Operational Risk in Major Infrastructure Projects
Operational risk in major infrastructure projects/businesses
Stephen Ward, University of Southampton, UK Professor of Management School of Management, University of Southampton, Highfield Campus, Southampton, SO17 1BJ , UK Email: scw@soton.ac.uk Tel: +44 (0)23 8059 2556 and members of the OPrisk Working Group: Roger Allport, Chris Chapman, Chris Lewin, Mike Nichols and Gerald Orman .
December 2008
Acknowledgements This research was funded by the Institution of Civil Engineers Research and Development Enabling Fund, whose support is gratefully acknowledged. The views and evaluations in this report do not necessarily reflect those of the Institution.
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CONTENTS
List of Tables List of Figures List of Abbreviations Executive Summary 1 Introduction 1.1 Importance of operational risk 1.2 Strategic, project and operations management 1.3 Study objectives and methodology 1.4 Four sectors 2 Operational risk in four sectors 2.1 The energy sector 2.2 The transport sector 2.3 The material resources and waste management sector 2.4 The water sector 2.5 Towards a generic set of risk drivers 3 Key issues 3.1 Interdependencies between elements of infrastructure within and across sectors. 3.2 Clarity and stability of operational performance objectives 3.3 Short-termism 3.4 Appreciation of the asset life cycle 3.5 Asset management. 4 Conclusions 4.1 The extent and significance of operational risks 4.2 Existing practices for managing operational risk 4.3 The implications of existing practices for project success 4.4 Problems in achieving more effective identification and management of operational risks 4.5 Ways in which operational risk should be addressed in different phases of the project life cycle 4.6 Differences between the public and private sector sponsors 4.7 Issues that warrant further study 4.8 Differences between UK and international practice 4.9 Conclusions 5 Recommended reading APPENDIX A Interviewee organisations APPENDIX B References Page iii iii iv v 1 1
Stephen Ward, University of Southampton, UK Professor of Management School of Management, University of Southampton, Highfield Campus, Southampton, SO17 1BJ , UK Email: scw@soton.ac.uk Tel: +44 (0)23 8059 2556 and members of the OPrisk Working Group: Roger Allport, Chris Chapman, Chris Lewin, Mike Nichols and Gerald Orman .
December 2008
Acknowledgements This research was funded by the Institution of Civil Engineers Research and Development Enabling Fund, whose support is gratefully acknowledged. The views and evaluations in this report do not necessarily reflect those of the Institution.
i
CONTENTS
List of Tables List of Figures List of Abbreviations Executive Summary 1 Introduction 1.1 Importance of operational risk 1.2 Strategic, project and operations management 1.3 Study objectives and methodology 1.4 Four sectors 2 Operational risk in four sectors 2.1 The energy sector 2.2 The transport sector 2.3 The material resources and waste management sector 2.4 The water sector 2.5 Towards a generic set of risk drivers 3 Key issues 3.1 Interdependencies between elements of infrastructure within and across sectors. 3.2 Clarity and stability of operational performance objectives 3.3 Short-termism 3.4 Appreciation of the asset life cycle 3.5 Asset management. 4 Conclusions 4.1 The extent and significance of operational risks 4.2 Existing practices for managing operational risk 4.3 The implications of existing practices for project success 4.4 Problems in achieving more effective identification and management of operational risks 4.5 Ways in which operational risk should be addressed in different phases of the project life cycle 4.6 Differences between the public and private sector sponsors 4.7 Issues that warrant further study 4.8 Differences between UK and international practice 4.9 Conclusions 5 Recommended reading APPENDIX A Interviewee organisations APPENDIX B References Page iii iii iv v 1 1
References: for examples Arnold, D. (2008) Challenge to roads survey. New Civil Engineer, May Arnold, D. (2008) Maintenance backlog up, New Civil Engineer, 3 April 2008, p. 7. Arthur D. Little (2005) Risk aversion in the UK rail industry. Report to the Department of Transport, March, Arthur D. Little Ltd. Cambridge. Chrisafis, A. (2008) Accidents tarnish France’s energy dream. The Guardian, 26 July p. 29. Clater, D. (2008) From Electricity Alliance West - Personal correspondence. CSS (2008a) CSS alarm at Government’s handling of survey data. Press release 23 June, www.cssnet.org.uk/release35a.php. CSS (2008b) CSS goes back to basics with lessons in structural failure. CSS press release, 18 March, www.cssnet.org.uk/Release30.php CSS Transport Futures Group (2008) Travel is good. CSS. www.cssnet.org.uk Dark, J. (2008) Network Rail reveals new plans to limit impact of work overruns. Transit, 23 May, issue 337. 68 Department for Transport (2003) Managing the accidental obstruction of the railway by road vehicles. www.dft.gov.uk/pgr/roads/network/policy/obstructionrailways/ Dowding, T. (2008) Terminal 5 debacle exposes reputational risk, Business Insurance Europe, 21 April, p. 7. Flynn, A. (2008b) The thin blue line. New Civil Engineer, 22 May, p. 20-21. Harvey, F. (2007) More than just hot air. Special report on risk management, Financial Times, 1 May, p. 2. Murray, D. (2008) Free bus and tube travel after Oyster Meltdown, Evening Standard 14 July. Oliver, A. (2008) Heathrow revamp on track despite T5 troubles, New Civil Engineer, 3 April, p. 8. Pagnamenta, R. (2008) How two tiny gliches plunged 500,000 homes into the dark. The Times 29 May p. 6-7. Rowson, J. (2008) No cash for vital checks. New Civil Engineer, 3 July. Smith, L. (2008) Recycled waste piles up as prices collapse. The Times, 6 November, p20. Topping, A. (2008) London tube hit by second Oyster card failure in weeks, The Guardian, 26 July. Transit (2008) Faults with cabling result in disruption to Virgin West Coast, Transit, 23 May, issue 337. Webster, B. (2008) Drivers face new breakdown peril as busy motorways open hard shoulder, The Times, 19 June, p. 23. 69