Environmental Risk Management as a Way to Improve the Economic Efficiency of Major Projects

Evolution of Environmental Risk Management in Major Projects

Environmental risk management in large-scale investment projects is not just about regulatory compliance, but a tool that directly affects economic efficiency. The speaker analyzes the experience of EuroChem, where the transition from manual management to a systematic methodology made it possible not only to standardize processes but also to prevent colossal financial losses.

Development and Implementation of a Unified Methodology

Until 2021, the company lacked a unified approach to assessing environmental risks for a portfolio of major projects, which included assets in Russia, Kazakhstan, and Brazil. The implemented methodology is based on classic tools (HAZID, ENVID) and qualitative assessment using a 5x5 matrix. A mandatory condition was conducting face-to-face risk sessions with cross-functional teams (designers, builders, procurement specialists) when the project passes through each stage (Stage-Gate) or at least once a year.

Key Changes in the Updated Methodology (2024)

• Introduction of new attributes: The emergence of the "showstopper" (SS) status, schedule delay (T), and budget increase ($) attributes allowed for clear classification of risks to be escalated to top management.
• Evaluation of measure effectiveness: Evaluation criteria (from ineffective to effective) were introduced based on changes in the severity or probability of the risk, making mitigation costs transparent.
• Detailing the risk matrix: The transition from letter designations (A, B, C) to alphanumeric ones (e.g., from A1 to A6) made it possible to track dynamics even within a single criticality category.

Process Digitalization: The Insight Module

Moving away from Excel and Word in favor of a specialized module in the Insight information system automated the control over the implementation of measures. The system sends notifications to responsible persons, allows curators to approve or reject supporting documents, and tracks overdue tasks, significantly saving time and resources.

Practical Case: Lifting Specially Protected Natural Area (SPNA) Restrictions

The presentation details a critical risk: the threat of refusal in the state expert review due to the subsoil plot being located under a specially protected natural area (SPNA) of regional significance in the Perm Krai. A direct ban on mining threatened the extraction of 70 million tons of ore (about 3 billion dollars in revenue).

Extensive work was carried out to solve the problem:

• Ecological and economic assessment and EIA: Two-year studies involving a leading university proved the absence of global negative changes to the landscape.
• Approvals from regulators: Positive conclusions were obtained from the State Commission on Mineral Reserves (GKZ) and the All-Russian Scientific Research Institute of Ecology (Ministry of Natural Resources of Russia).
• Changes in regional legislation: An amendment was made to the act of the Perm Krai government, lifting the ban for licenses issued before January 2022.

As a result, by investing tens of millions of rubles and 2.5 years of time, the team prevented the loss of billions of dollars, proving that environmental risk management can radically improve project economics.

What you will learn from this webinar:

• How to integrate environmental risk assessment into the overall management system of major investment projects?
• What criteria to use to identify critical risks (showstoppers)?
• How to evaluate the real effectiveness of risk mitigation measures?
• How to automate control over the implementation of the risk management plan?
• How to build relationships with regulators to lift legislative restrictions on mining in complex environmental conditions?