chevron pipe line company risk based prioritization process
DESCRIPTION
CHEVRON PIPE LINE COMPANY Risk Based Prioritization Process. Risk Management Phases. PHASE I Develop risk scenarios / situations that can lead to negative consequences Estimate the severity of the negative consequences Estimate how frequently these scenarios can occur. - PowerPoint PPT PresentationTRANSCRIPT
CHEVRON PIPE LINE COMPANY
Risk Based Prioritization Process
Risk Management Phases
PHASE I
Develop risk scenarios / situations that can lead to negative consequences
Estimate the severity of the negative consequences
Estimate how frequently these scenarios can occur
Risk Management Phases
PHASE II
Develop potential risk control activities for the risk scenarios
Develop estimates of how these activities impact the consequence and frequency of the risk scenarios
Risk Management Phases
PHASE III
Evaluate the effectiveness of risk reduction projects by estimating the:– baseline risk associated with a scenario– modified risk after the project is completed– resulting reduction in risk from the project
The Prioritization Problem
Too many activities competing
for too few resources
What makes prioritizing difficult?
?Customers
CostControl
Competing objectives
Differing opinions
D ecisions
Critical review
Uncertainty
Dispersed information/multiple stakeholders
Need to do morewith less
Internationalization
What is the Priority System Intended to Achieve?
Use limited resources in a way that best serves the objectives of CPL
Provide managers and operators with a consistent method for communicating what risk management resources will accomplish
Improve the consistency and defensibility of decision-making
Defining benefits: Chevron operating objectives
Maximize the value of CPLas the preferred
provider of pipeline transportation
Maximize the value of CPLas the preferred
provider of pipeline transportation
Maximize RegulatoryCompliance
Maximize RegulatoryCompliance
Maximize Health
& Safety
Maximize Health
& Safety
MaximizeEnvironmental
Protection
MaximizeEnvironmental
Protection
MaximizeFinancial
Performance
MaximizeFinancial
Performance
MaximizePublic and/or Communities’
Confidence
MaximizePublic and/or Communities’
Confidence
Maximize CPL Customer
Satisfaction
Maximize CPL Customer
Satisfaction
Maximize EmployeePartnering
Maximize EmployeePartnering
EcologicalResources
Workers
PublicAesthetic &RecreationalResources
BusinessContribution
OperatingCost
Savings
ResponseCost
Savings
Risk Dimension Scales
Public Confidence / Reaction
Formal public recognition Positive public comment Neutral Negative phone calls, letters Negative local news Prolonged negative local news Negative national news
Risk Dimension Scales
Customer Satisfaction
Attracting new customers Preferred supplier of transportation services Perceived improvements, informal compliments Neutral Complaints, dissatisfaction Formal complaints, key customers collaborating
to leave or leaving
Risk Dimension Scales
Regulatory Relations - Scales vary from
Formal positive recognition, to Partial or complete shut down of facilities, large
fines
Environmental Protection - Scales vary from
Permanent damage to an ecologically sensitive area, to
Minimal impact to an ecological resource
Scoring of Projects
Scenario based approach used to evaluate projects
Chevron management has established a dollar value for each scale for measuring performance in each risk dimension
Scoring measures the performance in each risk dimension
The results of scoring is a dollar based benefit of implementing a risk control project
Overall benefit
Overall measure ofrisk (or risk reduction)
Overall measure ofrisk (or risk reduction)
ScoringScales
[Riskassessment]
Weights[Risk
tradeoffs]
RiskDimensions
Activity benefit =Risk with - Risk without[Risk-based prioritization]
WH-SWRegs WEnv WPub W$ WCust WStrat
Xi XiXi Xi Xi
Xi Xi
Maximize RegulatoryCompliance
Maximize RegulatoryCompliance
Maximize Health
& Safety
Maximize Health
& Safety
MaximizeEnvironmental
Protection
MaximizeEnvironmental
Protection
MaximizeFinancial
Performance
MaximizeFinancial
Performance
MaximizePublic and/or Communities’
Confidence
MaximizePublic and/or Communities’
Confidence
Maximize CPL Customer
Satisfaction
Maximize CPL Customer
Satisfaction
MaximizeEmployee Partnering
MaximizeEmployee Partnering
Mitigation Measure Evaluation
Replace gathering lines at Rangely, Colorado
Benefit Summary
Worker H&S 0Public H&S 0Environment 302Public Reaction 0Regulatory Relations 159Financial Impact 67Customer Satisfaction 273Partnering with EE 7Total Benefit 808
Do Benefits Outweigh Costs?
Total Benefit = $808M (NPV)Project Cost = $130M (NPV)
B/C Ratio = 6.6
Evaluate benefit vs. cost for projects or project alternatives
Net Present Values calculated for risk benefits and project costs at an appropriate discount rate
Scoring Summary
Scored RankingBenefit /
Cost Cost Comment
1. Project A 6.4 25K Strong project
2. Project B 4.8 100K Strong project
3. Project C 3.4 200K Acceptable project
4. Project D 1.5 225K Evaluate relative to other projects
5. Project E 1.3 200K Evaluate relative to other projects
6. Project F 0.8 1MM Evaluate relative to other projects
7. Project G 0.8 600K Profit Center decision based on strategy and available $. Lower benefit due to no severe risk impacts.
CAPITAL PRIORITIZATION
AdditionalReview
QuickRelease
0
1
2
3
4
5
6
7
89
10
B/C
Rat
io
Cumulative $
WeakerJustifications
Benefits of Project Scoring Process
Input from subject matter experts used for scoring projects
Model integrates risk with financial performance of a project
Project scoring process is documented and typically used for capital projects over a selected cost threshold
The scoring process provides consistent evaluation of projects, with minimal opportunity for “gaming” the project funding process
