PATRICK PURSER

Vice President Fluor Corporation

Asia/Pacific E&C Operations Manager and Risk Officer
2015 Fluor Corporation.
ML20150128-001.pptx

Fluor Corporate Overview

C
Case
St
Study
d

Why talk about Risk Management?

Benefits of a Risk Management Program

Fluors Approach to Risk Management

Risk Matrix Sample

Keyy Take-Aways
y

2015 Fluor Corporation.

One of the worlds leading publicly

traded engineering, procurement,
construction maintenance,
construction,
maintenance and
project management companies

#109 on the FORTUNE 500 list

in 2014

Over 1,000 projects annually,

serving more than 600 clients in
81 different countries

40,000+ employees executing

projects globally

Offices in
Offi
i 33 countries
t i on 6
continents

103-year company legacy

Fluor Corporate Headquarters

Dallas, Texas

Americas

Europe/Africa/Middle East

Asia/Australia

Aliso Viejo, California

A h
Anchorage,
Al
Alaska
k
Arlington, Virginia
Baton Rouge, Louisiana
Buenos Aires, Argentina
Calgary, Alberta, Canada
Caracas, Venezuela
Charlotte, North Carolina
Clarksville, Tennessee
Dallas, Texas
Greenville, South Carolina
Houston, Texas
Idaho Falls, Idaho
Lima, Peru
Long Beach, California
Mexico City, Mexico
Port of Spain, Trinidad
Richland, Washington
San Francisco, California
San Juan, Puerto Rico
So Paulo,
Paulo Brazil
Santiago, Chile
Vancouver, B.C., Canada
Washington, D.C.

Aberdeen, Scotland
Ab Dhabi,
Abu
Dh bi U
U.A.E.
AE
Ahmadi, Kuwait
Al Khobar, Saudi Arabia
Amsterdam, The Netherlands
Antwerp, Belgium
Asturias, Spain
Bergen-op-Zoom,
Bergen
op Zoom, The Netherlands
Birmingham, England
Doha, Qatar
Dublin, Ireland
Durban, South Africa
Farnborough, England
Gliwice, Poland
Johannesburg, South Africa
London, England
Madrid, Spain
Maputo, Mozambique
Moscow, Russia
Rotterdam, The Netherlands
Secunda South Africa
Secunda,
Tarragona, Spain

Atyrau, Kazakhstan
B
Bangkok,
k k Thailand
Th il d
Beijing, China
Brisbane, Australia
Cebu, Philippines
Jakarta, Indonesia
Kuala Lumpur, Malaysia
Manila, Philippines
Melbourne, Australia
New Delhi, India
Perth, Australia
Seoul, South Korea
Shanghai, China
Singapore
Tokyo, Japan

Years of Experience in Region

North
America

South
America

Europe

Africa

Middle
East

Asia

Australia

103

78

67

55

68

64

65

Design

Conceptual
Design

Estimating

Feasibility
Studies

Engineering

Fabrication

Construction

Cost Control

Contract Staffing

Detailed
Engineering

Contracts
Management

Contractor
Management

Construction
Management

Material Control

Fabrication

Front-end
Engineering

Modular
Construction

Contractor
Management

Permitting

Modular
Construction

Process
Simulation

Project Financing

Routing

Scope Definition

Siting

Safety Planning

Technology/
ec o ogy/
License
Evaluation

Systems
Integration

Procurement

Planning &
Scheduling
Process
Simulation

Equipment,
Tools, and Fleet
Services

Expediting

Fabrication

Logistics

Low Cost
Country
Sourcing

Craft Staffing &

Training

Equipment &
Tools Supply

Purchasing

Quality Control

Safety Programs

Self-Perform
Fabrication

Sourcing

Commissioning

Engineering
Support

Asset Performance
Improvement

Contract Staffing

Initial Production

Plant Readiness

Equipment, Tools,
and Fleet Services
S

Precommissioning

Facility
Management

Systems Checkout

Turnover

Operational
Readiness

Validation

Plant Engineering

Plant Operations &

Maintenance

Small Capital
Projects

Turnarounds,
Outages
& Shutdowns

Field Mobilization

Material Control

Modular
Construction

Materials
Management
g

Project & Program

Management
g

Purchasing

Quality Control

Requirements
Planning

Rigging

Safety Programs

Sourcing

Scaffolding

Supplier Quality

Warehousing

Self-Perform
Construction

&
Maintenance

Operations

Start-up

The Energy & Chemicals business line

serves the global oil and gas
production/processing chemicals,
production/processing,
chemicals and
petrochemicals industries.

