Risk Management in Various Phases of Order-
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Risk management in various phases of orderCT Sales phase training
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20XX-XX-XX
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Page 2 Author / Department
Risk management in various phases of order
Risk:
Meaning: Losing something of value e.g..
• Profit (increase in cost)
• Market leadership
• Market share
• Human resource
• Goodwill etc.
•
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20XX-XX-XX
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Page 3 Author / Department
Risk management in various phases of order
•
ClarificationsPre Bid Eng Offers EngineeringOrder
Packing Insurance Prodn. / Procurement
CommissioningUnloading
Delivery
Storage Installation
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20XX-XX-XX
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Page 4 Author / Department
Risk Management
Quick check
• Pre bid engineering
• Site conditions / client work culture
• Substantial own product content
• Proven technology?
• Past experience?
• Chance of winning order?
• Legal restrictions?
• Extraordinary risks?
• Sufficient time for bid preparation?
• Know how / resource available?
Risk management in various phases of order
Order Phase
• Pre Bid / Bid
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Page 5 Author / Department
Risk Management
• Pre bid meeting for clarification and clear agreement on scope of work / functional guarantees (if any), battery limits, acceptance criterion
• Pre bid meeting for clarification on unclear contractual terms and conditions in enquiry
Risk management in various phases of order
Order Phase Offer to client
• Scope of work (Technical specs, BOQ, make, Client free supply, acceptance criterion, FAT, PGT)
• Unclear enquiry (wording, deadlines, penalties, damages, responsibilities, change order process, terms of payment, warranty, max. liability, arbitration etc.)
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Page 6 Author / Department
Risk Management
• Seek expert legal opinion and approval
• Secured payment terms, variable prices, hedging, DT/IDT approval, CF approval of BG clauses, appropriate contract structure, fixing of max. liability
• Appropriate offer validity backed up by internal (works) / external (vendor/contractors quotes)
Risk management in various phases of order
Order Phase
Offer to client• Legal Risks (definitions,
documents, language, independence of contract, governing law, settlement of disputes
• Financial Risks (delay in payment, price escalation, forex variation, applicable taxes and duties, permanent establishment, bank guarantees, consequential losses etc.)
• Contractual Risks: offer validity
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Page 7 Author / Department
Risk Management
• Discrepancy between Offer and Order
• Unacceptable Gaps: Request for amendment
• Acceptable Gaps: Seek internal approvals and make necessary changes in Order plan cost and profitability
Risk management in various phases of order
Order Phase
Order receipt and acceptance • Gaps between offer and order
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Page 8 Author / Department
Risk Management
• Documentation of agreed deliverables with battery limits (and exclusions)
• Responsibility, timeline fixation for client and vendors
• Agreed timelines, periodical reporting
• Amendments tracking
• Balanced approach, quality check
• Well begun is half done (patience pays)
Risk management in various phases of order
Order Phase
Engineering• Basic (SLD)
• Detailed
• Timely inputs• Correct inputs (GIGO)
• Competency (product + process knowledge)
• Wrong assumptions
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20XX-XX-XX
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Page 9 Author / Department
Risk Management
• Availability of BOQ (upto last bolts), monitoring of purchase progress, surprise vendor inspections
• Factor delay in agreed delivery period, crashing of manufacturing time (make/buy)
• Stringent quality checks prior to delivery
Risk management in various phases of order
Order Phase
Production / Procurement
• Unavailability of drawings, changes, material on timely basis• Unavailability of production slot
• Poor quality of material
• Rejection (workmanship)
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Page 10 Author / Department
Risk Management
• Cost benefit analysis
• Quality packing (exports)
• Documentation checklist
• Transit Insurance
Risk management in various phases of order
Order Phase
Delivery
• Incorrect mode (cost overrun)• Incorrect packing (material safety)• Incorrect / incomplete documentation (delays/demurrage)• Transit Damage
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Page 11 Author / Department
Risk Management
• Factor delay in delivery period/exclusions
• Sufficient, appropriate storage space.
• Periodical physical inventory checks, insurance
• Calibrated tools/tackles, instruments
• Security arrangement
• Proper staffing, training & development
Risk management in various phases of order
Order Phase
Storage / Installation
• Poor working conditions/climate •Insufficient, inappropriate storage space• Pilferage and theft at site• Interference by political / anti-social elements• Insufficient, inappropriate tools• Mistakes in installation (competency)
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Page 12 Author / Department
Risk Management
• Timely dialogue with client / Claim management
• Proper planning and scheduling of experienced commissioning engineers and support staff
• Extensive pre-commissioning checks, safety precautions, procedures
• Make immediate changes to “as built” drawings for proper handing over
Risk management in various phases of order
Order Phase
Commissioning
• Unavailability of fronts/clearances
• First time implementation of new technology• Flashover / accident / damage to equipments• As commissioned drawings
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Page 13 Author / Department
Risk Management
• Battery limits / exclusions in contract
• Understand client processes and escalation matrix at client end. Build cordial relationships.
• Periodical material and payment reconciliations and submissions
• Periodical compliance and submissions
• Seek expert professional advice
• Demonstrate consistent urgency for project closure and handover
Risk management in various phases of order
Order Phase
Handing over / acceptance
• Unclear acceptance criterion
• Work culture at client’s end
• Deductions from payment and delay in release of retention payments
• Labour Laws compliance
• Delay in issue of PAC, FAC
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Page 14 Author / Department
Risk management in various phases of order
Strategies used in Risk Management
• Avoid: e.g. With proper contract drafting, avoid risk of consequential damages and unlimited liabilities in an order. Other examples?
• Transfer: e.g. Back to back warranty obligation with vendor. Other examples?
• Mitigate: e.g. With additional security at field locations prevent damage/theft of installed material at site. Other examples?
• Accept: e.g. Construct additional temporary storage facility during monsoon. Other examples?
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Page 15 Author / Department
Risk management in various phases of order
Risk management tool and guideline
Microsoft Office Excel 97-2003 Worksheet
Microsoft Office Word 97 - 2003 Document
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Risk management in various phases of order
Open House
Questions?
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Risk management in various phases of order
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