Fluor - Risk Management

7/17/2019 Fluor - Risk Management

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PATRICK PURSERVice President Fluor Corporation

© 2015 Fluor Corporation.ML20150128-001.pptx



Fluor Corporate Overview

ase u y

Why talk about Risk Management?

Benefits of a Risk Management Program

Fluor’s Approach to Risk Management

Risk Matrix Sample

Ke Take-Awa s



One of the world’s leading publiclytraded engineering, procurement,

, ,

project management companies #109 on the FORTUNE® 500 list

Over 1,000 projects annually,

serving more than 600 clients in81 different countries

40,000+ employees executingprojects globally

Fluor Corporate Headquarters

ces n coun r es oncontinents

103-year company legacy

Dallas, Texas

3



Americas Aliso Viejo, California

Europe/Africa/Middle East Aberdeen, Scotland

Asia/Australia Atyrau, Kazakhstan

nc orage, as a Arlington, Virginia

Baton Rouge, LouisianaBuenos Aires, ArgentinaCalgary, Alberta, CanadaCaracas, Venezuela

u a , . . . Ahmadi, Kuwait

Al Khobar, Saudi Arabia Amsterdam, The Netherlands Antwerp, Belgium Asturias, Spain

- -

ang o , a anBeijing, China

Brisbane, AustraliaCebu, PhilippinesJakarta, IndonesiaKuala Lumpur, Malaysia

,Clarksville, TennesseeDallas, TexasGreenville, South CarolinaHouston, Texas

Idaho Falls, IdahoLima, Peru

,Birmingham, EnglandDoha, Qatar Dublin, IrelandDurban, South Africa

Farnborough, EnglandGliwice, Poland

,Melbourne, AustraliaNew Delhi, IndiaPerth, AustraliaSeoul, South Korea

Shanghai, ChinaSingapore

Long Beach, CaliforniaMexico City, MexicoPort of Spain, TrinidadRichland, WashingtonSan Francisco, CaliforniaSan Juan, Puerto Rico

Johannesburg, South AfricaLondon, EnglandMadrid, SpainMaputo, MozambiqueMoscow, RussiaRotterdam, The Netherlands

Tokyo, Japan

,

Santiago, ChileVancouver, B.C., CanadaWashington, D.C.

,

Tarragona, Spain

Years of Experience in Region

North South Middle America America East

103 78 67 55 68 64 65

4



EngineeringEngineering ProcurementProcurement ConstructionConstruction Start-upStart-up Operations &Maintenance

Operations &Maintenance

DesignDesign FabricationFabrication

ConstructionManagement

ContractorManagement

ConceptualDesign

Estimating

Feasibility

Cost Control Detailed

Engineering

Fabrication

Commissioning Engineering

Support

Initial Production

Asset PerformanceImprovement

Contract Staffing

Equipment, Tools,

Contract Staffing Contracts

Management

Equipment,

ContractorManagement

Material Control

Modular Craft Staffing &

Training

Equipment &Tools Supply

Field Mobilization

Studies

Permitting

Process

Simulation

Front-endEngineering

Modular

Construction Planning &

Plant Readiness

Precommissioning

Systems Checkout

Turnover

and Fleet Services

FacilityManagement

OperationalReadiness

Tools, and FleetServices

Expediting

Fabrication

Construction

Purchasing

Quality Control

Safety Programs

Material Control

ModularConstruction

Project & ProgramManagement

Routing

Scope Definition

Siting

Technolo /

Scheduling

ProcessSimulation

Safety Planning

Systems

Validation Plant Engineering

Plant Operations &Maintenance

Small CapitalProjects

Low CostCountrySourcing

MaterialsManagement

Self-PerformFabrication

Sourcing

Quality Control

Rigging

Safety Programs

Scaffolding

LicenseEvaluation

Integration

Turnarounds,Outages& Shutdowns

Purchasing

RequirementsPlanning

Sourcing

5

Self-PerformConstruction

Supplier Quality

Warehousing



The Energy & Chemicals business l ineserves the global oil and gas

, ,petrochemicals industries.

Ranks No. 1 on ENR (EngineeringNews-Record) magazine’s list of TopDesign Firms in the Petroleum sector

Full range of services including design,engineering, fabrication, procurement,construction, and project management

Consulting services for feasibility studiesand project financing

Global office platform optimizesexecution of all sized projects includingmega-projects in remote locations with

6



7



♦ Client: Reliance Industries Limited

♦ Project: Refinery & Petrochemical ProjectExpansion

♦Project Location: Jamnagar, India

♦ Scope of Work: PMC + Pet CokeGasification EP

♦ ro ec escr p on:

– PMC for addition of Petrochemical Plantsat existing Jamnagar refinery, including

world’s largest Coal / Petcoke, ,

Ethylene Cracker and multipledownstream units

– Engineering & Procurement Services for

♦ Completion Date: 2018

♦ Implemented Reliance’s Risk ManagementProgram

8



9



► The Titanic



Titanic - 14th April 1912

◦ Sea dotted with hundreds of iceflows…no extra lookouts osted

◦ Smith received up to 6 warnings ofice field from ships in area

’ nest …early warning nearlyimpossible

◦ Very hazy conditions…lookoutsconfused in what they saw ahead ofthem

◦ Titanic sped toward ice field at 22.5

Ref: ‘The Riddle of the Titanic’, Gardiner et. al. Orion, 1998

conditions)



Sea dotted with hundreds of ice flows – This identifiedrisk would have had mitigation strategies such as extralook outs, better communication with other ships in thearea, etc…

No binoculars available in crow’s nest – Further to theabove risk, the mitigation strategy would have also

Titanic sped toward ice field at 22.5 knots (10 knotsrecommended for conditions) – Mitigation strategy would

have ensured proper speed for bad conditions as thebaseline plan for the voyage.

