6 Steve Hillock Sala 3

Risks to Operating Plants –
Young and Old
Steve Hillock
Global Director of Operational Excellence
Stork – A Fluor Company
1
© 2017 Fluor. All Rights Reserved.
Risks to Operating Plants – Young and Old
Risk to operating facilities can occur in many different forms and at
different times in an assets life cycle.
• Risks develop when plants are in their initial design stages and
continue until the assets have reached the end of their useful life.
• Once facilities are operational, risks can begin to take on new forms
for both static and dynamic assets.
• There are also disaster based risks to operating facilities, both

manmade and natural.
© 2017 Fluor. All Rights Reserved. 2

GV201708579-001.pptx
HSE Topic: Creating Resilience
Resilience is the ability to anticipate risk, limit impact, and
bounce back rapidly in the face of turbulent change.
Community & Regional Resilience Institute (CARRI)
Foundations:
1. Identify the threats
2. Model the threats to predict the effects (risk)
3. Create risk management strategies to counter the negative effects
4. Understand the big picture

GV201708579-001.pptx
Fluor and Stork,
a Combined Force

GV201708579-001.pptx
What We Deliver – Added Value
Throughout The Life Cycle

GV201708579-001.pptx
Risks to New Facilities still in the
Design and Construction Stages

GV201708579-001.pptx
Engineering, Procurement,
Construction Business Risk
Management Framework
(BRMF)

Risk Management for the Engineering,
Procurement, Construction (EPC) Industry
• Construction industry = high risk
– Explicit project related risks
– Uncertainties related to external risks like weather, political
situations and environmental conditions
• Risk isn’t bad, but unmanaged risk is
• Choice:
– Make decisions based on their intuition, ad-hoc judgment, and
experience (risk transfer and hope strategy)
or
– Make decisions guided by a formal and systematic risk
management process (pro-active risk avoidance strategy)
GV201708579-001.pptx
EPC Risk Management Process
BRMF
• Fluor Corporation manages risk with its Business Risk Management
Framework (BRMF)
• The BRMF:
– Is utilized to systematically and continuously identify, analyze, and
respond to risk and opportunity throughout the project’s life cycle.
– Is based upon our vast industry experience and proven techniques.
– Consists of a dedicated organization of people, a uniform work
process and common risk language, a software enabler, routine
reporting and analysis, and periodic management reviews.

GV201708579-001.pptx
BRMF
Well established process

GV201708579-001.pptx
BRMF
Well established process
• Prioritize risks
– Rate each risk on:
• “Potential consequences” or “severity” if the risk
happens (1  5)
• “Likelihood” of the event occurring (1  5)
– Derive priority of that risk (1  5)
Quantitative Measurement for Prioritizing Risks
5 3 4 4 5 5
4 2 3 4 4 5
Consequence
3 2 2 3 3 4
/ Severity
2 2 2 2 3 3
1 1 1 2 2 3
1 2 3 4 5
Likelihood

GV201708579-001.pptx
BRMF
Software Tools and Knowledge
• MitigatorSM:
– Project-specific risk repository and report generator
• AccumulatorSM:
– Centralized risk and mitigation strategy library
– Contains risk data of over 600 Fluor projects
• Risk Knowledge Community:
– Online collaborative site
– Contains all risk practices, tools, training material, etc.
– Allows collaboration in forum sections

GV201708579-001.pptx
BRMF
Summary
Fluor’s BRMF is a structured risk management

framework that helps avoid us EPC surprises,
thereby increasing our ability to successfully
execute the plan and achieve project objectives.

