Shell Exploration & Production

Risk Management in Projects

Awareness Training

EPT
Venue Month 200x
Trainers /Instructors
EPT-PED-Development
 Shell Exploration & Production

Safety

Fire Alarm is ? Fire alarm testing scheduled

for ?
Follow signs for nearest escape? Assembly point
is ?
We are all responsible for safety.
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Training Objectives

Training (awareness level) in Risk Management

by:
Introducing Shell Project Risk Management System
(RMS)
Focusing on the Business context and why Risk
Management
Discuss Risk Identification, Assessment and
Response Action Planning
Providing you with Tips and Tricks on how to keep
RMS Alive!
Implementation
Monitoring
 Shell Exploration & Production

Training Session Ground Rules

Challenge the obvious - there are no dumb questions

Use simple language
One person speaking, avoid side discussions
Act as colleagues (no rank in room)
Delegate ongoing work in the office
Return from breaks on time
Core hours: 08:30 12:00
Turn cell phones off!!
Learn about the process - constructively challenge if its
not working for you
Dont complane abut facilitators speling
 Shell Exploration & Production

Introductions

Your Trainers /Instructors:

Name of Trainers

Within your group share:

Name
Current job
Interest in this training
You can wake me up in the middle of the night for a .
 Shell Exploration & Production

Agenda

08:30 Introductions Risk Management Overview

08:45 Risk Management Overview
09:15 Risk Identification
09:45 Break
10:00 Risk Assessment
10:30 Response Planning
11:00 Break
11:10 Implement Responses /Keep your Risk Management System
Alive
11:45 Recap and Close Out
12:00 Close
 Shell Exploration & Production

Value Improvement Practices

Identify Assess Select Define Execute

DG1 DG2 DG3 DG4

VAR 1 VAR 2 VAR 3 VAR 4 VAR 5

Smart
screening Smart
Portfolio Review framing

Concept
Concept Concept
Selection
Technical Limit Identification Selection
Planning
Value Creation
Review (TLVC) Opportunity Opportunity
Re-Framing Re-Framing
VE
Opportunity
Framing Risk mgt
Project
Risk mgt Project Healthcheck
Risk mgt Project Healthcheck
Healthcheck

New SFR-Categories endorsed by Reserves Committee

 Shell Exploration & Production

Risk Management System (RMS)

The management of risks requires that:

1. Risks are identified and prioritised
2. Responses are planned and implemented
3. There is an on-going process of monitoring, appraisal and re-
assessment, leading to improvement

Supported by:
. Communication and understanding of the risks at the
appropriate levels in the organization, and
. Enabling tools (to aid with managing the RMS)

Risk Management System (RMS)

=
Process + Organizational Framework +
 Shell Exploration & Production

Structure of a Risk Management System

Identify
Assess
Process Plan response
Implement
response
Monitor
/appraise
Improve
Close-Out
Risk
Management
System

Organization
Tools
framework
Roles &
Risk information
Responsibilities
Action information
Risk Assessment Risk Assessment / prioritization
Reporting
matrix
 Shell Exploration & Production

Risk Management Process

Plan/Approv Implement Monitor,

Identify Assess e Responses Responses
Appraise,
Re-Assess
Close Risk
depending on
re-assessment
Improve

The process loop repeats itself

for each identified risk, during all
phases of the Opportunity
Realisation Process
 Shell Exploration & Production

Organization

In order to manage your risks, you need to decide

Who should know what
What is your risk acceptance, approvals and resourcing
process
How to prioritize risks against other risks and other project
activities

You need an agreed Risk Assessment Matrix!