Lifeboat count reduced from 64 to 22 to enable moreexpansive promenades – Mitigation strategy would have

.

Officers not trained in li feboat use and were unsure oflifeboat capacity – Mitigation strategy would have ensuredproper training for officers

Risk Mitigation is about being proactive in addressing theserisks before they occur



In a 2014 survey of companies withsignificant capital investments (greater than

, a pro ec s over run cos

and/or schedule targets Projects are becoming more complex

Not identifying risks up front can lead toundesirable outcomes

- hoc judgment

Risk management is a proactive approach in

success



Better execution resulting in increasedawareness and self confidence

Vehicle to focus attention, resulting in better

resource allocation

Visible indicator of the roblems, challen esand issues

Documentation of management agreement

Provides basis for communicating key projectissues

na es essons earne o e cap ure anshared



Improved decision making through clarifyingresponsibilities, authorities and ranges ofaccep a e ou comes a a eve s

Disciplined framework for systematicallyguiding the process of managing risk

Thought stimulator to proactively identify andmanage risks that may not otherwise beconsidered

Reduced large losses as well as thefrequency of small losses



Improved allocation of resources

More fact-based decisions through the entireproject cycle

Improved confidence of various stakeholders,includin anal sts and ratin a encies

Corporations make money by taking risk andlose money by not effectively managing risk



Risk Management becomes an integralcomponent of the “Baseline Documents”

Provides Framework for “Managing the Risks”

Identifies potential risks

Document strate ies and actions re uired formitigation

Quantifies Event Contingency

Risk review / communication reducessurprises

esu s n ncrease pro ec successes or astakeholders



Integrated

Positive

Fragmented

Negative Proactive

Continuous

-

Reactive

Ad hoc

-

Broadly-focused

Process-driven

Narrowly-focused

Functionally-driven



ss gn…rea ng ma er a

Brainstorm…risks and opportunities

Consolidate…ideas Develop…risk / opportunities details

Evaluate…risk / opportunities importance

… enhancement strategies



Following slides address the identificationand riorit ization of otential risks



► Equipment type

►

► Plant layouts

► Project Site Location

►

Electrical facilities► Routing of major underground systems

► Controls systems and configurations

► Hazops reviews



Select most appropriate contractor toperform the work

rov e me y an cos e ec ve

decisions and execution Freeze design basis as early as possible

Ensure high level of alignment, motivationand teamwork with Engineering

Contractor and Owner Ensure periodic independent assessment

of execution

Estimate)



Tight project schedule

Desi n variations

Incomplete or inaccurateestimate

Excessive approval procedures(client & or government)

Lack of coordination between

project participants (Engineering Construction)

Inadequate program scheduling

Unsuitable construction planning

Unavailability of sufficientprofessionals and managers

Unavailability of sufficient skilled

Low management competency ofsubcontractors

labor

Accident occurrence (safety)

Occurrence of disputes

Price inflation of constructiona or an ma er a s



o ow ng es ress ow o

Prioritize Risks



Secondary Risks Key Risks

High

• ,significant adverse impact onbusiness objectives

• threaten the achievement ofbusiness objectives

e n c e

s

• Significant monitoring not

necessary unless changes in

Low Priority Risks Secondary Risks

• Lesser significance, but more

likely to occur o n

s e q u

classification

• Periodically reassess• Consider cost/benefit trade-off

• Reassess often to ensurechanging conditions (move to high

C

significance)Low

Low HighLikelihood



LIKELIHOOD OF OCCURANCE

Rating Likelihood Criteria

5 Almost Certain 91-100%, It is expected to occur in most ci rcumstances

4 Likely 76-90%, Will probably occur in most circumstances3 Possible 26-75%, Might occur at some time

- ,

1 Rare 0-10%, May occur only in exceptional circumstances

Rating Severity Financial Schedule

5 Critical >$1MM One Month

3 Serious $500k One Week

2 Moderate $250k Three Days

1 Minor $10k One Day



RiskNo.

Risk Severity Likelihood Priority Remarks Mitigation Strategy

1ro ec e

Location has PoorSoil Conditions

4 4 4May Require ExcessivePiling Increasing Cost

Perform GeoTech Survey

2Skilled Personnel

Risk4 3 4

Proper Leadership maynot be available to

mana e ro ect

Review personnelrequirements with HR andbusiness line mana ement

3 Arch itectural Risk 3 3 3Risk of unknown

conditions to the existingbuilding

Perform site survey tovalidate current conditions

Additional loads to Review existing designdrawin s4

Piperack "A"

4 3 4 existing piperacks couldcause damage Perform site survey to

validate current conditions

5Schedule Impacts

due to bad weather4 1 2

Abnormal weather coulddisrupt schedule

Geographic location hasmild weather year round

6Delay in Decisions

Risk 4 4 4

epresen a ves w

only be assigned on apart time basis

ose coor na on an

advance notice ofapprovals



Engage Risk Management Process early in theproject phase

Engage all necessary Functional disciplines in the

Risk Review process

Utilize Risk Mana ement rocess & tools tosupport organized and subsequent projectalignment

identification and mitigation

Instill discipline to maintain risk management

to close-out



QUESTIONS/COMMENTS

Fluor - Risk Management

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