RISK MANAGEMENT DURING PROJECT DELIVERY

The objective of project risk management is to provide information to decision makers while they select the correct
concept, perform basic and detailed design work and manage the project through execution. Risk management
integrates input from the risk register (both upside and downside risks), cost estimate and schedule into a probabilistic
risk analysis to provide ranges of possible outcomes of final cost and schedule along with the key drivers that may impact
the project.

This document describes how risks are managed in projects, from commencement of the project (between DG2-3) to
handover to operations post DG5.

Ris k Re g is te r

W e ca n
d o b e tte r!
Critica l Ris k s Ris k M itig a tio n
T– e chnica l CO ST SCH EDULE La b o u r P ro d u ctiv ity A ctio n Pla n s
E– conomic Successfully ma na ging
N e w Te ch n o lo g y
C – omme rcia l Why? key drivers & risk eve nts
H SE Co m p le x ity will help de live r
O – rga niza tiona l
P – olitica l Ris k An a ly s is Ris k An a ly s is Top Qua rtile Proje cts

P5 0

Focus of Business Risk and Project Risk Management

The scope of Business risk management, which is managed by Shell Finance, is to achieve business objectives, safeguard
company assets from inappropriate use, loss or fraud, facilitate safe operations and enable compliance with the
boundaries set by the Shell Control Framework. Subsets of Business Risk are for example HSSE, Opportunity, Project,
Operations, Reputation, Legal, Tax, Commercial and Financial risk. The focus of Project risk management is to identify,
manage and report the full spectrum of TECOP risks & opportunities that may drive TQ project execution and delivery.
The Decision Executive Owns risk management throughout the whole ORP, however, the BOM and Project Manager have
the delegated accountability – on behalf of the Decision Executive – to drive Opportunity and Project Risk Management
respectively.
Level of
IDENTIFY & ASSESS SELECT DEFINE EXECUTE OPERATE Reporting
Decision Ga tes 1 2 3 4 5
Opportunity Risk O pera tions Risk
Ma na gement Project Risk Ma na gement
Ma na gement

Busine ss Risk
Re porting

Up to CEO

BO M Project Manager
Delega ted Accounta bility Delega ted Accounta bility
On beha lf of the DE On beha lf of the DE
FN Assure tha t Opportunity & Project Risk Ma na gement is robust
Deliver Opportunity Deliver Ops.
Risk Ma na gement Risk Mgt. From DE

Deliver Project Risk Ma na gement

Up to DE
P ro je ct Ris k Re g is te r
CSRA Re porting
PS P ro je ct Ris k Re g is te r

Sta rt Project Risk Ma na gement upon

commencement PTproject. PM, PSM, Within Project
PFM a ppointed a t sa me time
between DG2 a nd DG3

Finance drives the Risk Management Assurance: The custodian who ensures an effective business control framework is in
place. This includes the risk management process, which is robust and where risks are adequately represented. This
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 RISK MANAGEMENT DURING PROJECT DELIVERY

includes formal support of risk & opportunities management plan, process, risk register and 5X5 RAM, external reporting
and leading the Risk & Opportunity dialogue in the Venture LT.

Project Services drives Risk Management Delivery: Creating, maintaining and executing the risk management process. This
also includes facilitation of the risk workshops for and present outcomes in Project LT, performance of risk analysis and
generation of risk reports.

Risk Management Throughout the Project Lifecycle

Risk management’s maximum zone of influence on successful TQ project delivery is early in the project lifecycle during the
value identification stages of pre-Decision Gate 3 (Pre-DG3).

Pre-DG3 – A very high-level risk management process covering the whole TECOP spectrum, with very broad ranges of
uncertainty, which can be used in conjunction with various early cost estimates and schedule scenarios to create cost
ranges – not single-point estimates – needed to successfully evaluate each concept. The concept with the most tolerable
risk profile and acceptable cost and schedule ranges is selected as the viable concept. The risk management facilitation
tool Project Execution Planning – Project Execution Risk (PEP-PER) helps the Team identify critical TECOP risks, create
mitigation and recovery plans, and convert them into contracting, procurement (C&P) and project execution strategies. A
Schedule Risk Analysis (SRA) to FID is required before DG3. The non-technical risk area is worked with the various new
business development units across the businesses.