Risk Severity (Probability times Impact)
Risk Strategy (4Ts : Take, Treat, Terminate and Transfer)
Communication strategy
 Shell Exploration & Production

Organization: Who needs to know what

/ Consequence

Critical Region EVP/Delegate

5 10 15 20 25 1. Region EVP /
1. Region Delegate

DE
DE DRB DRB
4 8 Severe
12 16 20
Impact / Consequence

2.2. Group
Group
Groupof of Project
projects Project
3Material
6 9 12 15 of
Projects
projec
Business
Business
Opportunity
Line of
Line of
Opportunity Sight
Manager (BOM) Sight
2 4 6 8 10 ts
Impact

Small Manager
3. Project

1 2 3 4 5
3. Project Project Operation
Project Project
Manager Operatio
Manager
Manage n
r Manager
Probability
Probability
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Tool

Risk
Information
record

Action Risk
information Reporting Data
Register Archiving
record
/Audit Trail

Risk
Assessment
/prioritization
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Risk Management Process: Identify

Plan/Approv Implement Monitor,

Identify Assess e Responses Responses
Appraise,
Re-Assess
Close Risk
depending on
re-assessment
Improve

Normal work process

Use workshop
Cross discipline team
 Shell Exploration & Production

Risk Identification Exercise A (5 minutes)

Individually identify (write down) 1 risk from your project

As if you were adding them to your project risk register
5 minutes
We will use these later in the morning
 Shell Exploration & Production

Some definitions

Risk
Possible future event that can affect project objectives either
negatively or positively

Issue
Known problem that will affect objectives if not managed.
100% probability of occurrence! Needs a decision to be
made. Not a risk.

Uncertainty
An unknown due to inherent lack of knowledge or ambiguity.
Characterised by a range of uncertainty, but 100%
probability of occurrence. Not a risk.
 Shell Exploration & Production

Risks, Issues and Uncertainties

Issue 1 Risk 1
Issue 2 Risk 2
Risk Issue
Issue 3 Risk 3
Issue 4 Risk 4
Manage Risk Manage issue

Build Realizations,
Uncertain Assign range of
Test range on decisions
ty: values

Determine Severity,
Risk: probability of occurrence,
Prevent or Recover
consequence
 Shell Exploration & Production

Structured risk information

Structured 3 Part Risk Statement
helps to clearly distinguish between:
Cause, Event and Consequence,
e.g.
As a result of <definite cause>, <uncertain event> may
occur, which would lead to <consequences for the
project objective(s)>
Cause Consequence

Range of outcomes
Upside
Risk

Uncertain
Event

Prevention Recovery Downside

Actions Actions

Risk Responses
 Shell Exploration & Production

Examples of structured risk descriptions

Insufficient information about resources in the portfolio,

could cause potential oil and gas opportunities within the
vicinity of the CPF to be left out resulting in lost
opportunity to improve project NPV

As a result of the contracted rig being released late from

previous operations, potential clash in between marine
installation and rig schedule may occur, which will lead to
delays in project schedule
 Shell Exploration & Production

Risk Identification Exercise B (10 minutes)

Individually revisit your risk: apply previous points
Are they really risks.or issues / uncertainties
Can you restate the issue / uncertainty in to a risk using the
Structured 3 Part Risk Statement
Are the risks pitched at the right level

Discuss with your Syndicate & pick 2 well defined risks

Prepare to Report out 2 good risks per Syndicate

Cause Event Consequence

We will use these later in the morning

 Shell Exploration & Production

Good risk identification

Quality risk register is critical to effective risk

management

1. Keep issues/opportunities & uncertainties

separate
2. Clarity and transparency of risk description
3. Level of risks recorded
 Shell Exploration & Production

Risk Identification Tips and Tricks

In the course of their normal day-to-day work:

Enter into the risk register ASAP, so they are not forgotten.
The more potential risks identified/proposed, the better.
Filtering, assessing and prioritising come later

Workshops: excellent tool when

a project does not have a risk register yet,
wants to kick of a risk management system, or
to identify risks in a specific area of the project with a cross
discipline (sub) team.
Means of confirming that the mitigation/response is
appropriate and supported (especially cross discipline cross
project interface)
 Shell Exploration & Production

