The decision to invest in new capital projects starts with critical decisions during the conceptual phase of new projects or the expansion of existing operations. The decision-making tools used to analyze project risk under conditions of uncertainty will help companies to determine the probability of success or loss and will drive the decision to invest in the new venture.
Of paramount importance, therefore, is the systematic and comprehensive evaluation of potential investments, and the development of detailed cash-flow analyses to determine as accurately as possible, the expected returns to the organization under varying conditions of uncertainty over the expected productive life of the project.
IMPORTANT FEATURES
The important features of the Professional Project Analysis: Managing Risk & Uncertainty training course are:
Apply sound project appraisal and quantification techniques to forecast and control potential future risk conditions that might jeopardize project success
Focus on achieving the organization’s overall strategic objectives by applying the techniques of decision analysis and economic evaluation
Understand the techniques used for advanced risk quantification and the development of risk mitigation strategies that will ensure or improve the financial feasibility of the project
Understand the implications of the time value of money on the financial projections of the project
Understand and apply the fundamental principles of financial engineerings, such as Net Present Value, Cost of Capital and Internal Rate of Return
Evaluate and compare alternative project solutions with different time horizons
Determine and continuously monitor project success and feasibility
LEARNING OBJECTIVES
By attending the Professional Project Analysis: Managing Risk & Uncertainty training course, delegates will learn how to:
Use qualitative and quantitative methods to assess the exposure of the project to particular risks in real and measurable terms
Perform a detailed financial appraisal of potential capital projects to ensure consistent and reliable decision-making processes
Understand and apply the principles and methods of modern economic engineering
Apply the fundamentals of discounted cash flow analysis to project evaluations
Determine the Internal Required Rate of Return of the project as the basis for sensitivity analyses to establish the risk exposure to the organization
Apply the concept of Expected Monetary Value to compare various alternatives
This unique training course will significantly enhance the skills and knowledge of delegates. It will improve their ability to quantify risks in order to ensure a more consistent decision-making process, thereby producing vastly better results in economic projections.
TARGET AUDIENCE
The Professional Project Analysis: Managing Risk & Uncertainty training course is designed for:
Project Team Leaders
Risk Management Team Leaders
Production Engineers
Cost Engineers
Financial Staff
It is also beneficial to all those responsible for or involved in project appraisal and planning, risk analysis, financial decision-making, project execution and ongoing business operations.
TRAINING METHODOLOGY
Delegates will develop advanced skills required to manage risk & uncertainty, in addition to mastering important financial analysis and cash flow management skills through formal and interactive learning methods.
The course includes individual exercises, team projects, applicable case studies, group discussions and video material that will bring to life the skills acquired throughout the course.
No prior knowledge of the topics covered in the course is required. New concepts and tools are introduced gradually to enable delegates to progress from the fundamental to the advanced concepts.
Pre & Post course assessments will be used to measure the effectiveness of this training.
COURSE CONTENTS
DAY 1 – Fundamentals of Decision Analysis & Engineering Economics
Description:
Day One will cover the process of Project Management Decision Analysis and explore the fundamental tools of Project Engineering Economics
DAY 2 – Rate of Return (IRR), Cost of Capital and Cost-Benefit Analysis
Description:
Day Two will cover Internal Rate of Return computations as a basis for determining the risk profile of a project, and will examine how to determine the Cost of Capital and Benefit-Cost Ratios of projects
KeyTopics:
Determining the Internal Rate of Return (IRR)
IRR for a Single O&G Project
Incremental Analysis
Estimating the Cost of Capital for a Project
The Cost of Debt Capital
The Cost of Equity Capital
Weighted Average Cost of Capital (WACC)
Financial Gearing (Structuring)
Estimating the Benefit-Cost Ratio for a Single Project
Comparing Mutually Exclusive Projects Using Incremental Benefit-Cost Ratios
DAY 3 – Financial Project Risk Analysis
Description:
Day Three will cover the application of economic and financial principles to the risk management process by performing three-point scenario analyses to determine the most probable outcomes expressed in financial terms
KeyTopics:
Overview of the Risk Management Process
Detailed Risk Quantification and Prioritization
Risk Quantification and Expected Monetary Value
Scenario Planning
Best case scenario
Base case scenario
Worst case scenario
Developing Risk Mitigation Strategies
Implementing Mitigation Strategies
Decisions Under Conditions of Uncertainty
Multiple Option Decisions
Combining Risk and Cash Flow Analyses
Minimizing Probability
Minimizing Impact and Consequences
Calculating the Expected Monetary Gain or Loss
DAY 4 - Risk Scenario Planning – Case Study & Application
Description:
Day Four will cover the more advanced application of Risk Scenario Planning to project cash flows based on three-point scenario analyses of risk impact projections
KeyTopics:
Cash flow projections – Tunnel Case Study
Base Case Scenario
Best Case Scenario
Worst Case Scenario
Risk Profile EMV Calculation before Mitigation
Identification of Risk Triggers & Probability
Plotting the Event Probability
Identification of Risk Receptors & Impact
Plotting the Financial Impact
Combined EMV Risk Profile before Mitigation
Developing Probability Mitigation Strategies
Developing Impact Mitigation Strategies
Replotting the Projected Risk Profile after Mitigation
Examining the J-Curve to Derive the Most Economic Mitigation Point
Final Risk EMV and Project Feasibility Calculations after Mitigation
DAY 5 – Cash-Flow Modelling and Project Decision Analysis
Description:
Day Five will cover detailed Financial Modeling as a basis for long-term project appraisal and management to ensure projects success
KeyTopics:
Preparing Cash Flow Projections
Incremental Costs and Benefits
Working Capital Requirements and Operating Costs
Forecasting Cash Flows
How to Deal with Inflation
How to Deal with Uncertainty and Risk
Risk Premiums
Pessimistic and Optimistic Forecasts
Opportunity Costs and Sunk Costs
Determining the Economic Life of a Project
Quantifying the Effects of Inflation
Effects of Inflation on Working Capital
Effects of Inflation on Taxation
Effects of Inflation of Cost of Capital
Variable Inflation Rates Over the Life of the Project
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