Identify risks and categorize each risk. Note: The categorization is up to you, but you might include such considerations as external risks (e.g., regulatory or currency changes) and technical risks (e.g. complexity or design).

Capture the following information based on the attached case study

Identify risks and categorize each risk. Note: The categorization is up to you, but you might include such considerations as external risks (e.g., regulatory or currency changes) and technical risks (e.g. complexity or design).

Prioritize the risks and discuss their severity.

Identify management response strategies for the risks.

Develop a Risk Breakdown Structure (RBS).

Include one current scholarly article

Requirements: 4 pages

Projectriskmanagementpractice:ThecaseofaSouthAfricanutilitycompanyRiaanvanWyka,PaulBowenb,*,AkintolaAkintoyecaElectricitySupplyCommissionofSouthAfrica(ESKOM),SouthAfricabDepartmentofConstructionEconomicsandManagement,UniversityofCapeTown,PrivateBag,Rondebosch7700,SouthAfricacSchooloftheBuiltandNaturalEnvironment,GlasgowCaledonianUniversity,CowcaddensRoad,Glasgow,Scotland,UKReceived26October2006;receivedinrevisedform26February2007;accepted20March2007AbstractThispaperdocumentstheriskmanagementpracticeofautilitycompanyforitsRecoveryPlanprojecttoaddresstherisksofpowerinterruptionsduetoashortfallofsupplyandincreasingelectricitydemand.Thecompany’scorporateriskmanagementprocessanditspracticeatdivisionalandprojectlevelsarediscussed.Thekeyroleofstakeholdersinriskidentification,analysis,mitigation,monitoringandreportingisemphasisedbythecompanyandthisdrivesitsriskmanagementpractice.Despitethelevelofresourcesavailablewithinthecompanytousemoresophisticatedriskmanagementtools,thecompanyadoptssimpleriskmanagementmethodssuggestingthatalargesizecompanydoesnotnecessarilyuse‘stateoftheart’riskmanagementtechniques.Recommendationsforimprovedpracticearemade.2007ElsevierLtdandIPMA.Allrightsreserved.Keywords:Riskmanagement;Utility;Casestudy;Stakeholder;Electricity;SouthAfrica1.IntroductionRiskmanagementcontinuestobeamajorfeatureoftheprojectmanagementoflargeconstruction,engineeringandtechnologicalprojectsinanattempttoreduceuncertaintiesandtoachieveprojectsuccess.MillerandLessard[1]havearguedwhylargeengineeringprojectsshouldbecarefullymanagedgiventhattheyare‘‘highstakesgames’’charac-terisedbysubstantialirreversiblecommitments,skewedrewardstructuresincaseofsuccess,andhighprobabilitiesoffailure.Inaddition,theycategorisedtheriskassociatedwithdifferenttypesofprojectsrangingfromoilplatformprojects,nuclear-powerprojects,hydro-electric-powerpro-jects,urbantransportprojects,roadandtunnelsystems,andresearchanddevelopmentprojects.Theyareoftheopinionthatpowerprojectspossessmoderaterisksinsofarasengineeringisconcerned,butareverydifficultintermsofsocialacceptability.ElkingstonandSmallman[2]examinedprojectriskmanagementpracticesofBritishutilitycompaniesgiventhattheutilitiessector(comprisingwater,power,telecommunications)isassociatedwithlesspredictableprojectswhichareperceivedtoberiskierthanday-to-daybusinessactivities.Theyarguedthatriskman-agementisanintegralpartofprojectmanagementinthissector;hence,mostlargecompaniesputsubstantialresourcesintothemanagementoftheirbusinessrisk.ThecurrentpaperpresentstheriskmanagementofaRecoveryPlanprojectoftheEskomHoldingsLtd.powercompanyinSouthAfrica.EskomHoldingsLtd.iswhollyownedbytheSouthAfricangovernment.Thecompanyisavertically-integratedoperationthatgenerates,trans-mits,anddistributeselectricitytoindustrial,mining,com-mercial,agricultural,re-distributorsandresidentialusers.ItisalsoinvolvedinthepurchaseandsaleofelectricitytoandfromSouthAfricanDevelopmentCommunity(SADC)countries,comprisingBotswana,Mozambique,Namibia,Zimbabwe,Lesotho,SwazilandandZambia.0263-7863/$30.002007ElsevierLtdandIPMA.Allrightsreserved.doi:10.1016/j.ijproman.2007.03.011*Correspondingauthor.Tel.:+27216503445;fax:+27216897564.E-mailaddress:[email protected](P.Bowen).www.elsevier.com/locate/ijpromanAvailable online at www.sciencedirect.comInternationalJournalofProjectManagement26(2008)149–163

Thecompany’sbusinessisdividedintoanumberofdivi-sions:Generation,TransmissionandDistribution;ResourceandStrategy;Finance,KeySalesandCustomersServices;Enterprises;HumanResources;andCorporateandExternalRelations.Thegrouphasmanymainsubsidi-aries,withthecorebusinessesincludingnon-regulatedelec-tricitysupplyindustryactivities,theprovisionofelectricitysupplyandrelatedservicesoutsideSouthAfrica,thegrant-ingofhomeloanstoemployees,themanagementandinsuranceofperceivedriskstoEskom,andsocialinvest-mentinitiatives.Thecompany’srevenueinthe12monthsofthe2005/2006financialyearwasR36,607m(US$4947mor£2662m)1andemployedsome29,697per-sons(excludingcontractandtemporaryworkers).Thispaperdoesnotaddtothetheoryofriskmanagement.Rather,thepurposeistodocumentrichcasestudymaterialindicatingthepracticeofriskmanagementandtheextenttowhichpracticeandtheoryconverge/diverge.OneoftheauthorsiscurrentlyemployedbyEskominaprojectmanagementcapacity,thusfacilitatingaccesstothecasematerialpresentedhere.Thecasestudyhasbeenstructuredintofourparts:Part1describesthecorporateriskmanagementprocessoftheholdingcompany.Part2presentstheriskmanagementprocessofadivisionofthecompany;thedistributivedivi-sionbeingusedforthispurpose.Part3presentsthecasestudyofaRecoveryPlanprojectofthedivisiontoaddresstherisksofpowerinterruptionsduetoashortfallofsupplyandincreasingelectricitydemand.Part4documentstheconclusionsemanatingfromthestudy.Thelessonfromthecasestudyisthata(very)largecompanywithanappro-priatelevelofresourcesmaynotnecessarilyusesophisti-catedriskmanagementtools;rather,simplemethodsthatenablethecompanytomitigatetherisksfacedbythebusi-nessareadopted.2.CorporateriskmanagementwithinEskomHoldingsLtd.RiskmanagementwithinEskomisanimportantandintegralelementofthebusiness.Giventheimportanceofriskmanagement,thecompanyhasadedicatedRiskMan-agementCommittee(RMC)asoneofitssevenprimarycommittees(theothercommitteesaretheBoardcommit-tee,auditcommittee,tendercommittee,humanresourcescommittee,remunerationandethicscommittee,sustain-abilitycommittee,andexecutivemanagementcommittee).TheRMCcomprisesthreenon-executivedirectors,thefinancedirectorandthemanagingdirector(Generationdivision).TheRMCischairedbyanindependent,non-executivedirector.Thecommitteeistaskedwithensuringthatthecompany’sriskmanagementstrategiesandpro-cessesarealignedwithbestpractice.Italsodealswiththecompany’sintegratedriskmanagementstrategyandprocesses,theseembracingrisktoleranceandappetite,riskaccountably,majorriskexposures,andemergingriskissues.Eskompracticesanintegratedriskmanagementstrategyandprocessbyidentifyingrisksandopportunitiesagainstbusinessobjectivesduringriskassessmentsthroughouttheorganisation,frombothalineandfunctionalperspec-tive.RiskintegrationbetweendivisionsandsubsidiariesisreviewedbytheRMCtoensureacoordinatedapproachtoriskmitigationmeasures.Keyriskmanagement‘‘buzzwords’’featureprominentlyinthecompany’sriskmanage-mentprocess,asdepictedinthecompany’s186page2006annualreport(http://www.eskom.co.za/annreport06/).Theriskprefixesthatarecontainedintheannualreportinclude:exposure,assessment,accountability,internalcon-trol,matrix,categories,mitigationmeasures,tolerancelev-els,categories,identification,evaluation,appetite,profile,audit,financing,issues,process,ownership,etc.Acontentanalysisoftheannualreportshowsthattheword‘risk’ismentioned206timeswhilsttheterm‘riskmanagement’ismentioned56times;thesebeingexplicitindicatorsoftheimportancethatthecompanyattachestotheriskstowhichitisexposed.Riskcategoriesthatthecompanyfacesaredefinedinthecompany’sriskmatrix,andinclude:finance,technical,environmental,legal,humanresources,informa-tion,stakeholders,regulatoryandstrategic.Theremitofthecompany’sRiskManagementCommit-tee(RMC)istoensurethatIntegratedRiskManagement(IRM)isappliedthroughouttheEskombusiness.ItreviewstheriskprocessesandallmajorriskswithinthebusinessandreportsbacktotheBoard.IntegrationbetweenthevariousEskomdivisionsandsubsidiariesisensuredviatheinteractionofthedifferentrisk(orrisk-related)committees.EachdivisionwithinthecompanyhandlesitsownRiskManagementSystemandmayhaveslightlydifferentriskapproacheswithineachofthesixregions:Western;Eastern;Northern;North-West;South-ern;andCentral.Thisdiversityisallowedaslongasitsup-portsthestrategyandmilestonessetbytheRMCwhichencouragesacoordinatedandcommonapproachforthebusinessasawhole.EskomhasadoptedtheCodeofPracticepublishedbytheInstituteofRiskManagementofSouthAfrica.Inaddition,ithasdevelopeditsownmethodologyfordeter-miningthe‘value’orweightingforspecificrisksfacedbythecompany.Theseweightingsareusedtoassisttheorganisationtobetteridentifywhichrisksshouldreceivepriorityandalsoshowthevalueofriskmitigationmea-sures.Alignedtothisvaluationmethodologytherearerisktolerancelevelsforeachdivisionandmainsubsidiar-ies,togetherwithriskappetiteparametersforeachfunc-tionalriskarea.BeingaSouthAfricanutilitycompanywithawiderremitforthesaleandpurchaseofelectricityfromneighbouringcountries,thecompanyhasidentifiedsomerisksthatitconsidersitfaces.ThesearedepictedinTable1.1Exchangeratesasat7thSeptember2006:R7.40SARands=US$1;R13.75SARands=£1.150R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163

