Over the next 20 years energy companies will spend over $38 Trillion on capital projects, and a significant number of those projects will run over cost, and over budget, to the tune of $5 Trillion in additional costs, thats Trillion with a T! These are just some of the startling stats released yesterday by global consulting firm Accenture. Only 34% of the energy executives surveyed said they had completed projects to within 25% of projected costs, and only 32% percent had delivered on schedule.

 

The fact is, today’s mega projects are larger and more complicated than projects even a decade ago. This means companies must take a different approach to managing those projects if they are to ensure successful delivery. Today’s effect capital project managers are those who take a project and portfolio view of their job, and as Accenture suggests, have a keen focus on risk management.

 

As I have discussed previously, and Accenture confirms, project risk management is a key component of today’s capital project structure. Organizations must have a rigorous, repeatable process for identifying and assessing risks throughout the project, across departments. The risk process must help understand the connection between risks, and show how a risk in one area can affect a process in another area. Risk management must be both a project and portfolio process, and be part of the everyday fabric of the project, involving almost everyone working. Additionally, the risk process must ensure that those risks which have been identified as critical to the budget and schedule of the project must be monitored for success on a continual basis. Finally the risk process must produce insight and comparisons against prior projects, budgets, schedules and key trends and indicators so that project executives are enabled to make better decisions, and empowered to ensure the successful delivery of their projects.

 

In the continued search for new resources, and the drive to improve old infrastructure, an organizations ability to deliver on-time and on budget is in many cases key to the survival of the business. A renewed and more advanced focus on risk management is in turn, a big key to success. With Trillions of dollars at stake, those who embrace risk as a core function of their business, and the projects, position themselves as leaders, and reduce deadly overrun costs.

 

If your company leading the way in managing capital project risk? Could you do it better?

Leave a Reply to Dr. HIMADRI BANERJI

*
*

(1) Response to “$5 Trillion Overspend on Capital Projects”

  1. Dr. HIMADRI BANERJI says:

    While agreeing to the general need of the rigorous processes, one has to however be careful that we do not get too plugged on statistics,probability and distribution subjects often associated with imponderables by most managers in an organization!

    Dr Himadri Banerji
    Risk Management Trainer and Conference Leader
    http://www.glgroup.com/Council-Member/Himadri-Banerji-107627.html