 6.6
10 Jindal Steel & Power Limited Raigarh Chhattisgarh 2.4
11 Ispat Industries Limited Dolvi Maharastra 3
12 Bhushan Power & Steel Limited Jharsugda Orissa 1.2
13 Bhushan Steel Limited Angul-Dhenkanal Orissa 1.56
NUMBERS OF STEEL PLANT IN INDIA WITH THEIR CAPACITY
SOURCE: http://pib.nic.in/newsite/erelease.aspx?relid=77494

7. OBJECTIVES
 To study the risks involved in Steel Plant Project and to
identify the benefits of application of the risk management.
 To identify the principles of Risk Management.
 To find the most critical risks which were quantified with the
help of @RISK software and as per the tornedo chart the
results are interpreted. .
 To assess and mitigate the risk involved in Steel Plant Projects
and arriving at a conclusion
7

8. REVIEW OF LITERATURE
 Steel demand and production outlook for indian steel.
 Steel consumption scenarios.
 Global outlook for Steel.
8

9. PROJECT RISK MANAGEMENT
PROCESS
9

10. QUANTITATIVE ANALYSIS
 Questionnaire
 Risk Rating
 Responses
 Tornado Graph
 Interpretation
 Identification of critical risks
 Mitigation Plans
10

11. VARIABLES
11
Development Phase
1 Significant swings in the demand for steel.
2
Decline in Profit Margin in downstream
processing.
3 Difficulties in financing project.
4 Unrealistic contract duration.
5 Scarcity of raw materials.
6 Market risk.
7 Political risk.
8 Delay in land acquisition.
9 Delay in obtaining permissions.
10 Energy Scarcity Risks.
11 Risk of Exchange Rate Fluctuations
12 Business Competition Risk.

12. CONTINUED…..
Construction Phase
13 Lack of decision making involving all project teams.
14 Unforeseen ground conditions.
15 Change in soil condition.
16 Lack of technical feasibility.
17 Changes in rules & regulations.
18 Severe weather conditions.
19 Safety Risk.
20 Non-availability of utilities on site.
21 Lack of effeicient technology.
22 Inadequate code provision.
23 Delay in payments by owner.
24 Delay in supply of equipments
25 Lack of information available.
26 Non-availability of utilities on site.
27 Failure of construction equipment.
28 Interrupted cash flow.
12

13. CONTINUED…..
Operation Phase
29 Fuel supply risk.
30 Improper estimation for maintenance&operationcost.
31 Overproduction of steel.
32 Incorrect manufacturing processes.
33 Ineffecient quality standards.
34 Inadequate safety measures.
35 Ineffeciency of subcontractor company.
13

14. WHY @RISK SOFTWARE
 Uses monte carlo simulation
 Shows many possible outcomes for a problem
under consideration
 It tracks many possible future scenarios,
 Its probability
 The risks associated with each different
scenarios.
 Allows the user to judge upon the risks which one
to take or which one to avoid
14

15. MONTE CARLO SIMULATION
A computerized mathematical technique
For quantitative analysis
For decision making
Generates all the possible outcomes
With their impact of risk
15

16. @RISK FLOW
CHART
16

17. TORNADO CHART
 Shows the spread of every parameter.
 Gives the critical parameters carrying the high potential
of uncertainty.
 The tornado spread gives the critical parameter.
17

18. TORNADO CHART
18

19. FINDINGS
 Critical parameters:
 Significant swings in the demand of steel
(Development phase)
 Decline in profit margin in the downstream
process(Development phase)
 Unforeseen ground conditions(Construction
Phase)
 Difficulty in financing project(Development
Phase)
 Delay in obtaining permission.(Development
Phase)
19

20. QUALITATIVE ANALYSIS
Phase Of Project Risk Involved
IISCO,Burnpu
r
JINDAL SAW
LTD,Mundra
SUNFLAG
STEEL
,Bhandara
DEVELOPMENT PHASE
DEFAULT IN MOU
1.default in mou provisions by
government
Y
DELAY IN LAND ACQUISITION:
1. political interference/patronage Y
2.policy restriction for change in land
use pattern
Y
PERMIT/APPROVAL RISK:
1.delay in contractual clearances Y Y
2.delay in project specific
orders/approvals
3.delay in statutory
clearance(environmental, forest, etc)
Y Y Y
4.improper feasibility report,
documentations
MARKET RISKS
1.Drastic change in market.
2.Competitors threat.
FINANCIAL RISK
1.project cost overrun Y
2.project not bankable Y
3.failure to arrange equity in time Y
DELAY RISKS
1. Delay in submission of drawing Y
2.Delay in handing over the site to
contractors
Y Y
3. Delay in mobilizing the required
resources in time
Y
4. Co-ordination and managerial
20

21. Phase Of Project Risk Involved
IISCO,Burnpu
r
JINDAL SAW
LTD,Mundra
SUNFLAG
STEEL ,Bhandara
CONSTRUCTION PHASE
TECHNOLOGY RISK
1. lack of technical feasibility.
2. technology failure Y
DESIGN RISK
1.Design changes Y Y
2.loss due to faulty design Y
3. Delays due to submission and
approval of design and drawing
4.insufficient design documentation
DELAYS DUE TO UNBALANCED
CONTRACT
1. Risk is unilaterally transferred to
one side.
Y
2.change in scope of project
3. Delay in settlement of claim
4.Delay in arbitration proceedings
during the execution of project.
Y
5.Delay in settlement of rates for
extra items, additional items and
revision of rates.
OTHER RISKS
1.Co-ordination and managerial
problems of the owner.
2.Delay in issue of drawings by the
owner in construction contracts.
Y Y
3. Health hazards and non-
availability of medical facilities.
4.Political problems, riots, agitations Y Y
5. Inter-state disputes.
6.Delay in releasing payments leading
to cash-flow problems to the
contractors.
7.Local problems, obstruction by local
Y
21

22. Phase Of Project Risk Involved
IISCO,Bur
npur
JINDAL SAW
LTD,Mundra
SUNFLAG
STEEL
,Bhandara
OPERATION PHASE
OPERATION RISK:
1.Transportation risks
2.improper estimation for
maintenance and operation
cost
Y Y
3.Poor workmanship
4.Poor quality
5.Non availability of man,
material, machinery,
money
6.Lack of political will
7.Breakdown Problems Y
8.Lack of management
expertise
9.Non sequential supply of
equipments Y
10.Non availability of spares
in stores Y
22

23. CONCLUSION
 Qualitative and Quantitative have given the same
results and hence the methodology can be validated.
 The research methodology can be taken as a
reference for further research work in Steel Plant
project or in similar researches for other
infrastructure projects.
 Most of the risks that are identified and which have
to be mitigated are from development phase .These
risks are to be taken into considerations for future
steel plant projects
23

24. THANK YOU.
24