In this exclusive piece, Risk Insight Consulting principal consultant, Gareth Byatt, looks at infrastructure work being planned and undertaken across the Asia-Pacific region and considers how risk management plays an important part in achieving good infrastructure project outcomes
The amount of investment going into infrastructure across the Asia Pacific region is huge and it is growing. A few years ago, the Asia Pacific infrastructure market (Asia and Oceania, which includes Australia) was forecast by some analysts to grow by 7-8% a year, reaching about US$6 trillion a year by 2025. The analysis estimated that by 2025 the Asia region could be worth about 60 percent of the world’s infrastructure spending.
The Asian Development Bank (ADB) has published various reports on infrastructure in the region. Their report titled “Meeting Asia’s Infrastructure Needs” provides a summary of estimated infrastructure investment requirements. Two tables from this report are below (for full details, refer to the report available on the ADB website):
A few examples of infrastructure work in the region
Examples of the many infrastructure projects and programmes of work underway across Asia Pacific, including Australia, include:
- China’s Belt and Road Initiative (BRI) is a multi-faceted, multi-year economic, diplomatic and geopolitical undertaking that covers an investment programme across several countries including road, energy, rail, telecoms and ports
- Malaysia’s infrastructure plans and projects include the MRT Line 2 project, a circa 150km Mass Rapid Transit system in and around KL, and various other initiatives
- In Singapore, projects include a new Terminal 5 planned for Singapore’s Changi airport, and the Tuas mega-port
- In the Philippines, major infrastructure projects have recently been approved including bridges, roads and the country’s first subway (Japan is an influential funder)
- Vietnam’s many projects include the Long Thanh International Airport and the Ho Chi Minh City (HCMC) Metro Rail System
- Australia’s infrastructure projects include the Westconnex road project in Sydney, Sydney Metro (currently the country’s biggest public transport project) and Melbourne Metro
This list doesn’t even touch upon the many projects in power and energy, water supply (including dams) and telecoms.
Infrastructure projects are challenging to undertake, with complex risks
Infrastructure projects are significant, long-term undertakings that have a broad range of stakeholders coming together. They come with large amounts of risk and uncertainty. With lifecycles that are measured in years or decades, broad and challenging scopes of work, and complex finance and budgetary arrangements, infrastructure projects have complex interconnected risks (for more detail about risk interconnectivity, refer to this article). How risk is viewed and, in contractual relationships, shared amongst stakeholders is critical to how the project is managed.
Whilst there are well-documented examples of infrastructure projects around the world that have not gone to plan, there are also examples of infrastructure work around the world that have achieved, or surpassed, their long-term objectives.
Many aspects to managing risk on infrastructure projects are applicable to other industries and sectors. Below are a few key points.
1. Make sure the management of risk is stitched into project activities
The management of risk works well when stakeholders connect and integrate with each other and avoid working in silos. Good risk management can act as “glue” to help this integration, and to avoid “stakeholder silos”.
The management of risk needs to be fully integrated into all aspects of the project’s initiation, planning and delivery, not an activity carried out by a few people “on the side-lines”. When managing risk is stitched into how the team operates in an integrated way, various perspectives are considered, and risk-informed decisions are made. This relates to everything on the project – from how finance is secured to how design undertaken, safety is managed, innovation included (e.g. the use of Industry 4.0), schedule and costs managed and everything else. Yes, it is beneficial to develop a Project Risk Management Plan, or a “Risk section” of a Project Management Plan, but it must be developed in an integrated way as a team, not by a few individuals and not in silos.
2. Team culture is key to having the right mindset to take and manage risk
For risk management to be effective, a collaborative project environment and culture needs to be nurtured by the project leadership team.
As the saying goes, culture eats strategy for breakfast. A good team culture includes the following elements:
- the tone at, and from, the top is one that promotes and undertakes good risk management;
- risk is discussed in everyday conversations and it is on the agenda of all reviews and decision-making forums at all levels of the project – it is not discussed in silos;
- the understanding of risk, and how much can be taken, is consistent across the team and all project stakeholders, from the front line to the board room;
- debate about potential problems is welcomed. If problems materialise, the project team learns from them and does not adopt a “blame culture”.
