PROJEK PEMBINAAN OFF-RIVER STORAGE (ORS) SUNGAI JOHOR

Inception Report

SECTION 12

RISK MANAGEMENT

12.1 GENERAL

Risk is the combination of likelihood and severity of a specified hazardous event. It is a product of the
likelihood of a hazard resulting in an adverse event and the severity of the event and can be
quantified using the below formula:

Risk = Likelihood x Severity

Likelihood is the probability of occurrence of an event within a specified period or circumstances

whereas severity is the impact from the occurrence of the event say on the people (injuries, death,
etc), environment and property.

Dams are considered high risk due to its potential to cause serious damage and lost of lives in the
event of dam failure. One of the most effective ways to manage the risk of the Sg Johor ORS is the use
of the Risk Management Plan (RMP) which is a structured approach to managing risks. It encompasses
hazard identification, assessing the risk, putting in place control measures and reviewing the
outcomes. The RMP also helps to minimise project delay and cost overrun.

A good RMP increases the success of the project through the identification and mitigation of risk. It
increases the effectiveness of the operation of the project and provides a roadmap to achieve its
outcome and objectives. In addition, it also increases the confidence level that the risks can be
effectively managed and addressed.

12.2 OBJECTIVES OF RMP

The objectives of RMP are as follows:

i. To identify and mitigate the risks especially those with high risks
ii. To monitor the risks
iii. To provide essential information to assist the project team in managing the risk
iv. To document the discussion and action plan to mitigate the risks

RMP provides a proactive action plan to risk management so that the risks can be identified early and
throughout the project to minimise any shock or surprise. The RMP for the Johor ORS project will
focus on the construction stage to ensure the construction is able to meet the design intent and to
minimise the risk during this stage of the project.

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12.3 SCOPE OF RMP

The RMP outlines the procedure for managing risk throughout the project life cycle. Apart from
documenting, identification and analysis of the risk, the RMP also documents the risk owner, provides
a register for risk tracking and implementation of the risk mitigation plan.

In order to increase the chances of success of the RMP, the following guides will be adopted:

i. Generally any decisions made should not be reversed unless new important facts surfaced
ii. Risk will be assigned to a sole risk owner; however, risk mitigation may be attributed to
several persons
iii. high risk activities will be assigned high priority status and its condition and mitigation
process closely monitored
iv. the target date for each activity in the risk register shall be realistic and achievable
v. in most cases it is sufficient to mitigate the risk to an acceptable level as totally eliminating
the risk may be impossible or impractical
vi. the risks shall be discussed and mutually agreed with all the stakeholders
vii. The planned and actual risk mitigation will be documented
viii. For high level risk, quick decision and action will be required

The RMP will detail the initial risk control action to reduce the rating of each risk such that the
residual probability and impact is reduced to an acceptable level. The register will be routinely
reviewed and updated throughout the construction stage. An initial risk control plan with mitigation
measure will be applied to risk with rating of medium to high, otherwise, routine monitoring is
sufficient. In cases where the consequence or impacts are high but the probability of occurrence are
uncertain, a semi quantitative analysis will be undertaken.

For each risk the RMP will consider ways to handle the risk (weakness) / opportunity (strength) by
means such as:

 Avoidance of the risk, if possible

 Mitigation measure to minimise the risk
 Transfer the risk to the entity most capable of handling it or by insuring against it
 A stand alone document for the risk register and management plan will be established

12.4 RISK ASPECTS OF SG JOHOR ORS

Potential risks envisaged for the Sg Johor ORS project include:

- Potential high cost inherent in a large scale engineering project especially in dam project where
the foundation condition will only known upon opening

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- The project is technically complex involving risks such as geological, geotechnical, hydrological,
environmental, legal and financial

- high risk during construction with impact on cost and time and with risk for contractual
disputes and claims between the contracting parties

- High potential impact to the environment as a sizeable area of the land will be inundated

- Long lead time from planning to completion of the project

- Risk during operation is high subject to weather conditions, flood, drought and seismic activity

- Risk of poor reservoir water quality due to land use activities in the catchment which can lead
to excessive reservoir sedimentation and chemical pollutants

The followings are the anticipated risks typical of projects such as the Sg Johor ORS:

i. Technical risks associated with site geology, hydrology, hydraulic and geotechnical
conditions

ii. Technological risks associated with the project layout and systems selected

iii. Adequacy and accuracy of data used

iv. Uncertain catchment conditions leading to operating risks and viability of the project

v. Conflict of water source users and impact on downstream water users

vi. Impact on social and natural environment due to the lack of vital information on
geology, streamflow, archaeology and sensitive fauna and flora etc.

vii. Site encumbrances and land acquisition problems causing delay to the project
implementation

viii. Geological risk particularly implication on dam stability and leakage through
embankment foundation and reservoir watertightness problem

ix. Hydrological risk due to river gauging data for hydrological analysis resulting in
overestimation of the yield and underestimation of the flood; the latter resulting in
under-sizing of the spillway and diversion facilities

x. Geotechnical risk related to slope stability problem and construction materials

deficiency both in quantity and quality leading to escalation in cost due to inadequate
sub-surface investigation

xi. Grey areas related to technological, technical, health and safety, environmental and
legal risks leading to underestimating the project cost

Latent geological conditions may lead to delay and cost of construction of river diversion works,
embankment foundation excavation and treatment. More temporary works may be required due to
the geological conditions which is less favourable due to inadequate subsurface exploration.