Define Phase – The focus is on identifying and managing risks for the selected concept throughout all work streams,
across all TECOP categories, as well as pan-project risks. Key activities include PEP-PER (to mitigate the risks for the
selected concept), brainstorming workshops and a Costs & Schedule Risk Analysis (CSRA) to the end of the project is
required before DG4.

Execute Phase – The focus is on proactively managing the TECOP risk register and providing input into project forecasting
through the Management of Change (MoC) process, cost forecasting and schedule re-baselining. Key activities include
brainstorming workshops, CSRA on an ongoing basis or during major re-baseline efforts.

Id e n tify An d As s e s s Se le ct De fin e Ex e cu te O p e r a te

VALUE IDEN TIFICATIO N VALUE REALISATIO N

Project Execution Pla nning –

Project Execution Risk (PEP-PER)

Co n t r o ls
ESAR
Re a d in e s s
ESAR FID *
IM PACT

VAR Re v ie w
VAR ESAR Pe e r Pe e r Pe e r
DG-3 VAR As s is t
DG-4 As s is t As s is t
RISK M A N A G M EN T Z O N E O F
M A X IM UM IN FLUEN CE
TIM E
En h a n ce d De live r y To Bu s in e s s De cis io n s & * No te
Un d e r s ta n d Fu ll Ris k Sp e ctr u m o f Co n ce p ts FID – Final Investment Decision
ESAR – Estimating Schedule
Fr a m in g / De p lo y in g RM Co n tr o ls , CSRA Assurance Review
VAR – Value Assurance Review
M itig a tin g Ris k s fo r Co n ce p t
P E Str a te g y, Fo r e ca s tin g , M a n a g in g , CSRA

Current Risk Management Resource Levels

The 11 Global project risk management SME’s meet twice a month to discuss and refine risk management tools and
processes. Finance will be invited to the SME meetings if risk assurance guidance is needed. Best practices are discussed
during the monthly Global Risk Management Forum teleconference, which is then passed on to the practitioners.

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Risk Management Training and Education

Risk management training continues to be an ongoing activity for both risk managers and project teams; primarily around
CSRA. Standardized CSRA training for risk managers is held within the regions as required and discussions continue with
Project Managers and project teams to educate them on the activities, timing and commitments needed from them to
successfully deliver quality CSRA deliverables for sound risk-based decision making.

Risk Management Tools

Delivery

 Project Guide 20 – Risk Management for Capital Projects defines the risk management process, tools, roles and
responsibilities and timing of risk management events and the Cost Schedule Risk Analysis (CSRA) Procedure 90
provides guidance on how to perform probabilistic risk analysis; including Unknown / Unknowns.
 EasyRisk is the recommended risk register tool used to capture qualitative risk information. The risk data is
monitored, reviewed, updated, and presented to management monthly and is used as input into the CSRA.
 @Risk and Primavera Risk Analysis are used to perform CSRA to determine ranges of possible cost / schedule
outcomes along with the key drivers that may impact the cost targets and schedule milestones / durations.
 TECOP Deterministic Contingency Tool is a facilitated deterministic, quantitative process used to calculate cost
contingency and final cost estimate ranges based on the project team’s ranking of key TECOP criteria.
 PEP-PER is a structured and systematic workshop used to identify and assess project execution risks
and mitigation plans, which are incorporated into strategic execution planning.
 Brainstorming workshops are held quarterly during project execution or at major project milestones.

Assurance

 Shell Control Framework: http://sww.shell.com/control_framework/

 Statement of risk management: http://sww.shell.com/risk/risk_management/index.html
 Risk management manual: http://sww.shell.com/risk/manual/risk_management_manual.pdf
 Opportunity Realisation Manual section 4.2.3.
 Project Guide 2b – Project Execution Review
 Project Guide 2c – Estimate & Assurance Review

Contact

In case of questions please contact Jochen Schneider PTE Risk management in PTE/S at Jochen.W.Schneider@shell.com

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