Royal Dutch Shell Plc: Project Risk Appraisal and Management

This report provides a comprehensive analysis of project risk appraisal and management within the context of the Royal Dutch Petroleum and Shell merger in 2005. It explores the business risk context, including strategic, operational, financial, reputational, and compliance risks associated with mergers and acquisitions. A detailed risk register is presented, identifying potential risks, their probability, impact, and proposed mitigation strategies. The report critically evaluates the project risk analysis techniques employed and includes a learning log reflecting on the process. The study emphasizes the importance of effective risk management in ensuring the success and sustainability of the merged entity, Royal Dutch Shell Plc, by addressing potential threats and capitalizing on opportunities.

Project Risk Appraisal and Management

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................................................................3
Business risk context...............................................................................................................................................................................4
A project risk evaluation that identify the risks related to the proposed project.....................................................................................8
Critically evaluating the project risk analysis technique.......................................................................................................................16
Learning log...........................................................................................................................................................................................18
CONCLUSION..........................................................................................................................................................................................19
REFERENCES..........................................................................................................................................................................................20

INTRODUCTION
Risk management is the process through which an individual or a company can identify, assess and control the threats to an
organization’s capital so that its brand image will not be affected in a negative manner. That is why, the process of identifying,
assessing the risk is essential because after that, a company can make effective steps to mitigate the risk accordingly. Further, in the
present era, to minimize the risk Project Risk Appraisal is used that examining how the project outcomes and objectives might change
by causing a direct impact on a risk. That is why, the current study also helps to gain a deep understanding pertaining to the same,
which in turn helps to improve the risk by implementing effective outcome to overcome the same. The current study is based upon the
case study of Royal Dutch Petroleum and Shell merger in 2005, where both Royal Dutch Petroleum Company and Shell Transport &
Trading Company became parent company known as Royal Dutch Shell Plc. In this, 40% interest in the group is registered in Shell
and remaining one is Royal Dutch. The company now engages in oil and gas exploration production, refining, transportation and
marketing to meet the basic needs of customers.
The rationale for these merger is to response to a scandal over the reduction of oil reserves and this help to improve the
business performance as well as raise the customer satisfaction level. Through merger, companies get an advantage of using resource
from both companies in order to get better response. That is why, with the help of merger, company get effective outcome and
improve the business performance in near future.
The report will shed light upon business risk context related to mergers, which includes the key risks involved within the same.
Further, the project risk evaluation will be discussed in which a risk register matrix will be performed that helps to determine ways
through which risk can be minimized. Moreover, a critical evaluation of the project will be performed that determines the reason for
not covering the anticipated risk and then with the help of a learning log, the report will reflect on learning.

Business risk context
Recently Royal Dutch Petroleum Co. and Shell Transport & Trading Company got merged together and formed a new
company called Royal Dutch Shell Plc. This action could lead to heavy risk in the business. The major reason behind this merger and
acquisition that took place is to avoid competition in the business (Mescall and Klassen, 2018). In the market, competition is a major
threat businesses face as it restricts the business to approach the whole market. Preventing competition is required as it attempts to
eliminate the risk of losing the brand identity and image in the same target market. It directly affects the position of the brand in the
same target market.

Merger and acquisition is always a risky proposal that can favour the business to support the overall competitive advantage in the
market. Risk can segregate into different types within the Royal Dutch Petroleum Co. such as operational, reputation, financial,
compliance, strategic (Rozen-Bakher, 2018). All the various and key risks involved with this merger and acquisition decision can be
projected in the following points. Every decision allows the organization to overcome various and different types of risk involved in
the business which can oppose to the business to achieve the targeted business objectives.
Strategic risk
Strategic risk is among the most significant and crucial risk associated with Royal Dutch Shell Plc. The company requires formulating
and designing the suitable strategy to overcome this particular risk. Every organization and company has its own culture and values on
which its operations are based. When mergers between the companies i.e. Royal Dutch and Shell Plc take place, this leads to the huge
risk involved for the organization in terms of providing the right strategic direction to the new venture. Merger involves the

engagement of the company to work together in order to achieve the business objectives of the newly formed company. The internal
culture and environment of organization is different which allows the company to face the great strategic challenge that may further
encounter in terms of failure in the business (Gandhi, Chhajer and Mehta, 2018). This particular risk is acceptable in Royal Dutch
Petroleum Plc because risk restricts the company to stay competitive in a market. The strategies and policies adopted by the
companies according to the overall cultural values, ethics and beliefs of the organization. At the time of merger, two companies come
together and deliver the business operations which will directly affect the decision-making and strategic formulation of the
organization. Effective strategic management tools and functions will favor and support the organization to overcome this particular
risk involved in the business. Operation management practice can also be applied by the company to run its operations in effective
manner.
Reputation risk
Reputation risk is another risk faced by Royal Dutch Shell Plc because it damage the business brand image when it fails to meet the
expectation of its stakeholder and create wrong impact within a market. Merger and acquisition directly create an impact over the
reputation of the brand. This decision strategically indicates that the company is not in a position to sustain itself in the market. This
practice allows the company to accumulate the functional and business values with other similar brands and try to sustain own
presence at top level in a market (Welch and et.al., 2020). This include the poor working condition for an employees or exploitative
working condition. The company also needs to establish proper communication between the stakeholders and organization. The
reputation risk of the company can hamper the strategic decision-making taken by the shareholders of the company. With the use of
proper communication organization will be able to support the right business objectives and at the same time secure the interest of the
potential customers and investors in the market.
Financial risk
This risk involves the fluctuation in budget and cause direct impact over the business performance. There are different types of
financial risk which a company mainly faces that include market, credit, liquidity and operational risk. This entire process will create