3.RiskManagementSystemwithintheDistributionDivisionGiventhateachDivisionandeachregionwithinthecompanyhandlesitsownRiskManagementSystem,riskmanagementwithintheDistribution(WesternRegion)DivisionformspartoftheresponsibilitiesoftheBusinessPlanningandIntegratedRisk(BPIR)CommitteewhichisledbytheBPIRManager.BPIRisthereforeasubcom-mitteeoftheRegional(Western)ExecutiveCommittee(REC).BPIRdutiesfocusonaholisticbusinessplanningandintegrationfunction,whichincludesallassociatedrisks.TheRECappointsthemembersandchairpersonoftheBPIRcommittee,who,inreturn,reportbackandadviseonallRegion’sbusinessrisk-relatedmatters.MembershipofBPIRconsistsofRECmembers,subjectmatterexpertsandotherEskomofficials.TheymanagetheentireRiskManagementProcessatregionallevelandincludeissuesaroundprocessdeadlocksandemer-gencypreparedness.TheBPIRcommitteemeetsonceamonthandhasiden-tifiedthefollowingattributesofitsapproachtotheoverallEskomIntegratedRiskManagement(IRM):assistswithbusinessdecision-makingasmoreinforma-tionbecomesavailablefromtheriskprocessbeingexecuted;facilitateslearningfromandincorporatinglessonsfromthepast;allowsforanexternalviewonmatterswhichcouldleadtomoreissuesbeingidentified;providesforintegrationbetweenthedifferentfunctionaldepartmentsleadingtotheoptimaladdressingofriskissues;allowsidentificationofanyopportunitiesarisingfromthemattersathand;ensuresfocusonobjectives,keepinginlinewiththeregionalobjectivesandthosesetbytheRiskManage-mentCommitteeatBoardlevel;ensuresaproperaudittrailforallrisk-relatedmatters:theorigin,owner,actionsdecideduponandtaken,andprogress;assistswithdecisionmaking,byprovidinginputintothecontinuousbusinessplanningwhichisalsoafunctionofthiscommittee;veryimportantly,itstrivestoprotectagainstanyimpacttotheregion’sfinancialresultsandimage;andmeetstherequirementsoftheKingII2report.4.CasestudyoftheWesternCapeRecoveryPlanprojectOneoftheprojectsoftheWesternRegionDistributionDivisionisEskom’sRecoveryPlanfortheWesternCape.Theprojectwasdevelopedtoaddressthecurrentriskofpowerinterruptionsduetoashortfallofsupplyandincreas-ingelectricitydemandduringthewinterperiod.Tounder-standthereasonsfortheshortfallinsupply,itisnecessarytounderstandhowtheWesternCapeissuppliedwithelec-tricityandtheexistingconstraintssurroundingthis.TheWesternCaperequiresupto4250MegaWatt(MW)ofpowersupplydailyoverpeakperiodsduringthewintermonths.Thisissuppliedfromfourpowerstationsthatpro-videacombinedtotalof4780MWasfollows:2·NuclearreactorsattheKoebergNuclearStation(900MW·2)1800MWCoalpowerstationsinMpumalanga2400MWPalmiethydro-electricpumpstation400MWSteenbrashydro-electricpumpstation180MWTotal4780MWHowever,therearepeakperiodsinthisregionwhenthereisasurgeinpowerconsumptionandtheseusuallyoccurbetween5amand8am,and6pmand8pmduringweekdaysasshowninFig.1.DuringroutinemaintenanceonUnit1attheKoebergNuclearStationinlate2005seriousdamagewasdonetothegeneratoranditscoolingsystemforthisUnit.How-Table1AlistofkeyrisksfacedbythecompanyKeyrisks1.Regulatoryriskthatencompassestheneedforclearregulatoryframeworkandadequatepriceincreasestoensurelong-termsustainability2.Futurecapacity,wherethefollowingneedstobeaddressed:a.Theavailabilityofcapacityinthelong-termb.Theimpactofnewcapitalprojectsontheoverallbusinessc.Theongoingabilitytomaintainconsistentsupplyd.Agingplantandincreasingplantperformanceindicators3.Debtmanagementofsmallpowerusers4.Non-technicalenergylosseswherethetheftofconductorsresultsinthelackofsupplyofpowerandthepotentialforinjuriestothepublic5.TheabilitytorespondtochangesintheindustryarisingfromtheproposednewElectricitySupplyIndustryinSouthAfricawhilemeetingtheshareholder’sobjectiveforthecompany6.ShareholderrelationshipswiththefocusontheabilitytomanagethedifferentexpectationsoftheshareholderandgovernmentdepartmentsintermsofEskom’sbusinessobjectives7.Informationsecurity,managementoftheoutsourcedinformationtechnologyservicecontract,lackofskillsandresources,andinfor-mationtechnologybusinesscontinuitymanagement8.Availabilityoftheskillsrequiredforthefuturebusinessneedsincludingskillsretention,trainingandsuccessionplanning.TheimpactofHIV/AIDSisalsoaddressedasacomponentofthiskeyriskarea2TheKingReportsonCorporateGovernance(KingIandKingII),publishedbytheKingCommitteeonCorporateGovernance,aimedatpromotingthehigheststandardsofcorporategovernanceinSouthAfrica.Morespecifically,theKingIReportdealtwithfinancialandregulatoryaspectsofcorporategovernanceand,inaddition,advocatedanintegratedapproachtogoodgovernanceintheinterestsofawiderangeofstakeholders.WiththepublicationoftheKingIIReport,intermsofwhichriskmanagementreceivedofficialconsiderationforthefirsttimeinSouthAfrica,companiesarenowrequiredtoauditriskexposureonanannualbasisanddiscloseittotheirshareholders.Inaddition,KingIIacknowledgedthatacompany’sactivitiesaremorethanprofittoshareholders,embracingeconomic,environmentalandsocialaspects.R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163151

