Improve Stakeholder Relationships by Managing Non-Technical Issues: Part Two
Over the next two weeks we will be sharing industry insight on non-technical issues and risks in this two-part series. Part One provided a basic overview of the importance of non-technical issues and risks in stakeholder relationship building, and Part Two is focused on the risks, opportunities, costs and best practices for managing these non-technical issues to provide successful project execution.
What are the risks?
Non-Technical Risks and Stakeholders
Non-technical issues are the number one reason that energy projects are delayed. Non-technical risks (NTRs) refer to all risks that are not technical or commercial in nature and generally arise from the interactions of a business with its broad range of external stakeholders. Not only can these issues cause significant project delays, they can be extremely costly and negatively affect stakeholder relationships.
Non-technical risks could potentially result in discontent stakeholders. This is forcing the industry to manage significant NTRs at the project and portfolio levels while challenging stakeholders where natural resource reserves are found. Many of these developing countries suffer from weak governance, insecurity, criminal activities, poor transparency, absence of regulatory framework and human rights abuses. These structural and political defects in the national government make business interfaces extremely unpredictable and difficult to manage. As a result, companies must depend on proactive management of NTRs at the portfolio level.
What is the cost: value ratio?
Non-Technical Risk and Value
Non-technical risks are the most common cause of project delays and are the most likely to be underestimated; however, they have the potential to significantly decrease the value of a project. Identification and early management of NTRs such as community grievances, environmental and social safeguards and alignment with venture partners, can significantly improve a project. According to Breemer and McKeeman (2012), NTRs of this nature account for up to 70-75% of the cost. This means schedule failures in projects, schedule delays, cost overruns and a host of stakeholder-related issues. The greatest cost was identified as lost value for future projects, expansion plans or sales. These costs were often overlooked and resulted in staff time being diverted to conflict management.
How can you better manage NTRs?
Impact Assessment Process
One way to better manage NTRs is by leveraging the impact assessment process (IA). The IA process identifies stakeholder’s needs, interests and concerns early on in the project. The project management team should leverage this process to ensure successful project implementation. The IA process also includes mitigation measures and joint monitoring with other stakeholders and includes the following steps:
· Identify stakeholder and relevant group members and any potential issues
· Assess stakeholder interests and concerns and rank attributes
· Prioritize stakeholder engagement throughout the project
· Engage stakeholders and deliver appropriate messaging
· Monitor the progress of effective engagement with stakeholders
Strong management of NTRs in E&P projects may have significant short-term success with net present value (NPV) while improving long-term industry operations. Effective management of non-technical risks, along with innovative technology, will continue to differentiate the oil and gas business and generate success well into the future.
For more information on strengthening your stakeholder relationships, visit our Project Delay Prevention Page here.