Enterprise Risk Management (ERM) is the process of minimizing risk through a thorough examination of your organization's structure and operation. ERM protects your assets and earnings by assessing and evaluating your exposure to accidental, financial, strategic, and operational losses.
In recent years, external factors have fueled a heightened interest in ERM. Industry and government regulatory bodies, as well as investors, have begun scrutinizing companies' risk management policies and procedures, and in an increasing number of industries, boards of directors are required to review and report on the adequacy of risk management processes in the organizations they administer.
Megaprojects in both engineering and construction live and operate in a world of risk, both internal and external. It is a simple fact that risks can come from a multitude of directions at any amount of potential cost. As head of your organization, you are required to not only assess the risks that your decisions and activities create, but to assess how other entities' decisions and practices may affect your operations. Much of Pegasus-Global's risk assessment is rooted in experience and practice in the field—in other words, just knowing how things operate, what to expect, and how people react to situations.
Pegasus-Global can assist an organization as it develops and implements a new risk management program or revamps a languishing one. This can involve employing effective risk management with experienced personnel on a corporate level for: 1) determining risks in order to make decisions as to whether to go forward with specific proposals; 2) determining risks for effective contract negotiation; 3) using the corporate risk management policies and procedures to first educate the business units on how to conduct risk management for selective projects; and then, 4) conducting corporate risk management audits of the business units for identification of potential differences from the set risk management program and determining a plan of action to be executed by the business units.
Organizations need a strong and functioning risk management program executed through a capable risk management group. With such a risk management program and capable/functioning risk management group, current and future contracts for services and projects will have fewer comparable issues to those cleaned-up, which will assure improving execution and commercial performance demanded by the corporation's boards, executive management, lenders, and stockholders.
While business units typically remain responsible for profit and loss and their own risk management functions, a strong corporate enterprise risk management program, through a functioning risk management group that can achieve results from the restructuring and improvement with the mandate of executive management, requires:
- Knowledge of the issues faced now.
- Knowledge of the issues and root causes of prior contract/project execution problems, especially those that have resulted in claims.
- Actual risk management program experience for owners, engineers, and contractors that can be applied effectively and immediately.
- Independence from entrenched sub-organizations in the operating structure and business units who have been doing "their own thing" without effective risk management efforts.
- Experience in using on-the-job training to improve internal capabilities to assume any out-sourced roles without allegiance to the "way things have always been done."
These answers describe Pegasus-Global. We have the unique knowledge of past issues that occur on megaprojects, current issues facing contract/project execution globally, three decades of risk management services and operating experience, and independence. We have performed comparable services to those described herein for owners like AES, Cal Energy, Marathon Oil and the British Columbia Ministry of Transportation and Highways; and Engineering and E&C firms like Parsons Brinkerhoff, Fluor, and units of Aker-Kvaerner. A good risk management program ultimately is a corporate effort that provides the means to enable reasoned and appropriate decisions to be made.