ever,thenuclearreactorwasnotaffected.ThetimeforrepairingthegeneratorandcoolingsystemwassetforatleastthreemonthsfromJanuary2006.Therepairpro-grammewasfocusedonminimizingtheperiodforUnit1tobeoutofservice.Thismeantthatvariousoptionshadtobeconsideredwhichincludedobtainingreplacementparts(i.e.statorandrotor),acquiringspareparts,andrepairingthedamagedparts.ThedismantlingoftheUnit1generatorisconsideredaslowprocessduetothecooldownperiodrequired(5days)andseparationoftherotorandstator(10days).Aftertheassessmentoftheextentofthedamage,itwasdecidedtostartrepairstothestatorandrotorandobtainasparerotorfromacompanyinFrance.ThisparticularcompanyhadbeentheoriginaladvisorstotheKoebergplantsome20yearsago.Duringthistime,KoebergUnit2continuedtoprovidetherequiredelectricitytotheWesternCape.However,anumberofpowerinterruptionswereexperiencedduringthemonthofFebruary2006duetoavarietyofreasons,including:1.Unit6oftheKendalPowerStationinMpumalangatrippedcausingalargefluctuationontheNationalNet-work.Asasafetyprecaution,Koeberg’sUnit2wasremovedfromthegridandplacedinacontrolledshutdown.Afterthestabilisationofthenetwork,ittookUnit2aboutaweektostartupandincreasegenerationtofullcapacity.Duetotheshortageofsupplyduringthisperiod,loadshedding(controlledblack-outs)wererequiredandimplemented.Publicopinionwasvocifer-ousinitscondemnationofEskom.2.Flash-oversbetweentransmissionlinesduetohighpol-lutionfromveldfiresandunexpectedfogcausedvariouspowerlinestotrip;interruptingthepowerflowfromthenorthandforcingKoeberg’sUnit2toremoveitselffromthegridonceagain.Thisledtomoreloadsheddingtomanagethepowershortage.Thisservedonlytoincreasepubliccondemnation.Anotherriskwasidentifiedfromthescheduledrefuel-lingofUnit2whichwasscheduledforMarch2006.How-ever,therepairstoUnit1hadtobecompletedintimesothatUnit2couldbeshutdownforapproximatelytwomonthstocompletetherefuellingandroutinemaintenanceprocedures.Innormalcircumstancesbothunitswouldthenhavebeenreadytoprovidepowerforthewintermonths.TherotorfromFrancewasonlyexpected(anddelivered)duringApril2006andtherepairstothelocalrotorandsta-torwerestillunderwayatthattime.ItwasimpossibletoremoveUnit2beforeUnit1wasrepairedastherewasnomeanstoprovidefortheshortfallinelectricitysupply.TheeconomicimpactoftheFebruarypoweroutageswasestimatedtobeinexcessofR500million(aboutUS$68mor£36m)andwassubjectofdiscussionatprovincialandnationalgovernmentallevels.ToremoveUnit2fromthegridwouldimmediatelymeanashortfallofanother900MWandwouldforcefurtherloadsheddingtooccurwithitsassociatedeconomicimpact.TheWesternCapeRecoveryPlanwasanefforttodothefollowing:(1)explaintheelectricitysupplyproblem;(2)forecastthepowerdemandandexpectedshortfallforthewintermonths;(3)providethetimelinesforKoebergFig.1.Demandforelectricityasshowninthepeakperiods.152R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163

Unit1toberepairedandUnit2toberefuelled;(4)iden-tifyallrisksthatcouldimpactontheprojectplan;(5)developmitigatingactionsfortheidentifiedrisks;(6)iden-tifyotherenergysavingoptionstominimizetheimpactoftheshortfall;(7)provideloadsheddingprinciplesandguidelines;and(8)providestakeholderandcommunica-tionguidelines.ThisplanwasacombinedeffortbetweenEskom,theCityofCapeTown(electricitydepartment)andREDONE(therecentlyformedregionalelectricitydistributor).AnEskomRecoveryTeamwasestablishedwhichwasheadedbytheManagingDirectoroftheTransmissionDivision.TheteamstructureisshowninFig.2.TheteamreportedintoabiggeroperatingmodelmadeupofvariousstakeholdersheadedbytheEnergyRiskManagementCommittee(ERMC)asshowninFig.3.TheEskomRecoveryTeam(ERT)metatleastonceeverytwoweekswhereprogressontheRecoveryPlanwasgiven.Thefeed-backwasconsolidatedandforwardedtotheIntegratedRecoveryTeamandfinallytoERMC.AweeklystatusLoad Shedding StreamleadKSACS Streamlead DSM Streamlead Customer Services StreamleadGrid and National Control Streamlead Human Resources StreamleadKoeberg/GenerationStreamleadCorporate Finance StreamleadEskom Enterprises StreamleadOther CorporateFunctionsCorporate Communications/ERD Streamlead WR Communications & Stakeholders Streamlead Corporate Spokesperson KeyPMSO – Programme Management Office DSM – Demand Side ManagementERD – External Relations Dept. WR – Western Region Recovery Programme PMO Recovery Programme Manager Corporate Communications & Stakeholder Manager Regional Recovery Sponsor National Recovery Sponsor Transmission Managing Director Western Region General Manager Western Region Risk Manager Fig.2.TeamstructurefortheWesternCapeRecoveryPlanproject.EskomHoldingsEskomExecutiveEskomRecoveryTeam Dept ofPublicEnterprisesDept of Provincial&Local GovernmentProvincialGovernment Energy Risk Management CommitteeERMCRecoveryTeamIntegratedRecovery Team MunicipalMunicipalRecoveryTeamRED1OtherStakeholdersDept of Minerals& EnergyFig.3.StakeholderstructureforriskmanagementoftheRecoveryPlanproject.R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163153

reportwasalsocompiledbyERTandpublishedinternallywithinEskomandexternallytothegeneralpublic.5.RiskmanagementoftheRecoveryPlanprojectTherearetypicallyfivestagesassociatedwithriskman-agement,namely:(1)riskmanagementplanning,(2)riskidentification,(3)qualitativeandquantitativeriskanalysis,(4)riskresponseplanning,and(5)riskmonitoringandcon-trol[3].However,EdwardsandBowen[4]statethatthepro-cessofriskmanagementshouldincludeevaluationandreportingandtheyhaveasaresultcategorisedtheprocessofriskmanagementintoninestages:Identification;Classifi-cation;Allocation;Analysis;Response;Recording;Moni-toring;Control;andEvaluation.Chapman[5]identifiedninephasesofthegenericriskmanagementprocess(RMP),comprising:define;focus;identify;structure,owner-ship;eliminate;evaluate;planandmanage.Practically,how-ever,itispossibletoclassifyallthesestagesintoafour-stageriskmanagementcycle:riskidentification;riskanalysis;riskresponse;andriskreporting.Theriskidentificationstageincludesclassificationandallocation,whileriskreportingincludesmonitoring,controlandevaluation.Theriskman-agementpracticeoftheRecoveryPlanprojectwithintheEskomintegratedriskmanagementprotocolispresentedbelowalongthelinesofthisfour-stageframework.5.1.Riskidentification(andclassificationandallocation)oftheRecoveryPlanprojectTheroleofstakeholdersintheRMPisemphasisedbyLoosemoreetal.[6].Accordingtothem,effectiveandfre-quentinvolvementofstakeholdersatallstagesoftheRMPwillensurethatmorerisksareidentifiedandcommitmentobtainedinmanagingthem.Stakeholdermanagementbecomesverycriticalintheriskidentificationprocessgiventhattheycanhaveconflictinginterestsandtherisksidenti-fiedcouldbebiasedtowardsthoseinterestsorlimitedtotheirownexperiences.Thepossibilitythatthestakeholdermixcouldchangeovertimealsohasanimpactonprojectobjec-tivesanditsassociatedrisks.Furthermore,stakeholdersmightbeunabletoexpresstheirobjectivesclearlyorlimitthesharingofvalidinformationduetoconfidentialityorinter-stakeholderpolitics.Hence,theyhavesuggestedthattheriskmanagerorriskmanagementserviceprovidershouldencouragestakeholderstobalancetheirobjectiveswithoneanother,beflexiblewherepossible,andunderstandthepres-suresandbackgroundunderwhichobjectivesarecreated.Itisgenerallyacceptedthatcompanieswithorganicstructuresallowformorecreativeandimaginaryapproachestoidentifyrisks,thoughitisstilleasierformechanisticstructuredcompaniestoimplementthoseapproaches[4].Thisisbecausethelattercouldprovidebackingintheformofauthoritysources,addressingpossi-bleresistance.Hence,companies’managementshouldbecommittedtotheriskmanagementprocess,identifyingleaderswithastrongpersonalpassionforthesubject.Theclassificationofriskscreatesacommonframeworkforgroupingrisks,althoughdifferentculturescouldclassifythesameriskdifferently.EdwardsandBowen[4]suggesttwoprimarycategoriesforclassifyingrisks:NaturalandHumanRisks.Naturalrisksarethosefromsystems‘‘beyondhumanagency’’whichincluderisksfromweather,geologi-cal,biologicalandextraterrestrialsystems.Risksfromhumansystemsaremoredifficulttocategoriseduetotheiroverlappingnature.Theseincluderisksfromsocial,political,cultural,health,legal,economic,financial,technicalandmanagerialsystems.Baber[7]referstointernallyandexter-nallygeneratedrisks.TheProjectManagementInstitute[8]classifiesriskintointernalandexternal.Examplesofinternalriskinprojectdevelopmentareissuesrelatingtolabour,materials,siteconditions,cashflow,etc.,whileexternalrisksincludegovernmentalregulations,vandalism,sabotage,environmentalfactors,marketforces,inflation,etc.Itisgenerallyacceptedasagoodriskmanagementprac-ticethatariskshouldbeallocatedtothepartywhocanbestmanageitthatrisk.Toavoidduplicationitissuggestedthatcontinuousinvestigationsareundertakenduringthepro-cessofriskmanagementtoensurethatanotherstakeholderhasnotalreadytakenupthecontrolofarisk[6].Eskom,ingeneral,isveryriskawareandhasinvestedconsiderableresourcesintothisprojectmanagementprac-ticewithinthecompany.Manyprocessesareinplacetoidentifyandmanagepotentialrisksinitsvariousfunctionalareas.WithinitsDistributionDivisionthefociofopera-tionsarecustomerservices,engineering(safetystandards–occupationalsafetyandhealthrequirements);finance;humanresources;informationmanagement;andcommer-cial.AllofthesefunctionaldepartmentsarerepresentedontheBPIRCommitteewhererisksareraisedandman-aged.Atthislevelrisksarecategorizedasfollows:finance;technicaloperationandperformance;legalauditandcom-pliance;people;strategicacquisitions,divestituresandpro-jects;strategy;transformation;pricing;regulatory(NER);stakeholders;information;subsidiaries,associatesandjointventures.Inthisparticularcase,themainreasonfortheinade-quatesupplycapacitytomeettheneedsoftheWesternCapewithinthenormallyenvisagedriskpossibilityofalossofgenerationatKoebergwasaggravatedbydecisionsbycentralgovernmentthatlimitedthecapacityofEskomtobuildnewpowerstationsortransmissionlines.ArisingfromtheWhitePaperonEnergyPolicy[9],governmentdecideditwasnecessarytoproceedwith‘theunbundlingofEskom’sgenerationandtransmissiongroups’and‘sep-aratethepowerstationsintoanumberofcompanies’to‘createtheopportunityforprivatesectorandBlackEco-nomicEmpowermentinvestmentopportunitiesinthegen-erationsector’.Later,theIntergovernmentalFiscalReview[10]stated‘TheESIrestructuringinvolvesthreekeyaspects:thesaleof30percentofEskom’sgeneratingcapacitytoprivateinvestors,withablackempowermentequitystakeofatleast10percentofcapacity;thesepara-tionofEskomintoseveralgenerationclustersandasepa-154R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163

