Evaluating project risks and developing mitigation strategies

It is vital that the business case demonstrates that the potential risks associated with the proposed EEM have been identified, evaluated and mitigated or can be managed.

Financial risk:
One of the prime concerns will be whether requested funds will be sufficient to deliver the promised EEM results or whether more will be requested further down the line. There may also be concerns about the risk of the project falling short of the expected level of savings and other benefits.

Market risk:
Consider what energy prices might do relative to other costs. What if the price of carbon emission permits collapses? What about interest rates?

Technical risk:
This will be of particular concern where new technologies or practices are involved. Any project that uses new technologies with the potential to impact core business operations or product quality can have significant cost implications.

Safety risk:
Safety is a major consideration in all organizations. If the project involves potential safety issues, demonstration of how these fit into overall safety assessment procedures will be needed, as well as how the identified risks can be managed.

The following table illustrates some of potential risks, questions to ask and possible actions.

Risk type Questions Actions
Financial risk
  • Will the project deliver the savings predicted?
  • Will the funds requested for the project be sufficient to deliver the project?
  • Provide basis of estimate including past case studies, calculations and assumptions
  • Ensure that quotes are from reputable sources
  • Conduct sensitivity analysis to account for variability in the assumptions you make about the costs and benefits of your project
Strategic risk
  • Will the use of funds follow organizational policies and not hinder the ability to deliver other organizational goals?
  • Demonstrate how the project links to existing policies and strategies
  • Make sure standard organization processes and policies are followed
Operational-technical risk
  • Will the project negatively impact normal operations?
  • Consult with the relevant managers and specialists to ensure that there is minimal or no disruption
Operational-safety risk
  • Will the project involve safety issues?
  • Follow the formal safety risk assessment protocol for the organization
Market risk
  • What happens if energy prices drop?
  • What if interest rates change dramatically?
  • Re-evaluate the business case against multiple scenarios: Conservative, current and aggressive

Some tips for managing risk:

  • Follow existing risk-assessment protocols when developing a business case proposal
  • Conduct stakeholder analysis on the project and discuss risk-related issues with the appropriate people
  • Use trials or pilots to build understanding of potential risks and how they can be managed. This approach can provide the evidence needed to test deeply held assumptions about perceived risks
  • List each of the key project risks that have been identified and the strategies that will be used to mitigate them