I’ve found that applying a risk management strategy to building upgrades forces you to plan well. You have to think about how confident you are in your assumptions, what you will do to reduce the chance of unforeseen things happening and consider how you will manage them if they do happen. Decision makers want to know that you have taken all relevant considerations into account.
- Bruce Precious, National Sustainability Manager - Operations, The GPT Group
Your business case must demonstrate that the potential risks of your project have been considered and can be appropriately managed.
Although your project may deliver a good result from an energy efficiency perspective and reduce a range of high level risks in the business (see section Describe and quantify all business costs and benefits), there are other potential business risks associated with the implementation of the project itself that must be taken into account.
In this section
- Typical project risks and actions to manage them
- Tips for managing risk
- Case studies that you might find helpful
- The GPT Group: Energy performance contracting to fund cogeneration and other energy efficiency initiatives at 530 Collins St Melbourne
- Woolworths Limited: Refrigerated display cases – door retrofit trial
- Australia Post: Using trials to investigate opportunities
- National Australia Bank: 500 Bourke Street Melbourne – Building Upgrade
Typical project risks and actions to manage them
Every project presents a level of financial risk. Management will be concerned about whether the funds requested for the project will be sufficient to deliver the project. They will also want to have confidence that the expected level of savings and other benefits from the project will be achieved.
From a strategic perspective there are a wide range of projects that compete for investment. It is important to show that your project is justified financially as well as delivering on other corporate goals.
Operational risk will be of particular concern where new technology or practices are involved. Any project that impacts on core business operations or product quality can have significant cost implications. Likewise, safety is a major consideration in all organisations. If your project does involve potential safety issues then you will need to demonstrate that you have conducted a safety assessment and that the identified risks can be appropriately managed.
The table below summarises some of questions you can ask in considering potential risks associated with your project and the action you can take to minimise them:
|Type of risk||Questions to ask||Actions you can take|
|Financial risk||Will the project deliver the savings predicted during scoping?Will the funds requested for the project be sufficient to deliver the project?||Ensure any quotes come from reputable sources.Review a similar project if available and use any monitoring and verification of their projects to inform your own calculations.Conduct sensitivity analysis to account for variability in the assumptions you make about the costs and benefits of your project.(link to ESMG and RARE information)|
|Strategic risk||Will the funds be used inappropriately, and hinder the organisation’s ability to deliver other corporate goals?||Demonstrate how your project links to existing policies and strategies and make sure you follow any processes that are outlined in your organisation.|
|Operational-technical risk||Does the project involve potential interruptions to normal plant operations?||Consult with the relevant managers and specialist expertise as required.|
|Operational-safety risk||Will the project involve safety issues?||Most organisations will have an established safety risk assessment protocol that will need to be followed.|
If you have defined risk assessment protocols in your organisation then it is essential that you follow them. Describe the risks and your mitigation strategies in your business case proposal and include any relevant supporting information, such as in-house checklists.
Tips for managing risk
- Check to see if you have existing risk assessment protocols that you must follow when developing a business case proposal.
- Conduct a stakeholder analysis on your project and use the questions in the table above to discuss risk-related issues with the appropriate people.
- Use trials to build understanding of potential risks and how they can be managed. Trials can provide the evidence needed to test deeply held “assumptions” about whether perceived risks are legitimate or not. As well as addressing technical and financial risk, they may also be used to assess impacts on production or sales.
- List each of the key project risks that have been identified and the strategies that you will use to mitigate those risks. Include information about the people consulted in developing the proposal since this will demonstrate that you have used appropriate expertise to identify risks and implement strategies to mitigate them.
Case studies that you might find helpful
The GPT Group: Energy performance contracting to fund cogeneration and other energy efficiency initiatives at 530 Collins St Melbourne
GPT minimised financial and technology risk associated with a building upgrade by using an Energy Performance Contract (EPC). In the contract the service provider implementing the upgrade initiatives guarantees the energy, greenhouse and financial outcomes to be delivered by the project.
Woolworths is conducting a trial to determine whether the installation of doors on refrigerated display cases would influence the shopping behaviour of customers.
Trials were undertaken to investigate the impact of changes to delivery trucks, including changes to speed and tyre pressure and aerodynamic modifications.
When NAB negotiated with the building owner at 500 Bourke Street to co-invest in an energy efficient building upgrade, the financial risk to both parties was minimised by signing a long term lease.