Risk Identification Workshop Methods

1. Follow the scope (value chain / project plan)

Use a poster describing the full project value chain / project plan
Discuss Each Step of the value chain / project plan
Use each of the TECOP (sub) categories to trigger ideas /
brainstorm
2. Use prompt list in Risk & Policy Guidelines
3. Use previous workshop outputs
4. Use existing risk registers
5. External Decisions
What decisions will be taken outside of the project that impact
the project objectives?
What are the current assumptions?
What are the other options?
Shell Exploration & Production

Break!!
 Shell Exploration & Production

Risk Management Process: Assess

Plan/Approv Implement Monitor,

Identify Assess e Responses Responses
Appraise,
Re-Assess
Close Risk
depending on
re-assessment
Improve

Impact / Consequence
Who needs to know what (line of
sight)
One RAM for Project Risks
Probability x Impact
Probability
 Shell Exploration & Production

Who needs to know what

/ Consequence

Critical Region EVP/Delegate

5 10 15 20 25 1. Region EVP /
1. Region Delegate

DE
DE DRB DRB
4 8 Severe
12 16 20
Impact / Consequence

2.2. Group
Group
Groupof of Project
projects Project
3Material
6 9 12 15 of
Projects
projec
Business
Business
Opportunity
Line of
Line of
Opportunity Sight
Manager (BOM) Sight
2 4 6 8 10 ts
Impact

Small Manager
3. Project

1 2 3 4 5
3. Project Project Operation
Project Project
Manager Operatio
Manager
Manage n
r Manager
Probability
Probability
 Shell Exploration & Production

* As a company we have lower tolerance for (the probability) of HSSE risks. Therefore, project risks with an HSSE impact should be principally

managed through the hazard management processes and tools outlined in the yellow guide, where HSSE risks are prioritised at a lower

probability threshold (see Table 3.1.3 for the appropriate matrix for assessing HSSE risks).
 Shell Exploration & Production

Calibration: Probability

Score: 1 2 3 4 5
Assessment Very Low Low Medium High Very High
% 0-5% 6-20% 21-50% 51-80% >80%
Probability
Non-HSE Extremely Low but not Fairly likely More likely Almost
Definition unlikely / virtually impossible to occur to occur certainly will
impossible than not occur

Project Occurs in almost Occurs in Occurs in Occurs in Expected to

Definitions no projects some projects most occur in
projects projects every
project
 Shell Exploration & Production

Calibration: Impact / Consequence

Score: 1 2 3 4 5
Assessment Very Low Low Medium High Very High
Cost/Benefit: < 10 million < 25 million < 50 million > 50 million
(Present Value)
< 5 million USD
USD USD USD USD 1
Schedule < 0.5 month < 1 month < 3 month < 6 month > 6 month 2

Production
<1.5 kbbl/d
<0.24 106 sm3/d
<3.0 kbbl/d
<0.5 106 sm3/d
< 7.5 kbbl/d
<1.2 106 sm3/d
<15 kbbl/d
<2.4 106 sm3/d
>15 kbpd
>2.4 10 sm /d
6 3
3
Ultimate <1 million bbl <2 million bbl <5 million bbl <10 million bbl >10 million bbl
Recovery <0.15 109 sm3 <0.3 109 sm3 <0.8 109 sm3 <1.6 109 sm3 >1.6 109 sm3 4

1.Basis: Manual Of Authority monetary level for RTD

2.Basis: PV7% of X months 30 kbpd delay for 7 yrs at 25
$/bbl
3.Basis: PV7% of X kbpd 1 yr production delay for 7 yrs at
25 $/bbl
 Shell Exploration & Production

Calibration: Impact / Consequence

Score: 1 2 3 4 5
Assessme Very Low Low Medium High Very High
nt
Significant legal
Reasonable Gap in exposure Major legal
Confident in
knowledge of knowledge present with exposure with
knowledge of
Legal law, no
law, intention to and/or controls potential to potential to result
be legally over minor result in material in major impact
dispute likely
correct aspects of law impact on the on the company
company
Minor credit, Debt terms have Debt terms
Financing terms
fund Minor credit, minor impact on impact Group
not acceptable.
availability fund availability Group targets. targets. Credit
Financing and/or debt and/or debt Credit standing standing parties
Credit standing of
parties involved
terms issues terms issues.. parties involved involved require
not acceptable
(normal work) questionable guarantees
Sizeable impact
Sizeable impact on national
Regional or
on local level, or level, or Limited
Reputation Slight impact Limited impact
Limited impact impact on
International
Impact
on national level International or
Regional level
Differences or Differences or
alignment in mid alignment in
Minor level high level Significant
Breakdown or
Relationsh differences or relationships relationships problems or
convergence in
alignments of convergence in
Breakdown or Breakdown or high level
 Shell Exploration & Production

