Detailed Risk Management Report: INGEPP Alkylation Project Analysis

This report provides a comprehensive analysis of the risk management strategies employed in the INGEPP alkylation project. It begins with a risk analysis of the tendering period, identifying potential risks such as contract limitations, project delays, financial constraints, and the specialized nature of the equipment. The report then outlines mitigation actions for each identified risk. The execution period is examined, detailing risks encountered during this phase, including project delays, payment issues, and cash flow problems, along with the management strategies applied. The report also offers key learnings and recommendations for avoiding similar issues in future projects, emphasizing thorough financial due diligence, secure contract terms, and the importance of project blueprints. Finally, a margin recovery and rescue plan is proposed to address the current financial challenges faced by INGEPP, including strategic discussions with stakeholders and the importance of proactively mitigating potential risks through effective financial planning and debt-equity capital management.

Running Head:- Risk Management
0 | P a g e
Risk Management
Risk Management
Risk Management
[Type the abstract of the document here. The abstract is typically a
short summary of the contents of the document. Type the abstract
of the document here. The abstract is typically a short summary of
the contents of the document.]
[Type the document
subtitle]

Risk Management
1 | P a g e
Table of Contents
I. TENDERING PERIOD.......................................................................................................................................2
RISK ANALYSIS..............................................................................................................................................2
RISK MITIGATION ACTIONS.................................................................................................................................2
II. EXECUTION PERIOD......................................................................................................................................3
RISKS OCCURRENCE........................................................................................................................................3
RISKS MANAGEMENT.......................................................................................................................................3
III. LEARNING & RECOMMENDATIONS......................................................................................................................4
IV. MARGIN RECOVERY AND RESCUE PLAN................................................................................................................5
REFERENCES................................................................................................................................................6

Risk Management
2 | P a g e
I. TENDERING PERIOD
RISK ANALYSIS
The risk analysis is done to identify the future possibility of the negative happening and
evaluating the impact of the negative events on the particular outcomes.
During the analysis that is made of the tendering period of the INGEPP, the major risks that
have been identified as per the first audit are:
1. The main risk is the chance that the EPC contract that is made regarding the whole alkylation
project between the IMP and PETROLEOS does not incorporate any responsibility of Petroleos for
INGEPP. So in case of any bad taking place there is nothing which PETROLEOS could do for
INGEPP.
2. There are chances that the project would not be completed in the committed deadline (Kulak,
2017).
3. The IMP may fault in providing money for the invoices generated by INGEPP. In addition to this,
due to the lack of the coordination in the undertaken activities, it might face issue in the undertaken
work.
4. the company in case if unable to generate desired results for the shareholders could face reluctance
from them for further investments and hence could get into the clutches of bankruptcy.
5. The unit of Hydro isomerization has been specifically customised for PETROLEOUS and in case
the project fails because of any circumstance, the same could not be used elsewhere.
6. Due to the company being unable to get cash for its work done, there are chances that the debts
shall remain unpaid and the company gets sued.
RISK MITIGATION ACTIONS
The risk mitigation actions plan is developed according the risk faced in the events. However, all the
mitigation action plans is based on the identified risk. The below given table has been given for the
same.
RISK NUMBER MITIGATION ACTION
1. INGEPP must ask before signing of the contract
some security in form of PETROLEOS
undertaking for it apart from IMP.
2. A project blueprint must be made to get the
things done within the set time period (Boutros,
& Purdie, 2014).

Risk Management
3 | P a g e
3. The 10% advance bond amount must be raised to
at least 30% and an undertaking from
PETROLEOS for providing remaining money
should also be taken (Sadgrove, 2016).
5. An advance undertaking must be taken from
PETROLEOS that it shall buy the machinery at a
specified price in case the project is on stake.
6. Certain part of the money that has been received
till date and the money generate internally from
other operations should be invested in some
return providing areas to get regular income to
pay off debts (Keynes, 2018).
II. EXECUTION PERIOD
The execution period has been determined on the basis of the risk occurrence and risk management
strategic plan in this particular event.
RISKS OCCURRENCE RISKS MANAGEMENT
1. The project completion deadline could not be
met. There had been a scarcity of internal
resources, and resultant there was a delay of one
month in initiation of basic engineering. Even
there had been space scarcity. Due to all this the
overall delay resulted in 4 months.
 Right on the day when the project was
accepted, the staffing should have been done and
resources must have been procured. But owing to
the time that passed, the best possible decision
now could be looking for space on rent and
overtime execution in engineering works
(Masciadra, 2017).
2. IMP faced inability in full payment of 3rd
term. Only US$ 250,000 was paid as compared to
US$ 750,000. Even when the tenure of the 4TH
term arrived, no money was paid by IMP. Further
it was observed that a cash flow crunch is being
faced by IMP (Ford, Piccolo, & Ford, 2017).
 A legal advisor must be hired to get a
thorough reading of the contract executed
between IMP and INGEPP to analyse whether
any rights are available with the later to recover
money.
3. INGEPP is in serious trouble relating to its
cash position. The company’s pending dues from
IMP worth three times more than its working
capital leading the company into a position of
inability to pay debts. Moreover, there is no new
inflow of capital from the shareholders, and the
talk in the air is of bankruptcy filing of the
company, if no substantial improvement takes
place.
 The company’s owners must inject some
personal funds in to the company to enable the
company pay off the external debts and remain
functional. If required, the help of financers could
also be taken who can provide finances in the
risky time (Black, 2018).