ratetransmissioncompany;andtheintroductionofanelectricitymarket,whichwillensurecompetitionbetweenthedifferentelectricitygenerators.Thesereformswillbeginduringthecourseof2003.’Thecentralgovernmenthadtakenresponsibilitytomanagetheinvestmentdecisionsofthesupplyindustry,anditwasonlyinlate2004,withloominginsufficientcapacity,thatthedecisionwasmadetoreturntheresponsibilityforelectricitysufficiencytoEskom[11].Thus,Eskomwasconstrainedbyexternalforcesinitsabilitytorespondtoidentifiedrisk.Mostsub-sequentriskwasaconsequenceofthisexternalrisk.TheidentifiedrisksareusuallyassignedtotheBPIRCommitteemembersformitigation.Althoughthecommit-teemembersremainaccountable,theycouldsubsequentlydelegatetheriskmitigationactionsandmanagementtorel-evantstaffwithintheestablishment.TheEskomRecoveryTeampanelofexpertsresponsibleforaddressingtheWesternCapeRecoveryPlanprojectcomprisedseniormanagersdrawnfromthefollowingdepartmentsand/ordivisions:NationalRecoverySponsor(thisisrepresentedbytheManagingDirectoroftheTrans-missionDivisionwhohasoverallaccountabilityforexecut-ingtheRecoveryPlan);RegionalRecoverySponsor(representedbytheGeneralManagerofDistribution–WesternRegion);andProgrammeManager(RiskManager–Distribution(WesternRegion),responsiblefordrivingtheRecoveryTeamfromaprojectandriskmanagementperspective).OtherfunctionsrepresentedonthepanelareProjectManagersandConsultants;LoadSheddingstream,DemandSideManagementstream;GridandNationalControlstream,Koebergstream(representedbytheProductionManagerforGeneration–NuclearCluster–whoisresponsibleforallactivitieshappeningattheKoebergNuclearPowerStation,i.e.repairingofUnit1,shuttingdownofUnit2forrefuelling,andmanagingtheoutputcapacitiesoftheseparateunits);EskomEnterprisesstream;KeySalesandCustomerServicesstream;CustomerServicesstream;HumanResourcesstream,Financestream;OtherCorporateFunctions(ManagersfromLegal,AuditandSecurityatcorporatelevel);ExternalRelationsDepart-mentstream;andCommunicationandStakeholderstream.ThisisacomprehensivestakeholderpaneltoensurethatnofunctionwithinEskomthatmaycontributetothesolu-tiontoresolvetherisksassociatedwiththeRecoveryPlanprojectisleftout.Thispanelcompiledanextensivelistofrisksandmitigatingactionsbasedontheirindividualexper-tiseandinputfromtheirrespectiveteamsandbusinessenvi-ronments.Someriskswereidentifiedbasedonpreviousexperience,whilstotherswerebasedondocumentedrulesandregulations(especiallyinthenuclearenvironment).ThepanelalsoidentifiedriskownershipandreportingmechanismsaroundtheserisksasshowninTable2.ManyoftheriskslistedinTable2havearisenasaresultofthemitigationstrategiesforothers.Forexample,theriskofnotbeingabletosupplythedemandforelectricity(RiskNo.20)ismitigatedbyDemandSideManagement(DSM)initiativeslikeprovidinganexchangeprogrammeforCompactFluorescentLamps(CFLs).3Provisionofenoughlights(RiskNo.23)andthepublic’stake-onoftheprogramme(RiskNo.21)becameadditionalriskstomanageasaresultmitigatingRiskNo.20.Inaddition,therewereacoupleofunidentifiedriskswhicharoseastimewentby:(i)afaultyvalveatKoebergwasdiscoveredafterUnit1wasreturnedtoservice;(ii)apinholeleakwasdiscoveredinKoebergUnit1,thoughitposednothreattooperations;and(iii)aproblemwiththeelectricalsupplyboardsatKoebergwasdiscoveredwhichforcedUnit1toshutdownafterithadbeenre-commissioned.Theriskidentificationmatrix(Table2)alsoindicateswhetherEskomortheCityofCapeTown(orboth)isresponsibletoactiontherisks.TherelevantRecoveryTeam’smembersareidentifiedasaccountableforparticu-larrisksandtheyareabletodelegatesuchriskstotherel-evantstaffasappropriate.Despitetheinvolvementonthepanelofvariousstake-holdersintheriskidentification,classificationandalloca-tionprocesses,certainshortcomingsbecameapparent,including:(1)aweakrelationshipbetweenEskomandtheCityofCapeTown(thetwokeyownerships–internalandexternalrespectively–ofthevariousrisks)leadingtoeachblamingtheotherandmiscommunicationstothepublic,i.e.customers;(2)lackofanintegratedRecoveryPlanbetweenthedifferentstakeholders(probablyduetoanexcessivenumberofmembersonthepanel);and(3)theriskswerenotnecessarilycategorisedaccordingtoEskomstandardsi.e.,theyweregroupedaccordingtothebusinessareasidentifiedfortheRecoveryPlan(i.e.,LoadShedding,Koeberg,Communication,etc.).Theexcusegivenfortheseshortcomingsintheriskmanagementpro-cessattheidentificationstageisthecrisissituationunderwhichtheseriskswereidentified.5.2.RiskanalysisoftheRecoveryPlanprojectItisimportantforperceivedriskstobeevaluated,decomposed,andsubjectedtosomeformofassessmentinordertounderstandthemagnitudeoftherisksfacingtheorganization[4].Theassessmentmethod,whichshouldbeappropriatefortheriskandorganisation,shouldmea-suretheriskseveritytodeterminewhatmanagementactionandprioritytoapply.Riskanalysisreliesonaqualitativeand/orquantitativeapproach.Itis,however,suggestedthatquantitativeriskanalysisshouldonlyfollowonqual-itativeriskanalysis,wherethelatterhasexposedimportantriskswhichcouldbeanalysedwithreliabledataandwherenumberswillmakelogicalsenseandcouldbeinterpretedsensibly[6].Qualitativeriskanalysescould,inmanycases,besufficienttoassessthemagnitudeofrisks,althoughsuchanalysisissubjectiveandsubjecttoerrorsofjudgement.To3Eskominitiatedaschemedwherebythepublicwereencouragedtoexchangetheirconventionallightbulbsforlesselectricity-consumingCFLs–atnocosttotheconsumer.R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163155

