Risk Management in Various Phases of Order-

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Risk management in various phases of orderCT Sales phase training

20XX-XX-XX

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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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•

ClarificationsPre Bid Eng Offers EngineeringOrder

Packing Insurance Prodn. / Procurement

CommissioningUnloading

Delivery

Storage Installation

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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?


Order Phase

• Pre Bid / Bid

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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


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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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)


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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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


Order Phase

Order receipt and acceptance • Gaps between offer and order

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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)


Order Phase

Engineering• Basic (SLD)

• Detailed

• Timely inputs• Correct inputs (GIGO)

• Competency (product + process knowledge)

• Wrong assumptions

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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


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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Risk Management

• Cost benefit analysis

• Quality packing (exports)

• Documentation checklist

• Transit Insurance


Order Phase

Delivery

• Incorrect mode (cost overrun)• Incorrect packing (material safety)• Incorrect / incomplete documentation (delays/demurrage)• Transit Damage

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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


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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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


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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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


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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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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Risk management tool and guideline

Microsoft Office Excel 97-2003 Worksheet

Microsoft Office Word 97 - 2003 Document

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Open House

Questions?

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THANK YOU

Documents

Risk Management in Various Phases of Order-