All parties involved in these projects – the client, the delivery team, consultants, investors and others – need a common ethos and an agreed understanding of how risk should and will be shared and managed. This is especially important for the biggest risks.
Large infrastructure teams often consist of people from around the world coming together, a great example of harnessing knowledge globally. A model that can help foster a shared understanding of risk is the Johari window. It can be used to encourage people and teams to avoid “blind spots” and “hidden areas”. For example, you may be aware of certain facts and data that are “hidden” from others, that, if others are given the opportunity to know about them, they can benefit from to manage a particular risk.
3. Weave “risk thinking” into integrated project planning and controls
As the saying goes, “plan the work, and work the plan”. It is good practice for a project to have a project Risk Management Plan (RMP), or a “Risk section” of a Project Management Plan. As mentioned earlier, it will be effective as long as it is collaboratively developed and integrated into project activities. Good standards and guidelines exist from institutes on key elements to incorporate into such plans. Make sure things like roles and responsibilities, governance, how risk is stitched into all project activities, tools and techniques you will use, and project resilience are covered.
Good project procedures and controls will have risk management interwoven into them. For all aspects of managing a project – including safety and the environment, design, schedule, contract and commercial, financial, procurement, quality, insurance and so on – good risk management and controls can help to bind them together. Some risks benefit from good qualitative risk techniques, others need quantitative risk techniques (many infrastructure projects make good use of quantitative risk techniques such as decision trees and Monte Carlo analysis, for example). Make sure people on the project have the best tools and techniques at their disposal.
4. Weave risk management into integrated project governance
Weaving the management of risk into project governance is critical. This includes, in all types of project reviews, using decision-making and knowing how to de-bias our decision-making and make risk-informed decisions through healthy debate and good analysis of data. The project team should regularly think through scenarios in its governance reviews to anticipate and be ready to adapt to ever-changing circumstances.
Infrastructure project governance needs to take broad-ranging stakeholder views into account and help the whole project team to be integrated across all disciplines. Project stakeholders (including external oversight bodies) will hold different views about the value that the project represents, how the project should proceed (or not), and what constitutes success or failure.
Project reporting must accurately reflect project status, and anticipated progress. Reporting is a window on team culture. For example, reporting based on good data should give “early warning signs” of potential challenges. A good culture ensures early warning signs are not delayed until it is too late and the project “suddenly goes into the red zone”, by which time it may be too late to do anything to change it.
5. Be resilient to deal with unexpected events and change
Resilience is an important capability of an infrastructure project team. Depending on what the project is, resilience may encompass three areas: (1) physically building in resilience measures for when the project is in operation, (2) team resilience and (3) responding to change during the project.
Building in resilience into the project may include measures and design to counter security threats, physical and/or Cyber, for example.
Project team resilience (sometimes called crisis management planning) means equipping the team with skills to deal with events and major incidents on the project, should they occur. Good team resilience is about responding quickly and effectively to problems if they occur (which includes elements such as how insurance can be structured). Over a project lifetime that could span many years, this is an important skill for the team to have.
Demonstrating resilience to respond to change (planned and unplanned) during the project means being adaptable to changing project conditions (e.g. selling a project to new investors/owners), economic situations, political change, social change and other external events that could occur during the lifespan of the project. Having a good risk management mindset for this stands an infrastructure project team in good stead.
6. Use risk management to help foster collaborative stakeholder relationships
Ensuring the team has a good ethos of risk management, having a good culture for taking and managing risk appropriately, and ensuring risk management helps with planning and important activities such as contracts management plays an important role in fostering good relationships between stakeholders such as the client and contractors. There will be some surprises and changes as the project progresses; how they are dealt with as a joint team is key.
In today’s complex and inter-connected world, risk management is a key element to the successful management of infrastructure projects.