A contract is an agreement that is enforceable at law. It is the primary tool through which organizations manage relationships and understanding with the other party. The risk is a critical consideration in the contracting process. The decision to invest in new capital projects starts with critical decisions during the conceptual phase of new projects or the expansion of existing operations. The decision-making tools used to analyse project risk under conditions of uncertainty will help companies to determine the probability of success or loss, and will drive the decision to invest in the new venture.

The emphasis of this course is on developing a solid understanding of the complexities of risk management. The course content recognizes the importance of planning, monitoring, and proactive insight and oversight into risk areas related to the contract and the potential capital projects to ensure consistent and reliable decision-making processes. Participants will learn how to integrate risk management practices into contract administration and project management

This 10-day Contract & Project Risk Management Masterclass consists of two modules which can be taken as a 10 Day Training course, or as individual, 5 Day courses

Training Objectives

By the end of the 10-day Contract & Project Risk Management Masterclass, participants will be able to:

• Apply useful techniques to identify, analyze, mitigate and monitor risks in the contracts.
• Describe each phase of the four-phase process model for managing risk.
• Explore different contract types to transfer risks and techniques to ensure effective risk allocation
• Learn how to create an effective risk monitoring plan and risk management strategies.
• Reduce contract failure, costly changes, and cost overruns resulting from poor understanding and management of risk
• Effective use of the total cost of ownership method to properly identifying and managing the risks
• Integrate risk management practices into contract administration.
• Use qualitative and quantitative methods to assess the exposure of the project to particular risks in real and measurable terms
• Perform a detailed financial appraisal of potential capital projects to ensure consistent and reliable decision-making processes
• Understand and apply the principles and methods of modern economic engineering
• Apply the fundamentals of discounted cash flow analysis to project evaluations
• Determine the Internal Required Rate of Return of the project as the basis for sensitivity analyses to establish the risk exposure to the organization
• Apply the concept of Expected Monetary Value to compare various alternatives

Target Audience

• Contracts, Tendering, Purchasing, Procurement, and Project personnel
• Contract Administration, Engineering, Operational, and Maintenance personnel
• Risk, Claims, Financial, and Audit personnel
• And all others who are involved in the planning, evaluation, preparation and management of tenders and specifications
• Project Team Leaders and Risk Management Team Leaders
• Production Engineers and Cost Engineers

Course Contents

Module 1 - Effective Contract Risk Management Masterclass

Module 1 - Overview of Risk Management

• KeyTopics:
  • The Need for Contractual Relationships
  • Defining Risk
  • The development of Risk Management
  • Gaining a Competitive Advantage Through Risk Management
  • Categories of Risk for Both Sides of a Contract
  • Risk Assessment Process
  • Managing Risk
  • Qualifying Suppliers
  • Defining Internal Control
  • Proportionality of Control

Module 2 - Risk Mitigation and Management

• KeyTopics:
  • How to establish contracts with well-balanced risks between customer and contractor?
  • Transferring Risk through Contract Types
  • Firm Fixed Price or Lump Sum Contracts
  • Cost Reimbursable Contracts
  • Incentive Contracts
  • Award-Fee Pricing Arrangements
  • Using Risk Management post contract to reduce conflict
  • Using Risk Management with the Parties to Improve the Contract during Tendering
  • Indemnities

Module 3 - Risks Associated Clauses

• KeyTopics:
  • External Events
  • Force Majeure
  • Strikes and Other Labor Disputes
  • Risk and Title
  • Assignment and Novation
  • Other Clauses that Need Managing Risks between Parties
  • Other Clauses that Need to Flow Down to Sub-Contractors
  • Risks Associated with Sub-Contractors

Module 4 - Management of Financial Risks

• KeyTopics:
  • Controlling Risk Associated with Payments
  • Currency Risk
  • Economic Risk
  • Fraud and Corruption
  • Limiting or Excluding Liability
  • Distinctions between Liability in Contract, and the General Law
  • Gross Negligence
  • A Review of Some Sample Clauses from Standard Contracts, and other Real Documents

Module 5 - Contingency Measures

• KeyTopics:
  • Mistakes and Misrepresentations
  • Impracticability of Performance
  • Remedies Generally
  • Types of Remedies
  • Liquated Damages
  • Warranties
  • Cover
  • Discussion of Real Examples(delegates are encouraged to bring real or made up examples for discussion)
  • Review of Course, Questions and Answer Session

Module 2 - Professional Project Analysis: Managing Risk & Uncertainty

Module 6 - Fundamentals of Decision Analysis & Engineering Economics

• KeyTopics:
  • What is Project Management Decision Analysis?
  • Risk and Uncertainty on projects
  • Identifying all possible outcomes
  • Identifying key decision-making factors
  • Fundamental tools of engineering economics
  • Time Value of Money
  • Simple and Compound Interest
    • Future value of a present sum
    • Present value of a future sum
  • Appraisal Methods Discounted Cash Flow Projections
  • Net Present Value Analysis (NPV)
  • Comparing Projects with Equal and Unequal Lives

Module 7 - Rate of Return (IRR), Cost of Capital and Cost-Benefit Analysis

• KeyTopics:
  • Determining the Internal Rate of Return (IRR)
  • IRR for a Single O&G Project
  • Incremental Analysis
  • Estimating the Cost of Capital for a Project
    • The Cost of Debt Capital
    • The Cost of Equity Capital
  • Weighted Average Cost of Capital (WACC)
    • Financial Gearing (Structuring)
  • Estimating the Benefit-Cost Ratio for a Single Project
  • Comparing Mutually Exclusive Projects Using Incremental Benefit-Cost Ratios

Module 8 - Financial Project Risk Analysis

• KeyTopics:
  • Overview of the Risk Management Process
  • Detailed Risk Quantification and Prioritization
  • Risk Quantification and Expected Monetary Value
  • Scenario Planning
    • Best case scenario
    • Base case scenario
    • Worst case scenario
  • Developing Risk Mitigation Strategies
  • Implementing Mitigation Strategies
  • Decisions Under Conditions of Uncertainty
  • Multiple Option Decisions
  • Combining Risk and Cash Flow Analyses
    • Minimizing Probability
    • Minimizing Impact and Consequences
  • Calculating the Expected Monetary Gain or Loss

Module 9 - Risk Scenario Planning Case Study & Application

• KeyTopics:
  • Cash flow projections – Tunnel Case Study
    • Base Case Scenario
    • Best Case Scenario
    • Worst Case Scenario
  • Risk Profile EMV Calculation before Mitigation
  • Identification of Risk Triggers & Probability
    • Plotting the Event Probability
  • Identification of Risk Receptors & Impact
    • Plotting the Financial Impact
  • Combined EMV Risk Profile before Mitigation
  • Developing Probability Mitigation Strategies
  • Developing Impact Mitigation Strategies
  • Replotting the Projected Risk Profile after Mitigation
  • Examining the J-Curve to Derive the Most Economic Mitigation Point
  • Final Risk EMV and Project Feasibility Calculations after Mitigation