Your assignment is to choose one of the following companies:
Saudi Aramco
The National Commercial Bank
Saudi Telecom Company
Do some research on any of the aforementioned companies and identify four risks they are facing.
For each risk please answer the following:
1. Why is this a risk?
2. What type of risk is it?
3. What is the likelihood of the risk? How great is the impact?
4. What strategy or policy does the company use to manage the risk?
** Your answers could either be in Arabic or English.
** You should submit your assignment in a pdf formatted file.
** Font size should be 12.
** Font type is Arial.
** Line spacing is 1.5
Your answers could either be in English.
** You should submit your assignment in a pdf formatted file.
** Font size should be 12.
** Font type is Arial.
** Line spacing is 1.5.
PROJECT RISK MANAGEMENT
Risks
Saudi Aramco identified various material risks in its 2020 corporate report. These include:
Type and Justification
A. Fluctuations in crude oil prices in the global market can lead the cash flow and operations of Aramco to vary considerably. For instance, while crude oil prices fluctuated between $50-$75 from January 2016 to early March 2020, due to Covid-19, prices fell below $37-per-barrel resulting in a material adverse impact on Aramco's cash flow and cause operational risks.
B. Given the highly competitive nature of the industry, Aramco could be influenced in a materially adverse way leading to significant variations concerning the price points at which it sells petroleum and causes operational risks by reducing profitability.
C. The global demand for hydrocarbon can be reduced by climate change concerns manifested in government laws/regulations and public sentiment. The regulatory environment of regions in which Aramco operates can become extremely stringent and can have material adverse (Saudi Aramco, 2020). It is identified as an industry and regulatory environment risk.
D. Aramco’s facilities have been subjected to various terrorist and other attacks. Abqaiq and Khuaris, 2 of Aramco’s major processing facilities, were attacked in September 2019 temporarily causing operations to be suspended (Mohammed, 2019). Terrorism is identified by the company as a risk to the industry and regulatory environment.
Likelihood and Impact Matrix
| Impact | ||||||
| Likelihood | Trivial | Minor | Moderate | Major | Extreme | |
| Rare | ||||||
| Unlikely | ||||||
| Moderate | Risk D | Risk A | ||||
| Likely | Risk C | Risk D | ||||
| Very likely | ||||||
Table 1: Risk Likelihood and Impact Analysis
Source: Author
Potential Strategies/Policies
To mitigate the influence of price fluctuations Aramco may adopt a performance-based contract revenue model to offer operators improved flexibility to reduce cost base to create a more stable income flow. While climate change risks related to the production of fossil fuel are inevitable, the company could adopt greener production methods to improve compliance with regulatory standards in the regions it operates in. To reduce exposure to hazards related to armed conflict and terrorism, Aramco could improve its dependence on production through inventories located outside the Kingdom.
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Pages: 4
Words: 890