Ranks No. 1 on ENR (Engineering

News-Record) magazines list of Top
g Firms in the Petroleum sector
Design

Full range of services including design,

engineering, fabrication, procurement,
construction, and project management

Consulting
g services for feasibility
y studies
and project financing

Global office platform optimizes

execution of all sized projects including
mega-projects in remote locations with
challenging environments

 Client: Reliance Industries Limited

Project: Refinery & Petrochemical Project
Expansion
TIC: US$ 15 billion
Project Location: Jamnagar, India
Scope of Work: PMC + Pet Coke
Gasification EP
Project
P j t Description:
D
i ti
PMC for addition of Petrochemical Plants
at existing Jamnagar refinery, including
worlds largest Coal / Petcoke
Gasification Paraxylene plant,
Gasification,
plant a large
Ethylene Cracker and multiple
downstream units
Engineering & Procurement Services for
Coal / Petcoke Gasification Plant
Completion Date: 2018
Implemented Reliances Risk Management
Program

The Titanic

Titanic - 14th April 1912

Sea dotted with hundreds of ice
flowsno extra lookouts posted
Smith received up to 6 warnings of
ice field from ships in area
No binoculars available in crows
crow s
nest early warning nearly
impossible
Very hazy conditionslookouts
confused in what they saw ahead of
them
Ref: The Riddle of the Titanic, Gardiner et. al. Orion, 1998

Titanic sped toward ice field at 22.5

knots (10 knots recommended for
conditions)

Sea dotted with hundreds of ice flows This identified

risk would have had mitigation strategies such as extra
look outs, better communication with other ships
p in the
area, etc
No binoculars available in crows nest Further to the
above risk, the mitigation strategy would have also
included proper equipment
Titanic sped toward ice field at 22.5 knots (10 knots
recommended for conditions) Mitigation strategy would
have ensured proper speed for bad conditions as the
baseline plan for the voyage.
Lifeboat count reduced from 64 to 22 to enable more
expansive promenades Mitigation strategy would have
developed alternative safety measures for passengers.
passengers
Officers not trained in lifeboat use and were unsure of
lifeboat capacity Mitigation strategy would have ensured
proper training for officers
Risk Mitigation is about being proactive in addressing these
risks before they occur

In a 2014 survey of companies with

significant capital investments (greater than
$250MM) 70% h
$250MM),
had
d projects
j t over run costt
and/or schedule targets
Projects are becoming more complex
Not identifying risks up front can lead to
undesirable outcomes
Current approaches involve intuition or adad
hoc judgment
Risk management is a proactive approach in
identifying obstacles that will prohibit project
success

Better execution resulting in increased

awareness and self confidence
Vehicle to focus attention, resulting in better
resource allocation
Visible indicator of the p
problems,, challenges
g
and issues
Documentation of management agreement
with the plan of action
Provides basis for communicating key project
issues
E bl llessons llearned
Enables
d tto b
be captured
t d and
d
shared

Improved decision making through clarifying

responsibilities, authorities and ranges of
acceptable
t bl outcomes
t
att allll llevels
l
Disciplined framework for systematically
guiding the process of managing risk
Thought stimulator to proactively identify and
manage risks that may not otherwise be
considered
Reduced large losses as well as the
frequency of small losses

Improved allocation of resources

More fact-based decisions through the entire
project cycle
Improved confidence of various stakeholders,
including
g analysts
y
and rating
g agencies
g
Corporations make money by taking risk and
lose money by not effectively managing risk

Risk Management becomes an integral

component of the Baseline Documents
Provides Framework for Managing the Risks
Identifies potential risks
Document strategies
g
and actions required
q
for
mitigation
Quantifies Event Contingency
Proactive disciplined review
Risk review / communication reduces
surprises
R
Results
lt iin iincreased
d project
j t successes ffor allll
stakeholders

