Risk Management is the Key to Success

There is a great need for risk management as energy projects grow in complexity.
Published: Wed 18 Jun 2014

Risk runs through a number of entities and for this reason, risk mitigation should work across a variety of disciplines and should be looked at in a holistic view. This is according to James Arnott, MD, Accenture Capital Project Services, who spoke to Engerati at the African Utility Week.

Capital project challenges

Accenture’s research reveals utilities’ three key challenges when executing capital projects:

1. The ability to understand or work within a regulatory environment that is sometimes misunderstood or emerging from a capability perspective

2.The ability to find talent-both to execute the build and ability to run the build once the asset is created

3.Spending more time in terms of doing better front-end loading associated with how to actually execute the project

To understand and combat the various risks in a project, a risk management strategy should be established from the outset.

The biggest challenge around the risk discipline is the associated maturity or optimism that people have, explains Arnott, “The project becomes important to the organization and sometimes the clarity or the ability to accurately interrogate a risk is not very effective. Bankability gets undermined as a consequence of organizational ownership for instance.”

Collaboration around standards and inter-country energy trade is important if lessons are to be learnt, explains Arnott. Projects also call for a holistic perspective-an outsourcing service must be able to integrate all the phases of the program or project.

Economic development

When assessing a project in Africa especially, it is essential that the economic development of a country is not undermined. The capital build should develop new economies and a new supply chain which will benefit the citizens of the country, explains Hayley Walters, MD Operations and Innovation at Accenture.

“While this is the responsibility of the government, it is mandatory for private enterprise to support the government’s agenda. They have attracted the finance, provided the governance, as well as the infrastructure. Private enterprises need to develop out local industry sectors.”

The benefit of bringing in an outsourced provider is that much of the work done in Africa is done by a consortium, explains Walters. A number of capabilities can be drawn upon since there are a multitude of parties involved in projects. She says, “Outsourcing can help with various aspects-not only risk. These include integrated planning, supply development programs and localization programs. There are multiple avenues where a company like Accenture can assist.”

Walters points out that by bringing in a global and experienced outsourced provider such as Accenture, project all parties will gain a deeper understanding of risks and lessons learned by others. “Many of these risks around the world are relative and can be applied to Africa. This certainly helps when the project is being planned and risks can be mitigated from the outset.”

Collaboration around standards and inter-country energy trade is important if lessons are to be learnt, adds Arnott. Projects also call for a holistic perspective-an outsourcing service must be able to integrate all the phases of the program or project.

Says Arnott, “Africa has a lot to offer and there is a lot to get right. Our success will be determined in terms of how well we are able to take that capability and harness it.”