negative impact over the financial performance of Royal Dutch Plc. The merger and acquisition created financial damage for the
company. It takes a cost to acquire all assets which create a financial burden over Royal Dutch Shell Plc (Chirico and et.al., 2020). All
this results into the fact that the company faced financial risks and challenges in the respective market. Also, sharing profitability of
the company will also create a financial risk for the business. This risk factor is significant in respect to the organization, which can be
overcome by implementing the effective marketing and sales strategy that can improve the revenue of the business. All these factors
create a huge impact over the performance of the venture in the market.
Operational risk
Operational risk may also be encountered by the firm as a result of mergers and acquisitions in the market. The entire practice will
allow the operations of two different businesses to merge and accumulate together in order to gain a competitive advantage in the
market. Operation risk also involves inefficient implementation of the operations of the firm (Grira, Labidi and Rouatbi, 2018). Every
time two different organizations merge and accumulate together, they tend to face issues in managing operations due to different
culture and managements strategy. Employees need and require working in new teams in which workers are not feel comfortable,
along with this, the behaviour and mind-set of the employees belonging to the other organization.
Compliance risk
Royal Dutch Shell Plc also have to comply with the compliance risk. This involves risk of coping with the legal factors or features that
may take a part of the business operation. This risk is huge as in case of any licence, in order to meet or cope up with the legal
requirements than it will directly hamper the financial success of the business in market. Compliance risk is massive and very
effective that directly challenges the company and its performance. (Thompson, 2022). This can be overcome by implementing a
proper legal team that can look into the whole matter or situation. Compliance risk always encounter the organization in process to
achieve and approach the business objectives of the firm.

A project risk evaluation that identify the risks related to the proposed project
Risk register
Step 1: Risk Identification Step 2: Risk Assessment Step 3: Risk Response Step 4: Monitor &
Control
Rank
Cost
Impact
($M)
Sched
ule
Impac
t
(Wee
ks)
#
Category
Opportunity / Threat
Risk
Name
Detaile
d
Descrip
tion
P6
Work
Packag
e or
Activit
y
Relate
d to
Risk
Probability (1 - 5)
Consequence (1-5)
Severity (Priority)
Probability (%)
Most Likely Cost ($M)
COST IMPACT
Most Likely (no. of
weeks)
Response Category
Respo
nse
Risk Owner
Contin
gency
Plan
Status
Date
Last
Upd
ated
Tracki
ng
Comm
ents

1 Cost
opportunity
strategic
Ineffect
ive
complia
nce of
policy
and
lack of
strategi
c
manage
ment
lead to
increase
the cost
of the
Royal
Dutch
Shell
Plc that
need to
be
improv
ed.
Project
manage
r of
Royal
Dutch
Shell
Plc
strategy
formula
tion
and
effectiv
e work
on the
task
lead to
reduce
the
chances
of cost.
4 4 1
6
80
%
$40,000.00
5
mitigate
compa
ny will
require
to take
control
of its
indirect
costs so
that
overall
acquisit
ion
costs
can
adjust
at some
level to
respon
d the
cost
risk.
strat
egic
man
ger
There is
an
increas
e in
engage
ment of
employ
ees so
that
they
also
suggest
the
ways to
improv
e the
same
and
reduce
cost
risk
within
Royal
Dutch
Shell
Plc
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signifi
cant
improv
ement

2
Financial
threat financia
l
This is
perform
ed
when
the
project
manage
r do not
have
enough
knowle
dge
pertaini
ng to
funding
and this
and this
in turn
affect
the
budget
of the
Royal
Dutch
Shell
Plc
which
need to
be
improv
ed
Error in
financia
l
reportin
g and
error in
tax
payees
3 4 1
2
60
%
#########
#########
4
mitigate
This
can be
mitigati
ng by
compli
ance
with
account
ing
standar
d so
that
effectiv
e
outcom
e can
be
generat
ed.
Also,
involve
all the
stakeho
lders of
Royal
Dutch
Shell
Plc to
present
their
views
pertaini
ng to
the
financial mangers
By hiring expertise within a project and consult the same to get better results and raise the performance
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Effect
ive
perfor
mance

3
Legal
threat reputati
on During
merger
of both
compan
ies, the
chances
of not
complyi
ng with
the
laws
will be
increase
There
is a
need to
adhere
with
effectiv
e laws
in each
depart
ment of
Royal
Dutch
Shell
Plc that
helps to
improv
e the
chances
of
error.
5 4 2
0
60
%
######
5
mitigate
Risk
mitigati
on
strategi
es
should
be
formed.
This
involve
s the
formati
on of
the
legal
team
who
will
look
after all
legal
require
ments
attache
d to the
busines
s. This
risk can
be
mitigat
ed by
the
firm
with
legal manager
pany should provide effective training and development session which in turn assist to improve the chances of
lack of legal compliance
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require
s
extra
actions

4
threat
Operati
onal
risk is
due to
the two
compan
ies
having
a
differen
t
culture.
The
workin
g style
of both
the
compan
y i.e.
Royal
Dutch
and
Shell is
differen
t. Also,
not
using
resourc
es in
effectiv
e
manner,
also
lead to
While
mergin
g with
another
compan
y lead
to
improv
e the
chances
of
occurre
nce of
the risk.
2 3 6 20
%
$15,000.00
2
Transfer
There
is a
need to
implem
ent
TQM
and Six
sigma
strateg
y
within
a Royal
Dutch
Shell
Plc that
help to
improv
e the
quality
of the
service
s and
improv
e
perfor
mance
(Sarala,
operational manager
rmed that helps to improve the performance and increase the chance of applying high quality of service.
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effecti
ve
perfor
mance