(68d) Understanding and Managing Business Interruption Risks

As the LNG market continues to expand, bringing with it both technical and commercial challenges, the key to successful implementation will be understanding and management of risk. This can be risk in terms of safety and security, environmental impact, reputation and business interruption. Focusing on the latter, a typical LNG import terminal project is exposed to business interruption risk in the form of project delays, regulatory shutdown, infrastructure failure, equipment failure, supply delay/diversion, and environmental disruption, all which could result in significant financial losses if not properly managed.

Risks can generally be mitigated in the following ways: technically, organizationally, contractually and commercially. In order to determine which options provide the best solution, one must understand the full impact of risk in terms of overall business interruption.

This paper will examine the use of risk management as a pro-active, strategic tool to evaluate business interruption costs and provide the basis for decision making. Methodology will be discussed that includes ranking and valuation of risk to optimize resources, maximize opportunities and enhance business performance.