GV201708579-001.pptx
Typical Owner’s Objectives and Pitfalls
 On-time launch to fulfill business case; but lack Operational Readiness Plan
 Maximize return on investment; but minimizing Capex sub-optimizes life-cycle

operational costs
 Existing, proven Operations capability; but may not have launched Greenfield
production recently
 International standards / best practices for asset reliability; but ineffective planning
sub-optimizes Operational Readiness execution
 Leverage Company infrastructure; but underestimate development effort,

integration needed across Organization and application of core competencies

GV201708579-001.pptx
Operational Readiness
Owner’s Risk Management Framework

Owners Risk Management Framework
ORMF
• ORMF is complementary program to BRMF
• Same process, different focus: overall venture or enterprise
Stockholders
Taxes
Startup Operations Employees
Maintenance
EPC Finance
scope Third Party Outsourcing Suppliers
Partner
Regulations
HR & Training Management
Community

GV201708579-001.pptx
Operational Risks
ORMF addresses Owner and Operational Risks and Opportunities for on-going
operations and/or new capital projects and startups
Typical Consequence Categories may be as follows:
– Project Finance and Business Case Risk

– Startup and Time to Market Delays
– Commissioning Delays
– Production Interruption
– Lost Income
– Operations & Maintenance Cost
– Regulatory and Quality Compliance
– Environmental Risks
– Direct and Indirect O&M Labor Costs
– Others (Safety, Security, etc.)

GV201708579-001.pptx
Successful Program Launch Planning
Risk Reviews
Plan
Act ORMF Do
Check
Gating Process used to

assess Readiness & mitigate
1st 2nd Risks at key Milestones
BRMF
RR RR RR RR

GV201708579-001.pptx
Process Overview
Identify Risks & Opportunities by
Category
Rate Consequences & Likelihoods
Establish Strategies & Action Plans

for High Priorities
Incorporate ORMF Outputs into

Readiness Review, Work Scopes,
Budgets, and/or Business Cases
GV201708579-001.pptx
Example Structure Consequences Ratings
Planning Horizon : 5 years
Rating Economic Safety Environmental
Minor > $10 mil < 20 LWD < 3 reportable
releases
Moderate $10-100 mil > 20 LWD fatality Governmental

Intervention
Plant shutdown
severe PR
Severe > $100 mil Multiply
fatalities
Define structure for rating consequence and likelihood levels
relevant to the categories of risk being assessed.

GV201708579-001.pptx
Example Structure
Rating Probability in Planning Horizon
Unlikely .5 % to 5 %
Possible 5% to 50 %
Likely > 50 %

GV201708579-001.pptx
Risk Prioritization Matrix
CONSEQUENCE
5 Y O R R R
4 Y Y O R R
3 G Y Y O R
2 G G G Y 0
1 G G G Y Y
1 2 3 4 5
LIKELIHOOD
RISK PRIORITY MITIGATION ACTION
HIGH RISK Emergency Unacceptable – Take immediate
mitigating action
MED HIGH RISK Urgent Unacceptable – Take mitigating
action
MEDIUM RISK Moderate – Justify work (can something else Execute mitigations in agreed
be done?) timeframe
LOW RISK Low - do not mitigate Work may not be justified
Create a Risk Prioritization Matrix to guide

mitigation strategies.
GV201708579-001.pptx
Owner’s Challenge: Maximize Return on Investment
How to Fit all the

Pieces Together
not Covered by
the EPC Team?

GV201708579-001.pptx
Operational Readiness for Capital
Projects
UpFRONTSM Methodology

Fluor’s UpFRONT SM
Operational Readiness Methodology

Operational Readiness Master Planning
Life-cycle Design Support Vertical Launch
Maintenance Readiness
Capacity
Plans, Risk &
Operations Readiness Steady State
Business Case Operations:
Analysis Systems Readiness -Capacity -Cost -Quality
-Safety -Environmental
On or Ahead
Organizational Readiness
of Schedule
Support Readiness
Supply Chain Readiness
Owner’s Risk & Readiness Reviews

Concept & Front-end Detailed Procurement & Commissioning &
Loading / FEED Engineering Construction Ramp-Up

GV201708579-001.pptx
UpFRONTSM Element Deliverables
Owner’s Risk and Readiness Reviews
.
Identifies Startup Support Needs and Priorities

 Guide the Owner through a structured risk identification and mitigation planning.
 Provides gap analysis and recommendations
 Revisited and updated at various phases of the project
 Confirms timing, suitability and status of operational readiness preparations as
startup nears.
Risk and Readiness Risk and Readiness Risk and Readiness Risk and Readiness
On-Time Startup
Review Review Review Review
Design Operations/
Conception Construction Startup Maintenance

