Energy & Chemicals Project Risk Management Process

BEST
PRACTICE

Team Awareness + Proactive Actions = Successful Project Risk Management

Risk Management Team

Human Resources

Executive Sponsor

Project Management

Estimating

Project Controls

Sales/Proposals Team

Engineering

Procurement & Materials

Plant Services

Legal

Construction

HSE

JV Representatives

Financial/Treasury Counsel

Subcontracts

Quality

Client Representatives

Project Risk Management Process (Proactive Actions to Manage Risk)

Strategize
Risk Strategy
The process of deciding how
to approach, plan and
implement the risk
management activities
for a project or program.
Evaluate Project
Requirements
Review project objectives,
success criteria, business
strategy & scope
Identify, define & align all
stakeholder expectations
Review project timeline &
constraints
Create risk management
plan for specific project /
program

KBR

Identify
Risk Identification
The continuous process of
determining and defining all
risks inherent in a project or
program.

Assess
Risk Assessment
The process of prioritizing and
analyzing the likelihood and effect
of risk upon the project
or program objectives.

Review project scope & plan

documents

Define probability, manageability

and impact criteria

Determine risk identification

techniques for specific
task / phase

Map risk data to project specific

tasks and scope

Determine participants
required
Define sources & identify
risks
Develop risk synopsis
Create risk register
Assign risk owners

Perform quantitative modeling,

as required, of potential
consequences (cost / schedule /
HSE)
Determine risk ranking, priorities
and treatment
Communicate major risks to
stakeholders

Process owner: Project Risk Management Dept.

Guideline: GD-GL-ECD-PM-1202

Respond
Risk Response Planning
The process of identifying,
evaluating, selecting and
implementing action plans or
techniques that will enhance
opportunities and reduce threats
to the project or program
objectives.
Evaluate major risk causes and
effects
Develop risk response plan
options
Evaluate risk response plans
Define risk triggers for the
response plans
Assess secondary risks
Allocate responsibility and
accountability
Implement and integrate
risk response plans into
project plans

Monitor
Risk Monitoring
The process of monitoring,
updating and evaluating the
effectiveness of risk response
plans throughout the project or
program life cycle.
Review objectives, decisions &
assumptions
Continuously review & update
risk register
Define criteria and evaluate risk
response plan effectiveness
Update risk response plans
Develop risk trend reports
Communicate status of risks to
stakeholders
Repeat Risk Management
Proactive Actions

Rev. 2, October 2005

Project Life Cycle of Risk Management

IRC

PROSPECT

PRE-AWARD

PRC

QUALS/PROPOSAL

NEGOTIATION

Post
NEGOTIATION
Review

EXECUTION

PLANNING

TRENDS

Mgmt.
Approval

PLAN

KICKOFF

AWARD

Client
Approval

EXECUTION PLAN

CHECK
ESTIMATES

FORECAST

CHANGE MGMT
CONTRACT
SIGNING

RISK MGT. REQMT.

OPs
Review

ESTIMATE

Major Risk
Response Plans
Proposal Risk
Strategy

Primary INPUTS
DELIVERABLES

Major Risk
Summary
Major
Response Plans
Cost Model
Schedule Model
Contingency
Allocations
Proj. Exec. Risk
Management
Plan

Risk Register

Risk Register

Major Risk
Summary

Major Risk
Summary

Major
Response Plans
Cost Model
Schedule Model
Contingency
Allocations
Proj. Exec. Risk
Management
Plan

Integrated Risk
Response Plans
Cost Model
Schedule Model
Project Critical
Activities
Contingency
Drawdown Curves
(Cost/Schedule)
Project Risk
Management
Procedures

Risk Profile
Reporting

Risk Profile
Reporting

< $100

< $500

> $500

< $20

< $100

< $500

> $500

KBR Est. / Controls

X
KBR Risk Facilitator

The table shows the PRM process deliverables for EPC projects that KBR is
planning or executing. Requirements are a function of project installed cost
and the project phase, as defined by the level of estimate. Consult PRMDM
Section 3.0 for further details and for Non-EPC/Service projects.

O
3rd Party Facilitator

Legend:
R = Required for Lump Sum / Fixed Unit Rates
Recommended to Client for Reimbursable
O = Optional
X = Primary Lead

Schedule Model

+/- 5 - 10%

Cost Model

Definitive

FEED,
Lump Sum Bidding,
Reimbursable Funding,
Estimates,
Unit Rate,
etc.

Risk Synopsis

+/- 10 - 15%

Risk Mgmt. Plan

Conceptually
Defined

Lead

< $20

Risk Register

+/- 15 - 25%

Project Risk Management

Deliverables

Risk Response Plans

Factored

Risk ID
Method

Risk ID Workshop

+/- 30 - 50%

Feasibility Studies,
Project Screenings,
Pre-FEEDs, FEEDs,
Budget Approvals,
etc.

Project Value
$MM

Major Risk Summary

Order of
Magnitude

Usage

WARRANTY

CONTRACT
COMPLETION

Integrated Risk
Response Plans
Risk Trend
Reporting
Major Risk
Assessment
Updates
Contingency
Reserve Draws
(Cost/Schedule)

Turnover Terms
Review Matrix
Risk Register
Updates
Major Risk
Monthly Review
Integrated Risk
Response Plans
Risk Trend
Reporting
Project Risk Close
Out Reports

Definitions

Risk ID Survey

Expected
Accuracy

Major Risk
Monthly Review

Lessons Learned

Project Risk Management Requirements

Estimate
Classification

WORK
TURNOVER/
ACCEPTANCE

Risk Register
Updates
Project Team Update of Contract, Change, & Progress

Risk Register

Contract Terms
Review Matrix

Project Team Update of Risk Profile

Major Risk
Summary

Executive Sponsor Signoff to Any Revisions

Legend:

Contract Terms
Review Matrix

Operations Executives Signoff

IRC Committee Signoff

Sales Input

Major Risks

Risk Register

Contract Terms
Review Matrix

ADJUST

Forecast Inputs
Project Reviews
Peer Reviews
Ops Reviews
PFSR Reviews
Client Reviews
JV Reviews

PROJECT SET-UP
& PLANNING

CONTRACT
COMMENTS
JV BID AGREEMENT

CLOSEOUT

COMMISSIONING/START-UP

Project Team Update of Contract, Change, & Progress

BID

PRE BID

KBR
Rev. 2, October 2005

Risk

An uncertain event or set of circumstances that, should it occur, will have an effect on the
achievement of the projects objectives

Risk
Management

The process whereby responses to the risks are formulated, justified, planned, initiated,
progressed, monitored, measured for success, reviewed, adjusted and closed

Risk
Assessment

The evaluation of risks to gain an understanding of their individual and combined impact upon the
project or program objectives

Qualitative Risk
Assessment

An assessment subjectively determining and analyzing the risks obtained in the Risk Identification
Phase which warrant a response

Quantitative Risk
Assessment

An assessment numerically determining and analyzing the risks obtained in the Risk Identification
Phase which warrant a response

Risk Trigger

Early warning measure or sign that a risk has occurred or is going to occur

Secondary Risk

Risk generated by a response to another risk

Residual Risk

Risk remaining after response planning

Risk Response
Plan

Documentation of what will be done to minimize threats and maximize opportunities for the project
in the form of proactive or reactive responses

Proactive Risk
Response

An action or set of actions to minimize threats and maximize opportunities that are carried out in
advance of the risk occurrence

Reactive Risk
Response

An action or set of actions carried out, as defined by risk triggers, after a risk has occurred to
minimize the threat effect and maximize the remaining opportunity effect