Managing Systemic Risk in Mining Capital Projects

This technical paper, authored by Jacques Gouws, explores managing systemic risk in mining capital projects.  Systemic risk refers to complex interdependencies within a project, originating from multiple sources and spreading quickly, often resulting in insidious effects that are difficult to identify individually. This risk can lead to sub-optimal project delivery or outright failure if not addressed proactively during the Front-End Planning (FEP) stages.

The paper begins by defining systemic risk and its impact on projects, highlighting the importance of managing this risk early in the project lifecycle. It argues that systemic risks are often not adequately addressed during the early FEP stages, leaving the project with a high-risk profile that could be mitigated. The author introduces the concept of Systemic Risk Mitigation Areas (SRMA), which are not risks themselves but areas that, if neglected, could lead to systemic risks.

Key considerations when quantifying project risk include individual risks, estimation accuracy, and systemic risks. The paper criticizes the common practice of focusing on symptoms rather than root causes of systemic risks during the QRA process, advocating for a more proactive approach.

A case study analysis of three brownfield platinum mine projects at late FEP stages is used to illustrate the practical application of SRMA. The case studies reveal shortcomings in systemic risk management that could have been addressed earlier. Eight prominent SRMA are discussed, including project team history, decision-making speed, project management processes, Work Breakdown Structure (WBS) representation, communication structures, technical complexity, contracting complexity, and contracting strategy.

Overall, this paper emphasises the importance of a hands-on, proactive mindset in managing systemic risk in mining capital projects, advocating for the integration of SRMA into early project planning stages to enhance project performance and mitigate potential risks effectively.