GV201708579-001.pptx
Capacity, Risk and Business Analysis
.
Combine Large Project Risk Management with early OR Planning to plan for
optimization of project ROI:
ROI Optimization Plan

• Business Strategy
 Project and Owner Risk Analysis
• Finance plan  Budgetary O&M resource estimates
• Off-take Strategy
• Commodity Plan  Economic and/or life cycle costs
• HR Strategy
• OR Project Plan  Financing strategy and capital structure support
• Supply Chain Strategy  Business case pro forma input
• Technology Strategy
• Risk Mitigation Plan  Location / site analysis and incentive
Business Case Rationale and
Project Optimization negotiations
Project ROI Optimization Levers

Commodity Contracts/ Human
Strategic Finance EPC O&M
Off-take Resources

GV201708579-001.pptx
Life Cycle Design Support
.
Integrates life cycle and business case justification into the

FEED and the EPC phase process
 O&M philosophies and strategy documents

 Operability/maintainability/lean checklists
 Major capital spares list
 Life cycle value evaluations
 Process FMEAs, criticality
rankings, availability allocations
 Human factors analyses
 O&M data & document specs
 Value stream maps
 Nonconventional asset ownership options
 Other Value Improving Practices
GV201708579-001.pptx
Maintenance Readiness
.
Implements maintenance and reliability practices
 Asset management system databases

 RCM, SIL, & RBI analyses
 Maintenance budgets, cost forecasts
 Maintenance staffing plans and schedules
 Preventive, predictive, calibration and NDE
testing plans and procedures in CMMS and
specialized condition monitoring systems
 Systematic failure elimination processes
 Outage plans
 Optimal spares order levels and MRO data bases
 Tools and equipment including shop layouts

GV201708579-001.pptx
Operations Readiness
.
Integrates procedures for operations, quality, logistics,

and production control
 In plant logistics procedures, equipment

 Standard operating procedures
 Quality procedures and systems
 ISO/QS certification
 Operations support plans for commissioning and
launch
 Special tools, jigs, instruments and equipment needed
by operations including mobile material handling
 Production control procedures, systems and databases
 Initialization of manufacturing execution systems

GV201708579-001.pptx
Systems Readiness
.
Through alliances with system integrators, assures that

business management systems and communications
infrastructures effectively enable implementation of the
business strategies.
 IT strategies
 Architecture design & standards
 Applications and interface specifications, installation & configuration
 Data migration & population
 Hardware specification, purchase & installation
 Support staffing & contracts
 Policies & Procedures
 User, SME & IT support training

GV201708579-001.pptx
Organizational Readiness
.
Develops HR policies, databases, and procedures
HR strategies, work system & culture plans

Recruitment & selection programs, instruments
Pay, progression, & incentive systems
Job descriptions, duty task analyses
Equipment vendor training specifications
Training planning, development, delivery,
oversight
Training contracts with trade schools and third
parties
Training manuals, CBT, coaching guides
Performance qualification instruments
Personnel manuals, HR policies
HR management system initialization
GV201708579-001.pptx
Support Readiness
.
Procedures, systems, tools, materials, and service contracts to

address the various plant support functions:
 Health and Safety
 Environmental Management
 Plant Engineering
 Facilities Services
 Energy & Utility Management
 Finance & Accounting

GV201708579-001.pptx
Supply Chain Readiness
.
Establishes an integrated supply chain

 Productive & MRO material supply chain strategies,
plans
 Productive material BOMs for sourcing and import into
MES
 Sourcing, preferred supplier networks
 Offsite logistics plans
 Material safety data sheets and databases
 Warehouse design
 Bins, shelving, material handling
 Inventory policies and order points
 Supply chain management procedures
 Purchasing & inventory management system
implementation
GV201708579-001.pptx
Operational Readiness Master Planning
.
Identifies tasks, roles, and responsibilities for readiness activities