overcomethedisadvantagesassociatedwithqualitativeriskanalysis,somequantitativeattributescanbeincorpo-ratedmakingitasemi-quantitativeriskanalysis.Thiscanbedonebyassigningpredeterminedvaluestotheprobabil-ityandimpactwhichwillresultinmorepreciseestimatesofrisksasshowninTable3[4].Ofcourse,differentorganisationswillassigndifferentvaluesforsemi-quantitativeriskanalysiswhichwilltaketheirriskattitudeandexposureintoaccount.Anorganisa-tioncouldalsoassigndifferentvaluesfordifferentprojects.AccordingtoEdwardsandBowen[4],whetherorganisa-tionsusequantitativeorqualitativeriskanalysismethods,decisionscouldstillbebasedonemotionsand‘gut-feel’ratherthanontheresultsgeneratedbytheapplicationofriskanalysistechniques.RisksofvariousnaturesandmagnitudescouldarisefromthedifferentareasoftheDistributionbusinesswithinEskom(CustomerServices,Engineering,Finance,etc.).Hence,theBPIRCommitteehasproducedaqualitativeanalysisratinganddescriptionprotocoltobeappliedtoriskmanagementwithintheestablishmentasshowinTable4.Basedontheratingandthedescriptionprotocol,Table2RiskidentifiedforWesternCapeRecoveryPlanprojectRiskno.DescriptionAllocatedtoEskomCityofCapeTown1CollapseofaginginfrastructureduetofrequentswitchingX2InabilitytosticktoloadsheddingschedulesXX3InsufficientnumbersofauthorizedstaffformanualswitchingoperationsX4PooroperationalcommunicationsX5PoorcommunicationswithpublicXX6InabilitytosoftenimpactXX7DependencyonstandbyplantandequipmentX8Normalmaintenanceandrefurbishment/expansionworkwillbeimpactedbytheabnormalstateofthenetworks,resultinginmaintenancebacklogs,failuretocompleteprojects,etc.XX9Electricitystaffburn-outwillresultinlowefficiency,increasedriskofaccidentsandequipmentdamageX10PotentialcommissioningdelaysintherecoveryofUnit1:XPotentialforcommissioningdelaysduetotherotorfromFrancenotbeingidenticaltotheoneremovedtoRoshervilleAnotherreasonforcommissioningdelayscouldincludestatorbarfailureduringstatorrepairPastrecordsindicatethatdelaysinunitstart-upfollowinganoutagearequitecommon11Koeberg:Unexpectedtrippingontheturbine-generatorsetX12Koeberg:ControlledshutdownduetooperationalconstraintsX13DelayedreturnofaKoebergunitafteratrip.X14PotentialcommissioningdelaysofUnit2X15LogisticsoftransportingthegeneratorequipmentontimeX16UnavailabilityofPalmiethydro-electricsupplyXDuetolimitedopportunitiestorestoredamlevels,Palmietcouldbecon-strainedintermsofpoweroutput.PotentialplantfailurescouldalsolimitthefulloutputofPalmiet.17FailureofsometransmissionequipmenthasinpastresultedinpartialortotalblackoutoftheCape.X18TransmissionLinesandsubstationsXFiresFogandmist19TotalBlackoutX20InabilitytosupplythedemandofelectricityX21ExtentofconsumeradoptionofenergyefficiencymeasureslessthanexpectedX22VerbalandphysicalabuseofimplementersX23Projectdelayscausedbytimerequiredtoacquireequipment(CompactFluorescentLamps(CFL’s),gascylinders,etc.)XTable3PredeterminedvaluesallocatedtoprobabilityandimpactofriskfactorProbabilityPredeterminedValueImpactPredeterminedValueRare0.10Insignificant5%ofcostUnlikely0.30Minor10%ofcostPossible0.50Moderate20%ofcostLikely0.70Major40%ofcostAlmostCertain0.90Catastrophic80%ofcost156R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163

theBPIRCommitteeisabletodecidehowtheriskswillberankedandprioritised(Table5).Asemi-quantitativeapproachisalsousedtoevaluateEskomprojects,whereprobabilityisindicatedasapossi-bilitypercentageofariskoccurringandimpactasaRandvaluewhichrelatestothepercentagecostimpactofthespecificproject.Theproductoftheprobabilityandimpactisthenusedtodeterminetherankingoftherisk.Quantita-tiveriskanalysisismostlyappliedinthebusinessareasofthecompanywheretheyaremoreapplicable,e.g.financeandcommercialissueswhereinvestmentrisksneedtobeconsidered.AqualitativeriskanalysismethodwasadoptedfortheRecoveryPlanproject,basedontheexpertiseoftheRecov-eryPlanteamandlessonslearntfrompreviouslessseriouscrisisprojects.Quantitativeanalysisisappliedfortransmis-sionloadfactorswhilstimpactandprobabilityratings,Table5QualitativeriskanalysisoftheRecoveryPlanprojectrisksRiskno.DescriptionImpactProbability1CollapseofaginginfrastructureduetofrequentswitchingHM2InabilitytosticktoloadsheddingschedulesHM3InsufficientnumbersofauthorizedstaffformanualswitchingoperationsMH4PooroperationalcommunicationsMM5PoorcommunicationswithpublicHM6InabilitytosoftenimpactMM7DependencyonstandbyplantandequipmentHH8Normalmaintenanceandrefurbishment/expansionworkwillbeimpactedbytheabnormalstateofthenetworks,resultinginmaintenancebacklogs,failuretocompleteprojects,etc.MM9Electricitystaffburn-outwillresultinlowefficiency,increasedriskofaccidentsandequipmentdamageMH10PotentialcommissioningdelaysintherecoveryofUnit1:HLPotentialforcommissioningdelaysduetotherotorfromFrancenotbeingidenticaltotheoneremovedtoRoshervilleAnotherreasonforcommissioningdelayscouldincludestatorbarfailureduringstatorrepairPastrecordsindicatethatdelaysinunitstart-upfollowinganoutagearequitecommon11Koeberg:Unexpectedtrippingontheturbine-generatorsetHM12Koeberg:ControlledshutdownduetooperationalconstraintsHL13DelayedreturnofaKoebergunitafteratripHM14Potentialcommissioningdelaysofunit2ML15LogisticsoftransportingthegeneratorequipmentontimeLL16UnavailabilityofPalmietHMDuetolimitedopportunitiestorestoredamlevels,Palmietcouldbecon-strainedintermsofpoweroutputPotentialplantfailurescouldalsolimitthefulloutputofPalmiet17Failureofsometransmissionequipment,haveinpastresultedinpartialortotalblackoutoftheCapeVeryhighL18TransmissionLinesandsubstationsHLFiresFogandmist19TotalblackoutVeryhighL20InabilitytosupplythedemandofelectricityMM21ExtentofconsumeradoptionofenergyefficiencymeasureslessthanexpectedHM22VerbalandphysicalabuseofimplementersML23Projectdelayscausedbytimerequiredtoacquireequipment(CFL’s,gascylinders,etc.)HMTable4BPIRCommitteequalitativeanalysisratinganddescriptionRatingDescriptorProbability1Adverseeventwillnotoccur3Highlyunlikelythattheeventwilloccur5Eventcanoccur7Highlylikelythattheeventwilloccur10AdverseeventwilldefinitelyoccurImpact1Ignore–eventisnegligible3Minor–financiallossorinjuries5Significant–lossofbusiness,significantfinancialloss,lossofjobs,somefatalities7–9Severe–lossofbusinessopportunities,majorfinancialloss,manyjoblossesandfatalities10CatastrophicimpactonEskomorthebusinessentityR.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163157

basedonhigh,mediumorlowratings,areallocatedtotherisksidentifiedfortheproject.Prioritywasgiventoallrisksthatcouldimpactoneithertherestorationofthepowersupplyorthereductionofelectricitydemand–thesebeingregardedasthemainprojectobjectives.AstheRecoveryPlanwasimplementedandtimemovedon,riskswerere-assessedandupdatedaccordingly.Forexample,astherepairstoKoebergUnit1wereprogressing,theriskofnotsynchronizingittothegridwasloweredaccordinglyovertimebeforeUnit2hadtobeshutdownforrefuelling.Aquantitativeriskanalysismethodwasusedtodeter-minetheWesternCapepowerloadanditsassociatedrisks.Table6depictstheloadforecastincomparisonwithsupplyandtheassociatedpredictedshortfall.Byusingthisanaly-sis,theRecoveryTeamwasabletocompilevariousriskscenariospertainingtothepossibilityofpowersupplyinterruptionsasshowninTable7.Byusingthesescenarios,theexpectedamountofloadsheddingcouldbedeterminedasshowninTable8.Basedonthisinformation,loadblockscouldbedesignedtomanagetheamountofloadtobeshed.Loadblocksfordifferentareaswereaggregatedtodeterminetherequiredloadtobeshed.Therewasadifferentloadblockforeverytwohoursthatloadsheddingwasrequired–toensurethatonegeographicalareawasnotinterruptedforlongerthantwohoursatatimeintermsofanunder-takingtothegeneralpublic.Theprojectadoptedacombinationofqualitative,semi-quantitativeandquantitativemethodsriskanalysisdependingonthetasktobetackledasonewouldexpect.However,certainshortcomingsarosefromtheanalyses.Inessence,theanalyseswereasonlyasgoodasthedatathatwereused.Forexample,theloadforecastindicatedthattheweekof5thJunewouldbetheperiodwhenloadsheddingcouldbetheworst(i.e.witha376MWshortfall).Ithappenedthatthisweekwasoneofthewarmestweeksoftheearlywinter,whichofcourseincreasedthefactorofuncertainty.Nonetheless,itisassumedthatthemitigat-Table6PredictedloadingandelectricitysupplyforWesternCapeLoadForecastTxLimitaKoebergbPalmietCustomerinterruptabilitycPredictedshortfallbeforeDSM13-Mar-06396724009004002006720-Mar-06395424428584002005427-Mar-0639692484816400200693-Apr-064036252677440020013610-Apr-06395225687324002005217-Apr-064054261069040020015424-Apr-06400326526484002001031-May-06404326946064002001438-May-064094273656440020019415-May-064223277852240020032322-May-064202282048040020030229-May-06410324009004002002035-Jun-064276240090040020037612-Jun-064267240090040020036719-Jun-064207240090040020030726-Jun-06426124009004002003613-Jul-064191240090040020029110-Jul-064128240090040020022817-Jul-064261240090040020036124-Jul-0641302400180040020067031-Jul-0641512400180040020064907-Aug-0641562400180040020064414-Aug-0642012400180040020059921-Aug-0642042400180040020059628-Aug-0641462400180040020065404-Sep-0641742400180040020062611-Sep-0640672400180040020073318-Sep-0640562400180040020074425-Sep-06394824001800400200852aTxlimitisthetransmissionlimitonelectricityimportfromtheNorth.2800MWistheabsolutemaximum.bKoeberg’sUnit2outputwasreducedovertimetodelayitsshutdownforrefuelling.cCustomerinterruptabilityarethoseagreementswithlargerpoweruserstouseselfgenerationoverpeakperiods.Table7RiskscenariosforpowersupplyinterruptionBaseCaseScenario2Scenario3Scenario4OneKoebergUnitNoKoebergOneKoebergUnitNoKoebergTwoPalmietUnitsTwoPalmietUnitsTwoPalmietUnitsNoPalmietUnitTxsystemintactTxsystemintactTxsystemcontingencyTxsystemcontingency158R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163

