The Work Out For Risk And Risk Aversion Of Project EPC Contracting

Project construction is an important approach to drive economic growth and social progress, As a typical project contracting in international and domestic project construction, EPC project contracting has such characteristics as big contract amount, extended contract scope, high execution difficulty and risks. In case of this mode of contracting, how does the contractor perform risk analysis and assessment? What are the techniques to avoid risks?Starting with researching background, theory tools, method, relevant concepts, terminology and project management theory involved in project EPC contracting and using related knowledge of EMBA courses, the writer of this paper performs risk analysis on the basis of practical experiences in some EPC project contracting and provides a detailed description about the principles of risk analysis, sources of risks, risk description, risk classification and risk decomposition. The aim is to improve project contractors’understanding of various risks in the execution of an EPC project, so that they may prepare themselves (analyze or forecast project risks in advance)and minimize those potential loss (some contractors do not have a full consideration of some risks in an EPC project), on which basis they can assess their capacity to bear such risks.On the basis of risk analysis and risk assessment, the methods of risk aversion are worked out to achieve the following goals:change the ideas of all project parties to various risks. The fact is: some project contractors hurries to "put out the fire" passively (deal with or take actions passively) when the risk has already emerged. Instead, they should "prevent fire" actively (take precautions for areas where risk may emerge in the process of project execution). The writer elaborates systematically on the principles, strategies, procedures, methodology and precautions to take care of various risks in Chapter 3 of Section 4 of this paper "Practices to handle major quality and safety event". The purpose is to make sure the project is executed in a controlled, orderly and normal manner.Improve the company’s or project’s quality and safety management system. Once quality management system and safety management system have been established, they should be implemented. The established management systems should be applied in the daily work, so that the deficiencies (sources of risks) may be discovered in such application. Through analysis and summarization, the management systems are updated and improved, and the improved management systems are used to guide the later project contracting activities.Enhance the sense of social responsibility of the project contractors, economic benefit is no the only goal. "Safety first, care for human life and protect environment" are the social responsibilities every project contractor should undertake. "Excellent project quality, production safety and civilized construction environment" needs adequate investment. Some project contractors ignore funds input into project quality, safety and environmental protection facilities to solely go after economic benefit, which is quite wrong, because a large number of major safety and quality accidents are attributable to insufficient funds input or weak sense of responsibility of the individuals.The techniques for risk aversion as described in this paper are useful for project contractors as well as individuals in this field. This paper can also be used as reference by college teachers and students in similar courses.Working out for prevention risk, risk aversion techniques completely & strengthen theory of project management.