 Critical path schedule of operational readiness activities
 Task list detailing scopes, responsibilities, deliverables and execution plan
 Budgetary estimate detailing resources requirements by activity, by project
phase, by resource type and by operational readiness scope element
 Master Plan status reports including routine reporting of status versus
activity schedules, resource plan and budget
 Master Plan updates to reflect deviations versus the plan and EPC
schedule

GV201708579-001.pptx
Vertical Launch .
Leveraging the expertise of the Fluor Commissioning group, Vertical Launch

validates the productive capacity of the new people, processes, systems and
assets -
 Commissioning plans and procedures
 Completed checklists for checkout, commissioning
and launch
 As-built markups
 Markups of training materials and on-the-job
training documentation
 Markups of O&M procedures
 Logs of warranty work completed or required
 Documentation of performance levels meeting
targets

GV201708579-001.pptx
ALCAN
AKSteel Corporation
Logan Plant - World’s Lowest Cost, Highest Quality Can Stock Produce
Multi-site, OR & Maintenance Improvement AK Rockport Beats Startup Schedule, Wins NAME Award
Refining & Off-Shore Readiness Plans
Contract Maintenance
Division-wide, Multi-Site API, Lean, UpFRONT,
OD, & Maintenance Initiatives
Division-wide, multi-site API/Lean Multi-site UpFRONT Maintenance Readiness

Strategies, Plant Relocation and
Reliability Optimization, MAXIMO
UpFRONT Launch Planning
Lean Operating System,
New Capital Launch Global Facility Management Assessments
Maintenance Readiness Planning
Best Launch in History - Ford Excellence Award
UpFRONTSM Planning for Upstream

Beat Startup Schedule - lower Operational Offshore Projects
Cost Multi-plant API Maintenance New Plant Launch
Improvement Operational Risk Analysis
consulting, facilitation and implementation
Corporate Maintenance Improvement and New

UpFRONT Planning, Capital Planning
Multi-Site API, UpFRONT Planning, Implementation
Maintenance Readiness & Maintenance Improvement UpFRONTSM Program Planning, MAXIMO
Initialization and
streamlined RCM
GV201708579-001.pptx
Risks to Plants and Facilities in the
Operating Stages

GV201708579-001.pptx
ISO 55000 Asset Management Model

GV201708579-001.pptx
Risk Based Maintenance Strategies and Continuous Improvement
Risk Based Inspections, Safety Integrity Level, Reliability Centered Maintenance

GV201708579-001.pptx
Failure Modes & Mitigation Tasks

GV201708579-001.pptx
Asset Criticality Can Change
− Age of the asset

− Impact of natural disasters
− Changes in incoming materials
− Changes in duty cycle needed of the asset
− Changes in supply chain availability
− Changes in regulatory requirements
− Changes in risk tolerance of the owner

GV201708579-001.pptx
Risk Based Maintenance Strategies and Continuous Improvement
Risk Based Inspections, Safety Integrity Level, Reliability Centered Maintenance

GV201708579-001.pptx
Natural Hazard Risks to Plants
Resiliency & Sustainability

Risk, Resilience, and Disaster Management
 The impact of a disaster to a Client’s physical facilities can be

significant, but is minor when compared to the greater cost
impact measured in terms of Business Interruption
 Resilience – Capability to absorb, deflect or recover from a

threat
 Private Industry is critical to post disaster recovery

GV201708579-001.pptx
GV201708579-001.pptx
Winter Weather Hazard Snowfall Hazard
Geographic
Hazards
Flooding & Hurricane Hazard
Earthquake Hazard Tornado Hazard

GV201708579-001.pptx
Population Shifts to
Vulnerable Regions
• In 2010, 39% of the U.S.
population lived in coastal
shoreline counties, which
represent less than 10% of the
U.S. land area
• Population density in coastal
areas expected to increase at
more than three times the
national average between 2010
and 2020

GV201708579-001.pptx
Population & Industry Densities in
Hurricane & Earthquake Hazard Zones

GV201708579-001.pptx
HAZUS Model – Hurricane
Location:
Charleston, SC
Event:
Hugo
Output:
Sustained Winds

