As part of due diligence and major decision making processes, we have undertaken high-level independent reviews for important projects. These include qualitative and quantitative risk assessments and value improvement activities undertaken by other professional organisations and in-house teams. We have also worked with independent project review and due diligence teams.
In our reviews we have examined and reported on:
- Qualitative risk assessment processes and outcomes
- Quantitative risk analyses across a range of topics, including project costs and schedules, environmental risk assessments and business case calculations
- Risk management frameworks, guidelines and related documents.
In some instances, we have been engaged to first review and then build on an in-house analysis by carrying out risk assessments and other analyses ourselves.
We have also developed guidance for independent peer review teams, to help them set priorities for their work and allocate limited due diligence resources more effectively.
We have also assisted in post-completion reviews and post-investment reviews, although these usually involve the relevant project and investment teams and they are rarely independent activities.
Contributing to a successful review
In our experience there are several important factors that underpin successful independent reviews:
- The purpose of the review should be to obtain better outcomes for the client organisation. This means that the approach the reviewer takes should be generally supportive of the work and those professionals providing the services or performing the activities being reviewed. We do not shy away from voicing our opinions but, drawing on our experience and specialist expertise, we seek to resolve any issues we discover rather than allow them to become sources of confrontation.
- The main criterion we use for making decisions about the approach being adopted by a professional provider or an in-house team is fitness-for-purpose for the client. We have reviewed several very large projects where the processes that were used were sound but quite different from those we might have used ourselves for the same task. Nevertheless we supported the work because it was fit-for-purpose and fulfilled the client's needs.
- We advocate that a reviewer should develop a close and cooperative relationship with the professional providers or in-house team. Working closely with the people conducting the primary analyses gives us better insight into what they are doing and why, as well as enabling us to contribute constructive advice. Our experience is that this can be achieved without compromising our independence.
- We believe that the most effective reviews are undertaken when the review starts early in the development of the work being reviewed, before too much is set in stone, as this supports the provision of strategic guidance and the detection of improvement and enhancement opportunities while they can still be exploited.
Comments from a senior principal in one of the organisations whose work we reviewed reinforce some of these points:
- [The reviewer] has taken a very objective and critical (constructive criticism) stance. Throughout his involvement, he has provided many comments (verbal and written) in relation to process, consistency and defensibility that have always been provided with positive suggestions attached.
- The peer reviewer has maintained independence and has not tried to put his own stamp (for example methodological preferences) on the risk assessment.
- Overall, the peer reviewer’s involvement has given us additional confidence that the risk assessment process that has been followed is appropriate, and that the risk assessment results can be supported and usefully applied by all stakeholders.
Challenges of reviewing quantitative analyses
Quantitative analyses present special challenges for analysts and reviewers. Not only is it important to understand the core analysis method being used, often some form of Monte Carlo simulation modelling in much of the work we do, but also:
- The quality and integrity of the sources of information used in the model
- The structure of the model and how this relates to the actual circumstances that it represents and to the information used as inputs
- How the outputs relate to the decisions they are to support
- How the outputs can be explained in terms of the inputs and the operation of the model.
Each stage in the analysis must be sound in its own right, and the process must be coherent from sources of information through to conclusions. Understanding and explaining this to decision makers and project teams often involves assisting them to make a transition from their existing processes to current good practice. Our long involvement in the field provides us with an unmatched ability to appreciate past practices and assist clients to take advantage of recent analytical developments. In many cases, we have been at the centre of these developments through our own work and within national and international professional organisations.
Some of the independent review activities in which we have been engaged are summarised below.
We reviewed the company’s arrangements for the independent peer review of their major capital investment projects. We proposed a revised, risk-based strategy based on a formal ‘College of Reviewers’ to conduct competent independent reviews that would be timely and structured as well as adding value. We provided foundation risk management training, and advanced training on specialised aspects of risk management, for the College of Reviewers. We developed an evaluation tool for members of the College when they were allocated to investment review teams.
Association of Superannuation Funds of Australia
We undertook a review and provided comments on drafts of ASFA’s Best Practice Paper 19, A risk management framework for superannuation funds.
We reviewed import risk analysis processes, including specialised quantitative IRA methods.
BHP Billiton Iron Ore
We have undertaken many quantitative cost and schedule risk assessments for very large iron ore asset development projects, often building on existing in-house analysis. Working with the in-house teams we have reviewed the existing work and extended it to provide them with independent verification of their processes and conclusions. This approach ensures that the insights of the in-house team are incorporated into the process while our review of their work enables them to extend their capabilities.
We helped the company with the evaluation of risk management information systems and the selection of a preferred system provider.
Department of Agriculture and Water Resources, Australia
We participated in an independent review of the Risk Return Resource Allocation Project and associated methods and models. The aim of the project was to provide a transparent and credible platform for the allocation of resources among options to reduce biosecurity risk.
Department of Climate Change and Energy Efficiency
We undertook independent quality assurance reviews of risk assessments for the Department in relation to Government projects and initiatives associated with:
- Carbon Farming Initiative
- Financial Assistance Scheme
- Green Start Program
- Solar energy rebate program and phase-out of another program in conjunction with the Renewable Energy Target
- Training Assistance Scheme.
Department of Defence, Australia
We conducted independent reviews of environmental risk assessments undertaken for Department of Defence sites under its Environmental Risk Management Framework.
Department of Sustainability and Environment, Victoria, Wonthaggi Desalination Project Peer Review
We acted for the Department to undertake an independent review of the environmental risk assessment process and its outcomes associated with a large seawater desalination project. The risk assessment was part of the approval process for the new plant in a politically-charged environment.
We undertook an independent review of the outcomes of a value management workshop that examined options for establishing park-and-ride facilities for an urban motorway.
Ministry of Agriculture and Forestry, New Zealand
We provided an independent review of a quantitative risk analysis model for flock infection with scrapie, an incurable degenerative disease of sheep and goats.
Newmont Waihi Gold
We provided an independent review of an assessment of the risks to people associated with potential ground collapses near a proposed recreational lake at the Martha open pit mine.
Nyrstar: Port Pirie Development Project
We provided an independent review of a quantitative cost uncertainty model and data provided to the project by another consultant as part of a bankable feasibility study. The model and key data were extensively revised to produce a model and output that was considered more credible, understandable and correct by the project and management teams.
Ok Tedi Mining Limited, New Guinea
We provided independent audit and peer reviews for sophisticated quantitative risk analyses for a sensitive mine waste management and environmental remediation project involving engineering, social and environmental aspects.
Port of Melbourne Corporation
We provided an independent peer review of the risk management process, including quantitative risk analysis, for the Risk Technical Report in the Supplementary Environment Effects Statement for the Port Phillip Bay Channel Deepening Project, and a review of selected submissions to the SEES Panel Enquiry. This was another politically sensitive project in which the risk assessment played a major role in decision making and stakeholder consultation.
Sydney Metro: CBD Metro peer review
We provided an independent peer review of all aspects of the risk assessment process for the CBD Metro Project.
Sydney Ports Corporation
We participated in an Independent Gateway Review of the Port Botany Expansion project, in compliance with NSW Treasury guidelines.
We participated in an Independent Gateway Review of the Enfield Integrated Logistics Centre.
Transport for NSW: North West Rail Link
We undertook an independent review of the quantitative risk analysis for the capital cost of the North West Rail Link (NWRL) Project.
We assisted in setting risk-based priorities for the in-house due diligence team exploring a significant and potentially risky merger opportunity.
We also reviewed and extended cost risk assessments for major projects that were initiated by in-house teams to provide them with independent verification of their processes and conclusions.