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Unfavourable hydraulic conditions at the river intake which may lead to operational difficulties during
operation.

12.5 RISK MANAGEMENT WORKFLOW

12.5.1 General

Risk management is a tool to manage risk and includes risk identification, risk evaluation, formulation
and monitoring of risk mitigating measures, and documenting of the entire risk management
processes. Risk assessment can assist in the decision-making process by determining the acceptable
level of risk and which option provides the least risk. A risk management framework such as the one
below can be used for the assessment.

Figure 12.1: Flow Chart of Risk Management

(Source: Garis Panduan Pengurusan Risiko Projek Bagi Projek Kerajaan)

The process involved in the implementation of the risk management plan for the construction stage of
the project is shown in Figure 12.2.

A three tiered risk management plan will be developed and the process involved is as illustrated in
Figure 12.3. In the Level 1 assessment a qualitative method will be used for quick evaluation of the risks.
In cases where the risk rating is high, they will be moved to Level 2. Level 3 will deal with cases where

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Inception Report

the probability of failure is uncertain but the consequences are high such as involving loss of life,
extensive damage to environment and economic losses.

A workshop will be conducted to deliberate on the risk factors. Various risk categories covering
technical, environmental, legal, contractual and financial risks will be evaluated. For technical risks,
the risks are further organised according to their particular nature or discipline such as hydrology,
hydraulic, geology, geotechnical, structure, mechanical, electrical etc. The process performed in the
risk analysis involves the following:

• Separating the project into its component parts and functions

• Identifying the construction activity or influence that has potential to impact negatively on the
design, construction and operation of the project, on third party or the environment
(illustrated in Figure 12.3).

• Analysing the risk for each factor, its probability of occurrence and consequences.
Risk Management
Work Shops
(Identify,
Incorporate RatingRisk and
Establish
Action Risk Log /
Plan)
Mitigation
Register
Measures In
Construction
Monitoring &
Method
Weekly
Supervision Site
Statements
Meeting To Resolve
Risk Issues Hold
Implement
Points/
Review Gatesby
Independent
Resolve Difficult
Consulting Engineer
Cases By Risk
Management
Figure 12.2 - Process in Implementation of Project Risk Figure 12.3 - A Three Tiered Risk Management Plan
Committee

The RMP details the initial risk control action to reduce the rating of each risk such that the residual
probability and impact is reduced to an acceptable level. The register will be continuously reviewed
and updated throughout the construction duration.

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Health, Safety, Security and Environment (HSSE) is the driving force behind Shell’s commitment
to improving its sustainability and environmental awareness.

HSSE (Health, Safety, Security & Environment) is the term used to describe the
processes/activities (planning, implementation, control, optimization) undertaken by
companies to ensure health, safety, security & environmental protection, particularly in the
working environment. Especially for industrial companies (e.g. energy industry) HSSE &
sustainability are of high importance.

Contents of HSSE management systems:

 identification & analysis of workplace hazards

 development of company-wide guidelines & minimum requirements
 training & further education of personnel (e.g. in the areas of accident prevention,
response & emergency preparedness)
 regular HSSE audits at company sites
 collection of HSSE statistics
 fire protection
 noise protection
 medical precautions
 travel health & safety measures
 environmental protection measures, etc.

In addition to the term HSSE, the following abbreviations are also common: HSE (Health,
Safety & Environment), SHE (Safety, Health & Environment), EHS (Environment, Health &
Safety).

Figure 12.4 - Subdivision of Project into Components and Construction Activities in Risk Identification,
Assessment and Rating of Risk Factors

12.5.2 Planning for RMP

Planning for RMP takes into account the objectives of risk management and outlines systematic ways
to evaluate, handle and monitor the risk mitigation. During the planning of the RMP, it is necessary to
assign roles and responsibility to individual who will be responsible for monitoring, taking action and
documenting the processes.

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12.5.3 Responsibilities

A Risk Management Officer (RMO) is responsible for planning of the RMP which includes among
others, evaluation, identification and monitoring of mitigation measures. Project team members and
personnel from various stakeholders will be involved in the RMP.

12.5.4 Documentation

The RMP process will be documented and reported in this project. The project team members will
contribute ideas and suggestions to improve the RMP or to address specific issues should they arisen
order to achieve an effective RMP.