Risk Assessment Exercise C (10 min)

Split syndicate in 3 groups

Each group: assess 1 risk
Using techniques discussed
Record assessment assumptions
Responses in place / naturally available
Transparency
Risk with a range of outcomes
Assess independently
Probability of event occurring Avoid bias
Impact on project objectives

Discuss results within your Syndicate

Prepare 1 Risk for report-out
 Shell Exploration & Production

Risk Management Process: Plan response

Plan/Appro Monitor,
Implement
Identify Assess ve
Responses
Appraise,
Responses Re-Assess
Close Risk
depending on
re-assessment
Improve

What is your Risk Strategy?

(Four Ts : Take, Treat, Transfer and Terminate)

Plan your response

(SMART: -Specific, Measurable, Achievable, Realistic,
Timely)
 Shell Exploration & Production

Risk Response Strategies (4 Ts)

Current risk severity is accepted as is (no further

Take
action)

Take action to reduce the severity. Reduce

Treat consequence and/or probability. Put more barriers and
contingencies in place
Current severity is not acceptable, and it is
commercially more attractive to transfer/share the
Transfer
risk-taking to/with others (insure/hedge/contract-out
risk)
Terminat
Risk critical to success. Must be eliminated via scope
e (Avoid)
change.
 Shell Exploration & Production

The Bow-Tie diagram

Cause Consequence

Range of outcomes
Upside

Risk

Uncertain
Event

Prevention Recovery Downside

Actions Actions

Risk Responses
 Shell Exploration & Production

S.M.A.R.T. responses (actions) ..

Risk responses must be:

Specific
Measurable
Aligned
Realistic
Timely

Quality check:
Each action when completed, must lower Probability or
Impact or the Risk concerned by at least one notch.
 Shell Exploration & Production

Assessment Residual Risk

Once you have decided what your response strategy will

be you will need to re-assess the risks for residual
probability & consequence.

Initial Assessment Risk responses Residual

+ Assessment
Impact / Consequence

Impact / Consequence
5 10 15 20 25 Specific 5 10 15 20 25
Measurable
4 8 12 16 20 Achievable
4 8 12 16 20
3 6 9 12 15 Realistic 3 6 9 12 15
Timely
2 4 6 8 10 2 4 6 8 10
1 2 3 4 5 1 2 3 4 5
Probability Probability
 Shell Exploration & Production

Risk Assessment Exercise D

Take the Risk you have now Identified and Assessed

Write down your Response Plan
RememberRisk responses must be:
Specific
Measurable
Aligned
Realistic
Timely
Prepare for report-out
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Break!!
 Shell Exploration & Production

Risk Management Process: Improvement

Plan/Approv Implement Monitor,

Identify Assess e Responses Responses
Appraise,
Re-Assess
Close Risk
depending on
re-assessment
Improve

Keep Your Risk Management

System Alive !
Embedding Risk Management in your
Project
Risk Register
Risk Management Culture
Tracking and Reporting
 Shell Exploration & Production

Embedding Risk Management in Projects

Develop and publish Project Risk Management Plan
Appoint qualified Risk Coordinator with clear mandate
Train the project team members
Hold two-day blended risk identification & training workshop, or
Plan 1-on-1 trainings between risk coordinator and owners
Hold risk workshops session at specific milestones
Start of Assess (after Concept Identification)
Start & End of Select (after Select Planning; before Selection)
Middle of Define (after BfD, before FEED)
Know where to find Support
Have regular risk Meetings
Develop Risk Culture in your project
Capture data in Risk Register
 Shell Exploration & Production