ingactionstominimiseloadsheddingisadequatewhenunexpectedshortfallsdooccur.Inthisinstanceplanswerepreparedfortheforecastedshortfallinpowersupply,butitnevermaterialised.Thismeansthatforecastingcouldbeinaccuratetheotherwayaroundaswell,i.e.ashortfallofpowersupplywhenitisnotexpected.However,itisassumedthatevenifthisshouldhappen,thenecessarymit-igatingplanswillkickinregardless.5.3.RiskresponseoftheRecoveryPlanprojectTheaimofriskresponseshouldbetominimisethemag-nitudeoftheriskorinthecaseofanupsiderisk,tomaximiseitsopportunityandbenefits[6].Nonetheless,organisationscandecidenottorespondtoarisk,because,forinstance,existingcontrolsareadequatetominimiseathreatorwherethereisahighprobabilitythattheriskwilldisappearinthefuture.Itcouldalsobethatrisksaresoinsignificantthatnothingneedstobedoneaboutthem.Anorganisation’sriskattitudeandexposurewillguidethisdecisionoritcouldbethatthecost/benefitresultofanyactionisactuallynegative.Itdoesnot,however,meanthattheseinsignificantrisksshouldbedeniedorforgotten.Rather,theyshouldbecon-tinuouslymonitoredtodetermineifanyoftheunderlyingcircumstanceshavechangedwhichmightrequireadifferentriskresponse.Publicperceptionand/orlegislationcouldforceanorganisationtorespondtoariskevenifitisinsig-nificant[6].Thisisparticularlyrelevantwhenitcomestopublichealthissues.Forexample,anytypeofradioactivecontaminationoftheenvironmentwillcreateapublicexpectationfortheorganisationtoattendtotheriskorleg-islationwillforceradioactivematerialstobehandledina(morecostly)certainmannereveniftheriskprobabilityandimpactisextremelylow.Formsofriskresponseareriskreduction,transfer,avoidanceandretention,oracombinationofthese.Anorganisationwillapplytheseresponsesbasedonitsriskattitudeandcost/benefitresultsaimingtowardsthe‘‘aslowaspossiblyreachable’’riskthatisleftandthenassign-ingtheproperlevelofmanagementtoit[4].OneoftheBPIRCommittee’sremitswastoensurethattheappropriateresponsewasassignedtomitigaterisksbasedonEskom’sriskresponsenomenclature:(1)treatrisk(i.e.toreducerisk);(2)toleraterisk(i.e.toretainrisk);(3)terminaterisk(i.e.toavoidrisk)and(4)transferrisk.Eskompolicyistoprovidefinancialbackingtoasetofacertainriskdecisions.Forexample,itdoesnothaveexter-nalinsurancecoverforitsmotorvehiclefleetandwouldstandinforanyclaimsorrepairsthatarerequiredinthatregard.Thisisbecausethecompanyconsidersthatinsur-ancepremiumsonitsvastnumberofvehicleswillbemuchmorecostlythantheoccasionalcostwhenafleetriskdoesoccur.Inaddition,becausethecompanyiscontinuouslyinthepubliceye,itpreferstoaddressinsignificantrisk(toler-ateinsignificantrisk)toimproveitscorporateimage.Forexample,thecompanycontinuouslyendeavourstomini-misepollutionfromitscoalstationsalthoughtheemissionlevelsarewellwithinacceptableregulatorylevelsandspec-ifications.Thecompany,however,willprefertoshareortransfersomeprojectriskstoaprojectpartnerorthirdpartyonahighmagnitudevalueproject.Table9showsthevariousmitigatingactionsthattheRecoveryPlanprojectteamappliedintheirattempttoreducetheimpactandprobabilityoftherisksidentifiedandanalysedbytheteam.ThetableshowsthatEskomcar-riesmostoftherisksbytreatingandtoleratingthem.Althoughitisdifficulttocommentonthevalidityoftheselectedmitigatingactions,theresponseoptionsthatEskomtookshowsthelevelofitscapacitytoabsorbmas-sivefinancialimpactsofrisksgiventhattheDemandSideManagementriskmitigationinitiativesaloneamountedtoR230million(aboutUS$31Mor£17m)whilethetotalRecoveryPlanprojectwasestimatedatR1.2billion(aboutUS$162Mor£87m).AnamountofR645mwasspentdur-ingthecrisisperiod.Theremainderofthebudgetisplannedforworkpreviouslyunplanned,tobeundertakenintermsofthelessonslearnedandtopreventsimilarsitu-ationsarisinginthefuturee.g.alinere-insulationproject.Timelinesareuntil2011.PartoftheDemandSideManagementriskmitigationstrategicwastelevisionbroadcaststothepublicusingcol-ourcodestomitigatetheriskofpoorcommunicationriskwiththepublic.Unfortunately,ananomalywascreatedbyusingthesamecolourscenariosontelevisionforloadshed-dingpurposesandthePowerAlertcampaign.ThePowerAlertcampaignusedcolourcodescenariostoinformTable8LoadsheddingbasedontheriskscenariosMonthPeakloadexpected(MW)Customerinterruptability(MW)LoadtobeshedinMWBasecaseScenario2Scenario3Scenario4March3969200695699692069April405420015465410542154May422320032382312232323June427620037687612762376July426120036186112612361August4204200–80412042304September4174200–77411742274%ofPeakloadtobeshedUpto9%Upto20%Upto30%Upto56%R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163159

Table9RiskresponsesstrategiesfortheRecoveryPlanprojectRiskno.DescriptionMitigation1CollapseofaginginfrastructureduetofrequentswitchingIdentify‘problem’areasReduceswitching?Repair/replace2InabilitytosticktoloadsheddingschedulesRedesignblockswithlargermarginofsafetyUsescenarios3InsufficientnumbersofauthorizedstaffformanualswitchingoperationsTrain,authorizeadditionalswitchingpersonnelArrangeloadblockssuchthatmostswitchingcanbedoneviaSCADA(remote)4PooroperationalcommunicationsShareinfowithESKOMDedicatedphonelines5PoorcommunicationswithpublicImplementcommunicationsstrategyIncreasefaultreportingcentre,betterroutingofcalls6InabilitytosoftenimpactDSM,ripplecontrol,bettersheddingschedules,communicationstrategy7DependencyonstandbyplantandequipmentCriticalallocationofavailableplantandequipmenttosupportkeyinstallations8Normalmaintenanceandrefurbishment/expansionworkwillbeimpactedbytheabnormalstateofthenetworks,resultinginmaintenancebacklogs,failuretocompleteprojects,etc.FacilitatethatmostoftheseactivitiescontinueCreateanunderstanding,throughgoodcommunicationwithcon-sumers,fortheseactivities9Electricitystaffburn-outwillresultinlowefficiency,increasedriskofaccidentsandequipmentdamageArrangeloadblockssuchthatmostswitchingcanbedoneviaSCADALimitneedforovertimeBetterplannedswitchingschedules.Dualshiftsystemforopscentre10PotentialcommissioningdelaysintherecoveryofUnit1:ThestrategyistoTREATtherisk:InspectionshaveoccurredinFranceandactionstakentomitigatethisdifficulty.Furtherinspec-tionswilloccuroncetherotorarrivesonsite.Theprojectteamismonitoringthesituationcloselyandpro-activelytakingactionstominimizetheriskThestrategyistoTREATtherisk:Theprojectteamismonitoringthesituationcloselyandpro-activelytakingactionstominimizetheriskThestrategyistoTREATtherisk:ProductionManagerroleassigned(24/7)focusingoncurrentandfutureactivitiestominimizeanyrisksPotentialforcommissioningdelaysduetotherotorfromFrancenotbeingidenticaltotheoneremovedtoRoshervilleAnotherreasonforcommissioningdelayscouldincludestatorbarfailureduringstatorrepairPastrecordsindicatethatdelaysinunitstart-upfollowinganout-agearequitecommon11Koeberg:Unexpectedtrippingontheturbine-generatorsetThestrategyistoTREATtherisk:CommunicatedtoapplicableTransmissionstaffThestrategyistoTREATtherisk:Workerinstructionsforstretch-outoperationshavebeendevelopedandimplementedpreviously.ProductionManagerroleassigned(24/7)focusingoncurrentandfutureactivitiestominimizeanyrisksThestrategyistoTREATtherisk:ProductionManagerroleassigned(24/7)focusingoncurrentandfutureactivitiestominimizeanyrisksThestrategyistoTOLERATEtherisksinceitisnotdeemedsignificant12Koeberg:ControlledshutdownduetooperationalconstraintsThestrategyistoTREATtherisk:CommunicatedtoapplicablePeakingstaffThestrategyistoTREATtherisk:ProductionManagerroleassigned(24/7)focusingoncurrentandfutureactivitiestominimizeanyrisks.ThenumberofPTswillbeminimisedThestrategyistoTREATtherisk:ProductionManagerroleassigned(24/7)focusingoncurrentandfutureactivitiestominimizeanyrisksTheriskstrategyistorespondonlyonceinformedsincenofore-knowledgeispossible13DelayedreturnofaKoebergunitafteratripThestrategyistoTREATtherisk:ThisisduetophysicalpropertiesofthecoreatthisstageinitsoperationandcannotbechangedTheriskstrategyistorespondonlyonceNNRcommunicateacon-cernsincenoforeknowledgeispossible14Potentialcommissioningdelaysofunit2ThestrategyistoTREATtherisk:ProductionManagerroleassigned(24/7)focusingoncurrentandfutureactivitiestominimizeanyrisks160R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163