FROM
Fragmented
Negative
Reactive
Ad hoc
Historical
Historical-looking
looking
Narrowly-focused
Functionally-driven

To
Integrated
Positive
Proactive
Continuous
Forward
Forward-looking
looking
Broadly-focused
Process-driven

Assignreading
A i
di material
t i l
Brainstormrisks and opportunities
Consolidateideas
Developrisk / opportunities details
Evaluaterisk / opportunities importance
Formulate risk mitigation / opportunity
Formulaterisk
enhancement strategies

Following slides address the identification

and p
prioritization of potential
p
risks

Equipment type

Sizing and process

Plant layouts

Project Site Location

Electrical facilities

Routing of major underground systems

Controls systems and configurations

Hazops reviews

Select most appropriate contractor to

perform the work
P id titimely
Provide
l and
d costt effective
ff ti
decisions and execution
Freeze design basis as early as possible
Ensure high level of alignment, motivation
and teamwork with Engineering
Contractor and Owner
Ensure periodic independent assessment
of execution
Be Baseline Centric (Design to the
Estimate)

Tight project schedule

Design variations

Excessive approval procedures

(client & or government)

High performance expectations

Inadequate program scheduling

Incomplete or inaccurate
estimate

Lack of coordination between

project participants (Engineering
Construction)

Unavailability of sufficient
professionals and managers

Unsuitable construction planning

Low management competency of

subcontractors

Unavailability of sufficient skilled

labor

Accident occurrence (safety)

Scope changes

Inadequate site information

Occurrence of disputes

Price inflation of construction

l b and
labor
d materials
t i l

Following
F
ll i Slides
Slid Address
Add
How
H
to
t
Prioritize Risks

High

Secondary Risks

Co
onsequences

Key Risks

Lower likelihood
likelihood, but could have
significant adverse impact on
business objectives

Low
Low

Significant monitoring not

necessary unless changes in
classification
Periodically reassess

Critical risks that potentially

threaten the achievement of
business objectives

Secondary Risks

Low Priority Risks

Lesser significance, but more

likely to occur

Consider cost/benefit trade-off

Reassess often to ensure

changing conditions (move to high
significance)

Likelihood

High

LIKELIHOOD OF OCCURANCE
Rating

Likelihood

Criteria

Almost Certain

Likely

Possible

26-75%, Might occur at some time

Unlikely

11 25% Could only occur at some time

11-25%,

Rare

91-100%, It is expected to occur in most circumstances

76-90%, Will probably occur in most circumstances

0-10%, May occur only in exceptional circumstances

SEVERITY
Rating

Severity

Financial

Schedule

Critical

>$1MM

One Month

Major

$1MM

Two Weeks

Serious

$500k

One Week

Moderate

$250k

Three Days

Minor

$10k

One Day

Risk
No.

Risk

Severity

Likelihood

Priority

Remarks

Mitigation Strategy

P j t Site
Project
Sit
Location has Poor
Soil Conditions

May Require Excessive

Piling Increasing Cost

Perform GeoTech Survey

Skilled Personnel
Risk

Proper Leadership may

not be available to
manage
g p
project
j

Review personnel
requirements with HR and
business line management
g

Architectural Risk

Risk of unknown
conditions to the existing
building

Perform site survey to

validate current conditions
Review existing design
drawings
g

Structural Risk to
Piperack "A"

Additional loads to
existing piperacks could
cause damage

Schedule Impacts
due to bad weather

Abnormal weather could

disrupt schedule

Geographic location has

mild weather year round

Delay in Decisions
Risk

R
Representatives
t ti
will
ill
only be assigned on a
part time basis

Close coordination
Cl
di ti and
d
advance notice of
approvals

Perform site survey to

validate current conditions

Engage Risk Management Process early in the

project phase

Engage all necessary Functional disciplines in the

Risk Review process

Utilize Risk Management

g
p
process & tools to
support organized and subsequent project
alignment

Leverage the entire project team to maximize risk

identification and mitigation

Instill discipline to maintain risk management

process from the project inception phase through
to close-out

QUESTIONS/COMMENTS