Risk Management Plan

Elements of a Risk Management Plan

Define Risk Management Process
Risk Assessment Methodology and Linkage with Line of
Sight
Budgets and Tools
Milestones/dates
Management/Decision Executive Sign off
 Shell Exploration & Production

Elements of a Good Risk Register

Reporting
Risk assessment matrix
Top risks and response plans
Risk management health
Number of due and overdue risks and actions per owner
Number of risks and actions added, closed, increased, reduced per month
Adequate support
Documentation for maintenance, support and usage
Back-up and recovery facilities

EasyRisk is the Tool of

Choice
 Shell Exploration & Production

Risk Management Tool

 Shell Exploration & Production

EasyRisk - information page

 Shell Exploration & Production

EasyRisk - RAM
 Shell Exploration & Production

EasyRisk, Easy to Start Using.

Combines advanced database mining features with the simplicity of

a web-based user interface and provides the following benefits
over Excel:
Simultaneous access by multiple users
Automatic audit trail creation and reporting
Access control
Robust
Runs on dedicated Shell servers in Amsterdam, is web-based, so no
software installation is required.
Shell has a global unlimited user licence for EasyRisk and the tool is
available free of charge to all DS, GS, GP and EP projects that are
a member of the Global Service Fee.
Please note that EasyRisk is not provided as a stand-alone tool, but
in support of the renewed Global Process 20, Risk Management for
Projects.
 Shell Exploration & Production

EasyRisk, Improvements in the Pipeline

Upgrade to v3.3 - Getting more out of your risk register

Improve Reporting
Improve upload from .xls
Improve Export Capabilities:
Connecting it to Quantitative Risk Analysis
Plan
We know what we want and is possible (specs with DNV)
We propose our view of V3.3 and discuss with Power Users Q4
2007
We will freeze v3.3 and Migrate v3.2 to v3.3 Q1 2008
All in V3.3 Q2 2008
 Shell Exploration & Production

Keeping your Risk Management System alive

Create Risk Awareness Culture in your Project

Appoint a risk coordinator
Review top three risk in monthly project review
meetings
Visibly recognize and celebrate success
Track, record and report progress
Hold monthly risk review meetings /engagements with the DE /
DRB
Discuss only key risks (3-5)
Hold weekly risk review meetings with the project LT
Discuss only key risks (3-5)
 Shell Exploration & Production

Where to find support

Your Project Risk Coordinator
Livelink:
http://siepteam-livelink.shell.com/teamsiep/livelink.exe?func=ll&objId=5854320&ob
jAction=browse&sort=name
Shell Global Network:
http://sww.global-networks.shell.com/forums/networks/dispatch.cgi/f.riskm
anagem
Region Risk Consultant / Focal Point
EPA Wim van Beilen
EPE Emma Ross, Rona Gunn
EPG Sylvester Ugiomoh, Michael Okonkwo
EPM Ali Lawati
EPR (SEIC) Maryia Galiulina, Aleksey Ferentsev
EPW Susan Smolinski
Global Consultants
E&P, EPT- Elisha Ezekiel-Hart, Alex Bary, Susan
P/S/T Smolinski
GS /GP Tim Olsen
 Shell Exploration & Production

Field Development Portal

 Shell Exploration & Production

How to Recognize Good Risk Management

The team can demonstrate how the assessments of the risks

have changed over time (no phantom moves).
Other secondary indicators that risks are actively managed
are:
The RAM is on the wall
Team members can name top 3 risks
Risk is item on progress meetings
The risk register is regularly being consulted and updated
Risk information is used to prioritize project resources and
activities
Risk register is used to support quantitative risk analyses
project risk level is reflected in the schedule and cost
contingencies (P90, P50, P10)
The team has a (dedicated) risk coordinator
 Shell Exploration & Production

Recap Training Objectives

Training (awareness level) in Risk Management by:

Introducing Shell Project Risk Management System (RMS)
Focusing on the Business context and why Risk Management
Discuss Risk Identification, Assessment and Response Action
Planning
Providing you with Tips and Tricks on how to keep RMS Alive!
Implementation
Monitoring
Improving
 Shell Exploration & Production

Structured Feedback

Each person.spend 1-2 minutes thinking:

What did you learn?
What went well?
What did you enjoy?
What could be improved?