Risk Management
4 | P a g e
III. LEARNING & RECOMMENDATIONS
There are several learning which could be used to avoid the possible risks and issues in these events.
However, there are following learning having been given as below.
To avoid similar situation from happening in future the following points must be observed:
 Before acceptance of any big project, a detailed research into the company’s financial history
and current state must be made. This shall help in avoidance of current situation as there would be no
project acceptance if the cash crunch is observed (Fleisher, & Bensoussan, 2015).
 The contract made must involve a fund security backup guarantee. The payment must be
guaranteed by some solid empire.
 The machinery bought to be used in the project must be the one which could get customised
as per some other projects too in the same field. If property specialised machinery is used, the chances
of the money blocked are certain.
 The advance amount taken from the other party must at least cover the initial costs of
operation to prevent work blockage.
 Project blueprint as per deadline is must to be made before any initiation of work.
 Backup team must be in hand to take positions in case the current team stops working (Ford,
Piccolo, & Ford, 2017).
 To meet deadlines, overtime must not be something to be afraid of.
IV. MARGIN RECOVERY AND RESCUE PLAN
Currently, the situation of INGEPP is full of cons only. The company is in debt and out of cash. The
other party is not releasing payments and the shareholders aren’t interested anymore. The situation
demands a proper strategic plan. The best way to proceed in the current situation is to talk directly to
PETROLEOS by conducting another meeting. They must be convinced about how promising the
results could get, if and only if some financial help is exerted by PETROLEOS to them. The above
given situation and risk associated with the events could be curb by using the given rescue plan
(Kulak, & Li, 2017).
A forecasted presentation is the best way to adopt. They must be shown the presentation and a
conclusion must be tried to be reached. Even though the PETROLEOS is not bound to help INGEPP
in any manner, it must be convinced for the sake of its own profit also to do the needful (Ford,
Piccolo, & Ford, 2017).
However, in any case the position in which the project’s stakeholders are lying currently is
too risky to be rescued from. IMP has raised its hands and a huge scam seems to have already planted
by it. The stakeholders being the financers, shareholders, somehow PETROLEOS are all in chaos.
The crux of this report is that in order to mitigate these possible risks associated with the events, there
should be proactively mitigated in effective manner. The main issue which INGEPP could face is
related to its legal funding and availability of the funding in the case. If proper financial strategic
program is adopted then this risk could be mitigated in effective manner. Nonetheless, there should be
proper linkage between the debt and equity capital. There should not be higher debt capital in the
capital structure otherwise it might face higher level of the financial leverage in the undertaken event.

Risk Management
5 | P a g e
REFERENCES
Black, A. (2018). How Business Works. Australia: Penguin.
Boutros, T., & Purdie, T. (2014). The process improvement handbook: a blueprint for managing
change and increasing organizational performance. Australia: McGraw-Hill Education.
Fleisher, C. S., & Bensoussan, B. E. (2015). Business and competitive analysis: effective application
of new and classic methods. USA: FT Press.
Ford, R. C., Piccolo, R. F., & Ford, L. R. (2017). Strategies for building effective virtual teams: Trust
is key. Business Horizons, 60(1), 25-34.
Keynes, J. M. (2018). The general theory of employment, interest, and money.EU: Springer.
Kulak, D., & Li, H. (2017). Missing Deadlines Means Missing Market Opportunities. In The Journey
to Enterprise Agility, 25(1), 5-14.
Masciadra, E. (2017). Traditional Project Management. In Knowledge and Project Management (pp.
3-23). Springer, Cham.
Sadgrove, K. (2016). The complete guide to business risk management. Routledge.