16.1  Methodology

Guidance notes - Methodology

This section of the report should document the methodology adopted in carrying out the risk valuation on the PSC.

Methodology for project risks (example)

The methodology used to identify, allocate and evaluate project risks is outlined below. These steps helped to ensure that risks were systematically recorded and quantified for the project.

Step 1:

Identify risks

Step 2:  

Categorise risks

Step 3:  

Estimate the likelihood of the occurrence of each risk

Step 4:  

Estimate the financial impact of the occurrence of each risk

Step 5:  

Allocate risks as transferred or retained

Step 6:  

Finalise the formation of the risk register

Step 7:  

Incorporate quantifiable risks into the PSC financial model discounted cash flow analysis.

The majority of the risk information was gathered and refined in five phases.

Phase One: Structured risk identification workshop

Phase Two: Structured risk quantification workshop

Phase Three: Further refinement of the risk quantification by risk experts

Phase Four: Risk review workshop

Phase Five: Risk modelling

The data gathered through this process is documented in the risk register which is contained in the PSC financial model.

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