Be ready to share at least 1 point with the group

 Shell Exploration & Production

Risks vs Issues Example

Risk Example:
It is the start of the day and it is partly cloudy.
You check the forecast and see there is a 50% chance of
thunderstorms today
The risk event is a thunderstorm, you have an estimate of the
probability and the consequence is you get wet
Being prudent you decide to take an umbrella with you, in case the
risk occurs
Your personal Project plan has an identified contingency plan the
umbrella

Issue Example:
Now lets assume you look out of the window and see it is raining
heavily
The fact that it is raining is no longer a risk, but a certainty
It is an Issue and youd better actively manage your response.
You can try to deny the Issue but you will only get wet
Shell Exploration & Production

Back-up
 Shell Exploration & Production

Organizational Roles
Managemen - Sets project objectives
t (Decision - Approves Risk Management plan and assigns resources
Executive) - Uses risk information in making decision

Project - Champions the risk management system

- Uses risk information for evaluating options and preparing
Manager decisions

- Manages the Risk Management System (RMS)

Risk - Maintains the quality of the risk register, approves risk response
Coordinator actions
-Trains and supports risks owners

- Manages Assigned risk(s) in line with the RMS

- Proposes /approves Suitable Risk Response and assigns action
Risk Owner owners
- Track progress, reviews risks, improves responses, closes risk
- Reports health of risk management system to management

Action - Execute actions as agreed with risk Owners

Owner - Record action status in risk register

- Identifies risks and proposes them to the risk register

Team
- Feeds back effectiveness of the risk Reponses to the risk owner
Member - Is aware of top projects risks and risk impacting own work
 Shell Exploration & Production
Risk Management Process (With tasks)
 Shell Exploration & Production

Risk Validation Process

1. Is the proposed risk really a risk?
No, it is an uncertainty Convert into risk, or close and add to
realisation table
No, it is an issue Convert into risk, or close and add to issues list
No, good idea articulate event managed, or close and add to
issues/ opportunity lists
Yes, next question
2. Is the risk pitched at the right level
No, irrelevant /managed through existing project controls close,
log reason
No, it is too detailed seek the larger risk and re-articulate
No, it is too high level /conceptual break down into smaller
manageable risks
Yes, next question
3. Is the risk already recorded
Yes, close, log reason
Yes, similar ones are consolidate /restate similar risks into one or
more risks
No, update risk description, review dates and assign risk owner
 Shell Exploration & Production

Project Delivery Organisation

here are 3 levels on which risks can be managed in a region
1. Region EVP / Delegates may differ per region
Delegate Examples: Head of major projects,
Head of opportunity development

DE DRB

2. Group of
projects
Business
Opportunity
Manager (BOM)

3. Project Project Operation

Manager Manager
 Shell Exploration & Production

Response & Severity

Color Response Strategy Authority

Critical Proactively Manage RTD
Severe Active Attention and Preparation DRB
Material Monitor Actively PM
Small Periodic Assessment PM
 Shell Exploration & Production

Risk Management in projects

Enables quality decisions

Protects the value of past

decisions
 Shell Exploration & Production

Why Risk Management?

Projects
Must identify significant risks to achieving project
objectives

Set boundaries for accepting risk, and

Apply fit for purpose response

 Shell Exploration & Production

Good Risk Management Helps Projects

Not through listing obvious and common activities, but

By providing a structured way of foreseeing the unexpected
and being prepared for it, to
Keep projects from entering fire fighting mode and
Promote focus on things not shouting for attention, but
equally important to success

Note:
When done well, it will not be noticed and the project can
expect smooth sailing.
When done badly, it will burden the project and only be
noticed when it is too late.