viewersofwhattheimmediatesituationwasandtorequestthemtotakecertainactions.Forexample,agreenscenarioonTVmeant‘‘Noactionisrequired’’,althoughforloadsheddingpurposesupto9%ofloadcouldbeshedatanytime.Theredscenariorequesteduserstoswitchoffmulti-pleappliancesandpowerpoints(e.g.,fromelectricheatingtounnecessarylighting);thisalsomeantupto30%loadshedding.The30%loadsheddingmeantonethirdoftheWesternCapecouldsitinthedark;thiswasaveryconsid-erablerisk!TherewaslackofcorrelationbetweentheseverityoftheTValertprogramandwhattheactualsitu-ationwas.Itworkedoutwellnonetheless,asveryfewinter-ruptionstookplaceduringthetimethatinterruptionswereexpected–exceptforanunexpectedfaultatKoebergwhichforcedUnit1tobeshutdown.AlthoughallthecrisisplanswereinplaceandtheprinciplesoftheWesternCapeRecoveryPlanwereimmediatelyapplied,itcouldnotavertcontrolledblackoutsintheCityandsurroundingareasasaresultoffaultatKoebergUnit1.Themainproblem,however,withthemitigationstrate-giesemployedwasthatmanyofthestrategieswereimple-mentedtooslowly;thiswasapparentfortheDemandSideManagementinitiativesandforcommunicationandstake-holdermanagement.Table9(continued)Riskno.DescriptionMitigation15LogisticsoftransportingthegeneratorequipmentontimeThestrategyistoTREATtherisk:AteaminFrancecomprisedofEskom,Alsthom,EdFandFrenchcustomsrepresentativesareworkingtoensurethatthedepartureoftherotorfromFranceremainsontrack.ItisconfirmedthattheSANavyship,theSASDrakensberg,willbeusedtoexpeditetransport.Thiswillcutapproximatelyoneweekofftheshipmenttime.Theshipwillbetrackedonadailybasis.AdedicatedlogisticsteamiscurrentlyworkingoncustomsandportarrangementsaswellastransportationfromCTHarbourtoKoeberg.Inaddition,recoveryoftheKoebergrotorcurrentlybeingrepairedatRoshervilleisbeingpursuedinparalleltotheshipmentoftheEdFrotor16UnavailabilityofPalmietNotcapturedDuetolimitedopportunitiestorestoredamlevels,PalmietcouldbeconstrainedintermsofpoweroutputPotentialplantfailurescouldalsolimitthefulloutputofPalmiet17Failureofsometransmissionequipment,haveinpastresultedinpartialortotalblackoutoftheCapeNotcaptured18TransmissionlinesandsubstationsFires:Extensionofthefireprotectionagents(FPAs)tootherareas.FPAsareforfiremanagement,andincludelocalfiredepartments,policingforumsandcivilsocietyFogandMist:Re-insulationofthelines–Replacingglasswithsili-concompositeinsulators(short-term–focusonkeylinesandpro-jectstofocusonallcoastallines)FiresFogandmist19TotalBlackoutRegionalControlwillbedirectedbyNationalControlTherewillbedirectcommunicationbetweenEskom’sRegionalandNationalControlwithCityofCapeTown’sControlCentreTheEmergencyOperatingCentre(EOC)willberesponsibleforcommunicationwiththeRegionalCrisisCentreIftheEOCisnotyetactivetheRegionalControlCentrewillalerttheRegionalCrisisCentre(RequiredisonlyonecontactpersontoavoidsidetrackingtheControlCentrefromdoingswitching)TheemergencywillfurtherbemanagedaspertheESKOMproce-duresdorestorepowersupplytoaffectedareasintheCapeAllcommunicationwithESKOMwillbethroughtheEOCAllexternalcommunicationabouttheblackoutwillbethroughtheRegionalCrisisCentre20InabilitytosupplythedemandofelectricityInitiatevariousDemandSideManagementProgrammes.Thiswillinclude:CFLexchangeSelfgenerationGasconversionsVoluntaryconservationSubsidisingelectricityefficientdevices21ExtentofconsumeradoptionofenergyefficiencymeasureslessthanexpectedAdiverserangeofprojectswillbepursued.Successfulprojectswillbeacceleratedtomakeupforprojectswithlowersuccess22VerbalandphysicalabuseofimplementersImplementerswillworkinteamsandwillavoid‘hotspots’23Projectdelayscausedbytimerequiredtoacquireequipment(CFL’s,gascylinders,etc.)ProcurementprocesseswillbestreamlinedasfaraspossibleR.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163161