GV201708579-001.pptx
Location:
Charleston, SC
Event:
Hugo
Output:
Displaced
Households

GV201708579-001.pptx
HAZUS Model – Earthquake
Location:
Charleston, SC
Event:
Magnitude 7.3
Output:
Peak Ground
Velocity

GV201708579-001.pptx
HAZUS Model – Earthquake
Location:
Charleston, SC
Event:
Magnitude 7.3
Output:
Bridges Sustaining
Moderate Damage

GV201708579-001.pptx
Risk Map of Colombia
The probability of occurrence of a potentially

damaging phenomenon. An occurrence
resulting from:
• seismic hazards
• landslide hazards
• volcanic hazards The degree of loss resulting from the
• flooding hazards occurrence of the phenomenon. Factored are:
• tsunami hazard • population density,
• beach erosion/accumulation hazard • industrial regions,
• concentration of economic activities
• infrastructure Resulting risk as a function of
Ref: Department of Earth Systems Analysis,
International Institute for Geo-Information Science and Earth Observation (ITC)
hazards and vulnerability
GV201708579-001.pptx
62
Natural Disaster Summary 1900 to 2011
Deaths from natural disasters decrease while frequency of events and number of affected increase
500
500
250MM
K
400
Number of disasters reported
Number of people killed
Number of people affected

200
K
100MM
200
0
0
1900 1950 2010
Source: EM-DAT: the OFDA/CRED International Disaster Database – www.emdat.be

GV201708579-001.pptx
Emphasis on Increased Risk
Number of Natural Catastrophes with at Least $1 Billion in Economic Loss
and / or 50 Fatalities
Source: Munich Re: 2013 Natural Catastrophe Year in Review

GV201708579-001.pptx
Four Players Create a Risk Ecosystem
The Big Picture of Resilience

GV201708579-001.pptx
Insurance – Yes…. Does it cover this?
• Sales/customer loyalty • Regulatory compliance
• Unrecoverable costs • Employee lives
• Shareholder confidence • Local tax base
• Employee retention • Revenue
• Productivity and • Regional economic
innovation recovery
 Resilience = Insurance Premium Reductions

GV201708579-001.pptx
Understanding Risk to Business & Industry

GV201708579-001.pptx
What Do You Need To Know To Start Planning
for Your Facility?
• Recovery Time Objective (RTO)
– How long can your operations be off-line?
– Do you have any single points of failure?
– Is redundancy built into your production process?
• Threat Hazard Identification and Risk Assessment (THIRA)
– Have you identified all of your threats?
– What size threat do you use for planning purposes?
– Likelihood - Probabilistic vs. Deterministic approaches

GV201708579-001.pptx
NFPA 1600
Business Continuity and Disaster Management
Standard is outlined as follows:
• Prevention Phase
– Vulnerability Assessment
– Risk Management
• Mitigation Phase
• Preparation Phase
• Response Phase
• Recovery Phase

GV201708579-001.pptx
(%)
Source: The Impact of Catastrophes on Shareholders Value, Oxford Metrica.

GV201708579-001.pptx
Enterprise Resilience Services Resilience Score
Resilient Pre-Event Post-Event

Enterprise Planning Site Selection
Design Planning Recovery
Risk Based Life Cycle Planning
 BCP Alignment  GLS Services  Criticality Reviews  Site Assessment  Response

 Map Supply Chain  All Hazard  Risk Management  Recovery
Dependencies Assessment  Mitigation  After Action Review
 Threat Identification  Design Threat  Preparedness & & Lessons Learned
Determination Planning
 High-Level
Vulnerability  Multi-Discipline
Assessments Resilient Design
 Prioritize Spending
 Insurance
Negotiations

GV201708579-001.pptx
Resilience Model

GV201708579-001.pptx
Resilience Model

GV201708579-001.pptx
Dimensions of Resilience

GV201708579-001.pptx
Location:
Charleston, SC
Event:
Hugo
Output:
Displaced
Households