12.5.5 Risk Identification

Risk identification is the first step in the RMP. The fundamental of risk identification is to ensure that
all the critical activities or risks which may have impacts on the project are taken into account. The
risks identified will be documented in the risk register.

Risks will be identified during the Risk Management Workshop (RMW) to enable the project team to
identify and address the risks at an early stage i.e. before any risk can manifest. Involvement of team
members who were involved in technical, cost and project schedule in the risk identification process is
critical as they are more aware of the risk associated with the project.

12.5.6 Risk Analysis

Analysis of the risk identified is a continuous process similar to risk identification. These two processes
are usually carried out concurrently. The risk identified will be analysed to ascertain:

i. Likelihood of the risk occurring

ii. Impact of the risk identified
iii. Risk owner
iv. Impact of risk on third parties

During the risk analysis, it is important to ascertain whether the risk needs to be mitigated or follow
up action required to manage or minimise the impact of the risk. Cases where the risk may not
require mitigation include:

i. The likelihood of occurrence of the risk is very slim

ii. The impact of the risk is negligible
iii. The risk is beyond the control of the project capacity.

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12.5.7 Risk Evaluation

The risk analysis is then followed by the identification and selection of mitigation option and its
priority. It is important to arrange and group the risk as follows:

i. The risk identified is acceptable and mitigation action is not required. However, the risk will
be documented for future revisit.

ii. The risk identified is rejected if the risk does not exist, not likely to happen or after risk is
being analysed.

iii. Risk with high impact which require attention and mitigation action

12.5.8 Risk Mitigation

Risk mitigation is to avert or lessen the likelihood of occurrence of the risk or should it happen to
reduce the impact. The project team members or stakeholders who are responsible for the risk will be
assigned as risk owner. Risk mitigation requires input from the stakeholders and relevant parties. In
the event the mitigation measure does not reduce the risk or the risk has reached an unacceptable
level, contingency plan will be developed.

12.5.9 Risk Monitoring and Reporting

In order to efficiently monitor and track risk mitigation of high risk impact, the mitigation action
should be reflected in the work planning and project schedule. The risk monitoring and reporting shall
be carried out on a monthly basis to monitor the risk management and mitigation.

A risk register will be prepared comprising:

 An identification number for each risk/opportunity

 A general descriptive label of the risk/opportunity
 Description of the risk/opportunity
 The risk owner
 The probability, impact and rating of the risk/opportunity

A Risk Report to communicate the risk analysis and assessment will be prepared and submitted.

12.6 RISK MANAGEMENT ORGANISATION

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The risk management organisation will form part of the project structure or organisation rather than a
standalone organisation. RMO is tasked to be the coordinator of the risk management program.

RMO is task with the followings:

i. Report to the Project Manager on the risk status of the project

ii. Track and monitor to ensure that the risk identified is lowered to an acceptable level
iii. Facilitate the risk management workshop
iv. Prepare risk management reporting

The RMO shall approve the risk management plan and received the latest updates on the status of
each risk register from the risk owner/party responsible.

The project team will play the following important roles in managing the project risk which includes:

i. Study and make recommendation to the RMO on any changes to the risk management plan
based on the lessons learned
ii. Update the project risk register as when necessary
iii. Evaluate and provide justification on risk analysis and provide mitigation action
iv. Report risk identified to the RMO and the Project Manager through the risk register

12.7 RISK MANAGEMENT WORKSHOP

Risks workshop(s) will be held to deliberate on the risks facing the project. The participants will
consist of the consultants (geologist, hydrologist, dam engineers power system), economists, EIA
consultant appointed by the client and the client’s representatives and other representatives from
relevant stakeholders.

The workshop will be carried out using the following process:

 Introduction of workshop members and role in the project

 Agreement of likelihood criteria for event occurrences and consequences including

direct financial, business, environmental, social impact

 Definition of the project area and components

 Identify the hazard that could affect each area or component

 Define the risks that could result from the hazard

 Using the likelihood and consequence criteria determine the risk using a risk matrix. A typical
example of a risk matrix is shown below.

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Risk Matrix
Likelihood
Consequence
1 2 3 4 5
A S1 S2 H3 H4 H5 H = HIGH
B M1 S1 S2 H3 H4 S = SIGNIFICANT
C A M1 S1 H2 H3 M = MODERATE
D A A M1 S1 H2 A = ACCEPTABLE
E A A A M1 S1

 Where the risks are unacceptable, determine the mitigating action that can be taken to
reduce the risk. The preferred method of reducing risk is to eliminate it but in all
cases, the residual risk is determined after the mitigating action is completed. Each item is
given an identification number and someone is made responsible for ensuring the mitigating
action is completed.

 The risk analysis remains a living document and can be used through the entire project to
ensure that the project risks are controlled within an acceptable level.

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