Risk Management in project

1. , , , $ 1 4 2 3 Risk Management in project Prepared and presented by Mads Hembre, discipline advisor Risk Management

2. Content Our Values Risk Picture StatoilHydro Risk Management in StatoilHydro Tools Risk Management Risk and Quality Management Risk Management Process Risk module Input Use Output Why Risk Managment 2

3. We in StatoilHydro – Our Values Courageous Our values: • Be imaginative, ambitious and stimulate new ideas • Use foresight, and identify opportunities and challenges • Challenge accepted truths and enter unfamiliar territory • Make clear demands on each other and push for constructive change • Understand and manage risk • Courageous • Open • Hands-on • Caring - threats and opportunities !

4. Risk picture - StatoilHydro

5. Definitions 5 Risk: Any uncertainty that, if it occurs, would affect one or more objectives. Risk is the product of probability and consequence. Threat: Any uncertainty that, if it occurs, would affect one or more objectives negatively Opportunity: Any uncertainty that, if it occurs, would affect one or more objectives positively

6. Risk Management – CVP-Process 6

7. 7 Risk Management (ref.FR05) • Risk Management shall be used actively throughout the project development: • Prior to DG 1, management of risks shall be established and maintained as a continuous management process throughout the project development process. • Risk management shall be an integrated part of the management of a project, where all project units shall contribute actively in the process. • Requirements for Risk management shall be included in contracts and purchase orders.

8. Risk Management Risk Analysis $ $ Probability simulation based on: - UM Top 10 List - Economic planning assumptions • Cost estimate • Schedule estimate • Total value chain Risk Management 1. Identification 1 2. Assessment 4 2 3. Response Action 3 4. Response Control 8

9. Tools – Risk Management 9 Quality Management

10. Risk actions and quality control activities/PIMSWEB Risk Areas Contracts Subprojects Project Risk Control Risk Identification Risk Assessment Risk Action Quality System Audit Contract/discipline Examination Assignment Notify Prepare Execute Report Observations Follow up Close-out

11. 1. Identification • Identify risks during functional brainstorming sessions • Conduct analysis through total value chain for full project lifecycle • Encourage and facilitate cross-learning trough similar projects • Nominate RM coordinator to ensure QA and secure use of PIMS Web • 4. Response Control • Define and clearly communicate UM process so all projects are aligned with corporate requirements, regulations and integrate public expectations • Reporting system allows leadership to be aware of main uncertainties and enable control of work quality • Third party knowledge is leveraged to develop Statoil expertise • 2. Assessment • Risk are ranked over dimensions: probability of occurrence, potential consequences, manageability of outcome • Specify cash impact • Project core teams review sub-groups main risks and define Project Top 10 List • Raise Red flags when critical exposures identified • 3. Response Action • Define for each top 10 Risk mitigating actions & back-up plans • Track response action in by responsible person or by action deadline • RM coordinator reports progress to core team and ensure compliance with process • Functional experts control quality of RA during CAR’s 11 RM – Process Risk Management - Process

12. Risk areas Country / Politcal HSE, fraud and corruption Market / Contractual People / Organization   Project execution / Operation   Reserve base    Strategic / Financial   Technology / Technical

13. Consequences 15

14. Probability 16

15. Overview system Risk Actions Actions Actions Input SQL-server QM-module Output Reports Online update • Lists • Combined • Graphics • Statistic Reminder e-mail My PIMS • Excel • HTML • PDF

16. Online update Record by record (risks-actions) List (risks) Action list (actions)

17. Record by record

18. List

19. Action list

20. Identification

21. Assessments

22. Actions

23. Action - dialog box

24. Links/Attachments

25. Reports Lists – record by record Combined – Risk and action records together Graphics – graphical elements in report Statistic – frequency of use

26. Report examples (all types) Risk List

27. My Pims

28. Why Risk Management ?

29. CAPEX Risk analysis Estimate Technical allowance Frame agreement prices Experience Market growth Concept Identified elements managable Uncertainties execution Identified elements not manageable 31 Uncertainty Facts ”Scope of work” Phase

30. 32 Risk Analysis on the value chain • A value chain includes all the variables that affect the cash flow • Each Risk in the value chain is described with a probabilitydistribution and linked to the economical model • Dependencies between variables are taken into account • Risk in project economy is calculated through Monte-Carlosimulations Risk Analysis - RiskMS

31. IDENTIFIED UNC. ELEMENTS Analysis Output Report Risk Assessment Risk Analysis NPV Range and distribution Reservoir Risk Model development Dependencies Distributions Project scope Model based on SIAM Monte Carlo Simulation Assessment Drilling Risk P(10), P(E) and P(90) RISK R E G I S T E R CAPEX Risk Sensitivities VALUE CHAIN ANALYS I S OPEX Risk Expected NPV Higher Value Chain Focus Transportation Risk Market Risk 7,13 15,33 Tax/fiscal Risk 0 4,2 0 3,0 1,36 0,00 Other Risk 1,19 0,83 0 2,0 1,41 0,69 0,00 0,69 1,51 0,64 Downside 1,32 0,75 Upside 33 Risk Analysis – RiskMS Risk Analysis - RiskMS

32. Remember… “the essence of project management is risk management”