GV201708579-001.pptx
Global Resilience Subject is Forming
Interest in Resilience
 Resilience is a field of Risk Google Searches Over Time
Management
 Significant progress in quantifying
risk
 Interconnectedness between all
Source: Google Trends
entities
 Must create resilience across
multiple dimensions for success

GV201708579-001.pptx
Risks to Operating Plants – Young and Old
Risk to operating facilities can occur in many different forms and at
different times in an assets life cycle.
• Risks develop when plants are in their initial design stages and
continue until the assets have reached the end of their useful life.
• Once facilities are operational, risks can begin to take on new forms
for both static and dynamic assets.
• There are also disaster based risks to operating facilities, both

manmade and natural.

GV201708579-001.pptx
Thank You for your Attention!
Questions?

© 2017 Fluor. All Rights Reserved.
GV201708579-001.pptx
78

6 Steve Hillock Sala 3

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

6 Steve Hillock Sala 3

Uploaded by

Copyright:

Available Formats

Risks to Operating Plants –

Young and Old

• There are also disaster based risks to operating facilities, both

© 2017 Fluor. All Rights Reserved. 2

© 2017 Fluor. All Rights Reserved. 3

© 2017 Fluor. All Rights Reserved. 4

© 2017 Fluor. All Rights Reserved. 5

© 2017 Fluor. All Rights Reserved. 6

© 2017 Fluor. All Rights Reserved. 7

© 2017 Fluor. All Rights Reserved. 9

© 2017 Fluor. All Rights Reserved. 10

© 2017 Fluor. All Rights Reserved. 13

© 2017 Fluor. All Rights Reserved. 17

Fluor’s BRMF is a structured risk management

© 2017 Fluor. All Rights Reserved. 18

 Maximize return on investment; but minimizing Capex sub-optimizes life-cycle

 Leverage Company infrastructure; but underestimate development effort,

© 2017 Fluor. All Rights Reserved. 19

© 2017 Fluor. All Rights Reserved. 20

© 2017 Fluor. All Rights Reserved. 21

– Project Finance and Business Case Risk

© 2017 Fluor. All Rights Reserved. 22

Gating Process used to

© 2017 Fluor. All Rights Reserved. 23

Rate Consequences & Likelihoods

Establish Strategies & Action Plans

Incorporate ORMF Outputs into

Moderate $10-100 mil > 20 LWD fatality Governmental

© 2017 Fluor. All Rights Reserved. 25

© 2017 Fluor. All Rights Reserved. 26

Create a Risk Prioritization Matrix to guide

How to Fit all the

© 2017 Fluor. All Rights Reserved. 28

© 2017 Fluor. All Rights Reserved. 29

Operational Readiness Methodology

Life-cycle Design Support Vertical Launch

Supply Chain Readiness

Owner’s Risk & Readiness Reviews

© 2017 Fluor. All Rights Reserved. 30

Identifies Startup Support Needs and Priorities

© 2017 Fluor. All Rights Reserved. 31

ROI Optimization Plan

Project ROI Optimization Levers

© 2017 Fluor. All Rights Reserved. 32

Integrates life cycle and business case justification into the

 O&M philosophies and strategy documents

Implements maintenance and reliability practices

 Asset management system databases

© 2017 Fluor. All Rights Reserved. 34

Integrates procedures for operations, quality, logistics,

 In plant logistics procedures, equipment

© 2017 Fluor. All Rights Reserved. 35

Through alliances with system integrators, assures that

© 2017 Fluor. All Rights Reserved. 36

Develops HR policies, databases, and procedures

HR strategies, work system & culture plans

Procedures, systems, tools, materials, and service contracts to

© 2017 Fluor. All Rights Reserved. 38

Establishes an integrated supply chain

Identifies tasks, roles, and responsibilities for readiness activities

© 2017 Fluor. All Rights Reserved. 40

Leveraging the expertise of the Fluor Commissioning group, Vertical Launch

© 2017 Fluor. All Rights Reserved. 41

Division-wide, multi-site API/Lean Multi-site UpFRONT Maintenance Readiness