Risk Management and Contingency Planning
Project: A case of manufacturing, delivery and installation of a large power transformer. 1. INTRODUCTION
A project to manufacture, deliver and install a large power transformer is time and resource (material and labour) consuming, relies on services and products provided by more than one supplier, involves multiple expertise, and costs tens of millions of Rands. If a transformer fails, the cost of rectification can go as high as over 70% of the price of a new one. By so saying, risk management and contingency planning plays a key role in the management of such a project. In this report, the need and process of risk management as well as the types of risks in relation to the power transformer project are discussed.
2. PROJECT BACKGROUD
A power transformer is an electrical machine used in reticulation/distribution networks which steps voltage up or down (according to network requirements) for the efficient supply of electricity to various connection points. The transformers vary in size and capacity – the bigger the capacity of transformation, the bigger the size. Manufacturing a transformer requires specialized machinery as well as hand craft – the bigger the size of a transformer, the more the hand craft. Transformer parts cannot be discretely tested, all parts (including accessories) have to be assembled into a complete transformer machine before testing its performance – this is mentioned to highlight the due diligence required. Manufacturing of large transformers is traditionally done in European countries and therefore delivery means moving the transformer from a manufacturing factory in Europe to a customer base in South Africa. It involves various mode of transportation, namely: railway, sea and road. From factory, the transformer is crane lifted onto a rail bed and moved to a harbour where it is hoisted onto a ship and transported to South Africa. From a South African harbour, a transformer is placed onto a low bed ‘abnormal’ vehicle and
A project to manufacture, deliver and install a large power transformer is time and resource (material and labour) consuming, relies on services and products provided by more than one supplier, involves multiple expertise, and costs tens of millions of Rands. If a transformer fails, the cost of rectification can go as high as over 70% of the price of a new one. By so saying, risk management and contingency planning plays a key role in the management of such a project. In this report, the need and process of risk management as well as the types of risks in relation to the power transformer project are discussed.
2. PROJECT BACKGROUD
A power transformer is an electrical machine used in reticulation/distribution networks which steps voltage up or down (according to network requirements) for the efficient supply of electricity to various connection points. The transformers vary in size and capacity – the bigger the capacity of transformation, the bigger the size. Manufacturing a transformer requires specialized machinery as well as hand craft – the bigger the size of a transformer, the more the hand craft. Transformer parts cannot be discretely tested, all parts (including accessories) have to be assembled into a complete transformer machine before testing its performance – this is mentioned to highlight the due diligence required. Manufacturing of large transformers is traditionally done in European countries and therefore delivery means moving the transformer from a manufacturing factory in Europe to a customer base in South Africa. It involves various mode of transportation, namely: railway, sea and road. From factory, the transformer is crane lifted onto a rail bed and moved to a harbour where it is hoisted onto a ship and transported to South Africa. From a South African harbour, a transformer is placed onto a low bed ‘abnormal’ vehicle and
References: Cervone, H.F. 2006. ‘Project risk management’. OCLC Systems & Services: International digital library perspectives, 22(4): 256 – 262 Chapman, C. and Ward, S. 2003. ‘Transforming project risk management into project uncertainty management’. International Journal of Project Management, 21(2): 97-105 Galway, L. 2004. Quantitative Risk Analysis for Project Management, A Critical Review. Santa Monica: Rand Corporation. Available from: [Accessed 17 March 2011] Kippenberger, T. 2000. ‘There’s no such thing as a risk-free project’. The Antidote, 5 (4): 4pgs. Available from: [Accessed 17 March 2011] Martin, V. 2008. Fundamentals of Senior Management: Study guide for MBA713. Block 4 Managing Projects and Change, Session 1: Preparing a Project. Milton-Keynes: Open University