5.4.Riskreporting(recording,monitoring,controlandevaluation)oftheRecoveryPlanprojectItisconsideredgoodpracticeforriskstoberecordedinarisklogorregisterdatabasesystem[12]aftertheyhavebeenidentifiedandassessed.Thisistofacilitatethemoni-toring,controlandevaluationoftherisks.Eachriskshouldbeuniquelyidentifiable(usingarisknumber/code),indicating:thedescription;thetypeofrisk;theassignedriskowner;andtheapplicableriskresponseandmitigationaction.Itisimportantthatthefrequencyofmonitoringtheriskandthemethodofreportingarepre-decidedveryearlyintheriskprocess[4].Atthesametime,mode(s)ofcom-municatingtheriskstorelevantstaffandexternalstake-holdersmustbeintroduced[6].AccordingtoLoosemoreetal.[6],thegreatertheriskthemoreseniormanagementshouldbecomeinvolved.Thisisalsoimportantwhereriskresponseimplementationislikelytomeetwithresistance,particularlywhereresources(fundsandpeople)areredirectedfromotherprojectsorfunctionstomitigaterisks[6].MonitoringandcontrollingofriskswillhighlighttheurgencyoftheRiskManagementSystemandmakerisksmoreobvioustoidentify.Italsoincreasesriskawarenessandthereforereducesriskmagni-tudeasmoreinformationbecomesavailable;anditshouldalsoallowriskknowledge/lessonslearnttobecapturedforfutureprojectuse[4].TheBPIRCommitteehastheoversightresponsibilityofalltheriskswithintheWesternRegionDistributionDivisionbusiness.Oneofitsmainobjectivesistointe-gratetheserisksandassesshowoneriskcouldimpacton,orcreate,another.Italsoidentifiestheriskimpactontheotherregions,divisionsand/orsubsidiaries.Itaimstomakethebusinessmorerisk-awareandencour-agestheinclusionofriskmanagementprocessesinthenormalbusinessprocesses.TheBPIRCommitteesuggeststhatrisksbereviewedannuallyforthosewheretheexpo-sureislongtermandcouldhaveanimpactonlong-termbusinessobjectives.Monthlyreviewsaredone,however,tokeeptheRMSdynamicanduptodate.Ad-hocriskanalysesareundertakeninthecasewherechangesoccurthatcouldhaveanegative(orpositive)impactonthebusiness.Forprojectdevelopment,theCommitteesug-geststhatriskanalysisandmonitoringareundertakenatthreestages:conceptphase;beforeimplementation;andwhentherearesignificantchanges/problemsduringimplementation.TherisksontheRecoveryPlanprojectwererecorded,continuouslymonitored,andregularlyreportedtotheCommitteeandtothevariousstakeholdersinvolvedintheprojectwithlessonslearntincorporatedintothefeed-backprocess.Nonetheless,theinitialRecoveryPlanreportdidnotindicatealltheriskanalysisresultsonimpact,probabilityandmitigatingactions.Thiswasnotedandremediedjustintimetoensurethattheseomit-tedinformationdidnotimpactonthemanagementoftherisks.6.TheWesternCapeelectricitycrisisaftermathTheNationalElectricityRegulatorSouthAfrica(NERSA)decidedtoformallyinvestigatetheincidentsatKoeberg’sUnits1and2whichoccurredduringNovember2005.Theseincidentsarenotdiscussedinthisreport,butwerealsoduetoaswitchingfaultandflash-oversbetweentransmissionlinesduetohighpollutionfromveld(grass)fires.4Atthetimeonlyoneunitwasgeneratingpowerastheotherunitwasofflineduetomaintenancebeingcarriedout.NERSA,however,foundthatEskomwasnegligentintermsofmaintenanceprocedures.Itidentifiedfaultypro-tectionsystemsandfoundEskominbreachofitslicenseconditions.AtKoebergitfounddeficienciesinitsconfigu-rationmanagement,non-conformancetoproceduresandill-disciplineincertainareas.TheRegulatorindicatedthat,iffoundguilty,EskomcouldbefineduptoR300million.5EskomcontestedtheNERSAreportandrespondedthatnotallincidentsindicatednegligenceorabreachoflicensecon-ditions.Itemphasisedthatthenuclearsafetyregulations,assetbytheNationalNuclearRegulator(NNR),haveneverbeenviolated.Eskomhas,however,acknowledgedthattherewereoversightsregardingsomeofitspracticesandprocedures.6ThedamagedoneduringtheJanuary2006mainte-nanceonUnit1(asperthereport)wascausedbyaboltleftbehindinthegenerator.Atthetimeaconcernwasraisedbecausetheboltwasofanothertypethanthoseusedinthegenerator.Threeinvestigationstookplace:onebythepoliceandthesecurityservicesincludingtheNationalIntelligenceAgency,onebytheNationalEnergyRegulator,andathirdbyEskomitself.Originallyitwasthoughtthattheunitcouldhavebeensabotaged,butthesefearswerelaidtorestaftertheinvestigationswerecompletedandthecauseoffailureascribedtohumanerror.7Someofthekeylessonslearntinclude:8TheWesternCapeisvulnerabletopowersupplyissues–ensuremitigationplanisinplaceatalltimes.Ensuresupportfromalloperationstoallowplantper-sonneltofocusontheproblemsathand.Streamlinethecommunicationprocesstobelesscum-bersomeandtimeconsuming.Co-ordinateallcommunicationwithgovernmentacrossallthreetiers.Needtoknowandbesensitivetothedirectandknock-onimpactoncustomersandtheEconomy.4http://www.fin24.co.za/articles/economy/display_article.aspx?Nav=ns&lvl2=econ&ArticleID=1518-25_1836685(20/10/06).5http://www.mg.co.za/articlePage.aspx?articleid=280838&area=/breaking_news/breaking_news__business/(15/9/06).6http://www.mg.co.za/articlePage.aspx?articleid=281096&area=/breaking_news/breaking_news__business/(15/9/06).7http://www.southafrica.info/what_happening/news/erwin_koeberg180806.htm(20/10/06).8061004_ExcoBoard_Presentation_Close-outReport_RvW2.ppt.InternalEskomdocument,unpublished.162R.vanWyketal./InternationalJournalofProjectManagement26(2008)149–163

EnsureprotectionofKeyIndustrialCustomerloads(withinlimits).Prioritiseloadsheddingbasedonupfrontdeterminedprinciples.PublishLoadSheddingschedulesaweekinadvanceandsticktothesesincebusinessesplanoperationsaroundthem.Restoreconfidenceintheelectricityindustry,i.e.build/sustainreputationandcorporateimage.Mediaeducationandrelationshipbuilding.Identifymultiplelevelsofriskandperformadequateriskmanagement.Understandtheimpactandimportanceofvariouslevelsofcrisiscommunicationandmessagesbeingsentout.7.ConclusionsTheobjectiveofthispaperwastodocumenttheprocessofriskmanagementusedbyautilitycompanyformanag-ingrisksassociatedwithitsprojects.ThepaperhasreflectedonthetheoryandpracticeofriskmanagementbypresentingriskmanagementoftheRecoveryPlanpro-jectoftheDistributionDivisionofEskomHoldingLtdinSouthAfrica.Thecompany’sriskmanagementsystempolicyallowsfortotalriskintegrationbetweendivisions,regionsandfunctionaldepartments.Thecompanyensuresthatariskmanagementprocessformspartofitsstrategyanddevelopsacompanygovernancestructuretoimple-mentandmaintaintheprocess.However,potentialrisksandopportunitiesareidentifiedwithinitsvariousbusinessdivisions,departmentsandfunctions.Riskaccountabilityisimplementedatthecompany,divisionalandprojectlev-elsbyassigningriskstothemembersoftheriskmanage-mentteamtoensurethatmitigatingactionsareimplemented.Theprogressofriskmitigationistrackedonaregularbasis.However,certainshortcomingsareevidentintheriskmanagementprocessofthecompany.Theseshortcom-ingsinclude:anexcessivenumberofstakeholdersthatarerepresentedontheriskmanagementpanelsandcom-mittees;aninabilitytosticktotheoverallcompanyriskmanagementprocessatatimeofcrisis;andlooseimple-mentationofthecompany’sriskmanagementsystemacrossitsvariousdivisionsandbusinessfunctions.Lackofintegrationofexternalandinternalstakeholders(inthiscase,EskomandtheCityofCapeTown)isanothershortcomingoftheriskmanagementsystem,aswastheassociatedriskcommunicationtothepublicandkeycustomers.Thecompanyhasaccesstoandusesdifferenttech-niquesofriskmanagement,suggestingthatthereiscon-gruencebetweenthetheoryandpracticeofriskmanagementbythecompany.However,thecompanyadherestoaverysimpleriskmanagementprocessthatenablesittocarryoutitsbusinessfunctions.Thecom-pany’suseofquantitativeriskanalysisisverylimited,althoughithastheresourcestousemoresophisticatedtypesofanalysestoassistinitsRMS.Thistendstosup-portElkingtonandSmallwood’s[2]viewthatthecurrentprocessthatthisutilitycompanyusesforriskmanage-mentisweak.Althoughthisisautilitycompanywithmoreattendantriskscomparedwiththeriskslevelsandfactorsfacedbyotherindustries,thereisnoevidencethatthecompanyuti-lisesmoresophisticatedriskmanagementtools.Rather,thecompanystrategywastoraiseriskawarenesswithinitsbusinesssupportedbyhighlevelgovernancestructuresandtoensurethatriskmanagementisanintegralpartsofbusinessactivities.Riskmanagementactivitiestakeplaceatdifferentlevelswithinthecompany.Futureresearchcouldmeaningfullybedirectedatestablishingtheeffectivenessandefficiencyofthismultilevelriskmanagementstrategy.AcknowledgementTheauthorsareindebtedtoProfessorTrevorGaunt,DepartmentofElectricalEngineering,UniversityofCapeTown,forhisvaluableinputconcerningexternalforcesini-tiallyconstrainingEskom’sabilitytorespondtoidentifiedrisk.References[1]MillerR,LessardD.Understandingandmanagingrisksinlargeengineeringprojects.IntJProjectManage2001;19:437–43.[2]ElkingstonP,SmallmanC.Managingprojectrisks:acasestudyfromutilitiessector.IntJProjectManage2002;20:49–57.[3]TaylorH.CongruencebetweenriskmanagementtheoryandpracticeinHongKongvendor-drivenITprojects.IntJProjectManage2005;23:437–44.[4]EdwardsPJ,BowenPA.Riskmanagementinprojectorganisations.Elsevier:ButterworthHeinemann;2005.[5]ChapmanC.Projectriskanalysisandmanagement–PRAMthegenericprocess.IntJProjectManage1997;15:273–81.[6]LoosemoreM,RafteryJ,ReilyC,HiggonD.Riskmanagementinprojects.2nded.TaylorandFrancis;2006.[7]BakerRB.Understandinginternallygeneratedrisksinprojects.IntJProjectManage2005;23:584–90.[8]ProjectManagementInstitute.Aguidetotheprojectmanagementbodyofknowledge(PMBOK),2000ed.NewtonSquare,PA:ProjectManagementInstitute;2000.[9]DepartmentofMineralsandEnergy(1998)WhitepaperontheEnergyPolicyoftheRepublicofSouthAfrica(p.55),availableathttp://www.dme.gov.za/pdfs/energy/planning/wp_energy_policy_1998.pdf(accessedon11May2007).[1

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