Beijing: On March 26th 2010, a joint research project focusing on Quantitative Risk Management (QRM) announced the completion of its 1st phase. Having started cooperation with the Research Centre of State-owned Assets Supervision and Administration Commission (RC/SASAC) since 2007, DNV aims to provide Chinese state-owned enterprises (SOE) with practical guidance in the field of enterprise risk management.

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Mr. Wang Xiao Qi, Chief of Bureau of Planning and Development, SASAC speaks at the seminar
Cover of the research report

Wang Xiaoqi, Chief of Bureau of Planning and Development, SASAC, Zhou Fangsheng, ex-vice chief of Bureau of Enterprise Reform, Li Baomin, director of RC/SASAC, Ms. Qiu Zhiqing, chief expert in the approval of national level investment project under NDRC, project team members, together with more than 70 representatives from 40 central SOEs covering a wide range of industries including oil and gas, chemical, power, metallurgical, large equipment manufacturing, etc. attended the seminar held in Beijing on March. 26th.

Sharon Guo, Project Director of DNV Sustainability Centre Beijing gave an overview introduction on the research report of this project titled “Quantitative analysis for improved decision making in large investment projects”. In the context of more Chinese enterprises going global and facing more business uncertainties, there is an urgent need for them to adopt more advanced methodology to manage the investment risks. Quantitative risk management is such an analyzing tool that almost none of Chinese SOE uses previously. A real business case (mine acquisition) was under quantified evaluation to showcase the benefits of quantitative risk management. This part was stressed out in Tina Huang’s speech later on.

In the end, the research gives several suggestions as follows:

  • Quantitative risk analysis should incorporate into enterprise risk management system;

  • When using the quantifying method, several segments need to be addressed, including occasion, data collecting and coordination between approval panel, enterprise & financing body;

  • Competence building is one of main problem of rolling out this tool among central SOEs. Enterprises can consider cooperating with professional institute in training aspect.

Mr. Wang Xiaoqi commented, “As the supervisor and investor of SOEs, SASAC shoulders the responsibility to remind these enterprises of business risks that they may encounter, a large part of which includes investment risks. It is the key point of why RC/SASAC initiates this project with DNV.”

Ms. Qiu Zhiqing, who has more than 40 years experiences in approval of national most important investment projects, gave highly positive comments on the risk-based life cycle analysis approach: “The quantitative risk analysis approach used in this project is valuable and suitable to widely apply to investment projects.”

Committed cooperation with RC/SASAC
Starting from 2007, DNV has cooperated with RC/SASAC in a series of joint research projects in terms of enterprise risk management and energy efficiency. This time, the project is the 4th joint project with RC/SASAC. Not long before, on Sept. 27, 2009, Henrik O. Madsen, DNV President and CEO paid a visit to SASAC, meeting with Shao Ning, vice chairman of SASAC.

According to Sharon Guo, up next, the research report will be distributed to all the participated SOEs. A few enterprises have expressed their interests in further discussing the possibility of adopting this methodology into their practical work. Thus, DNV will actively identify any opportunity to help SOEs in specific case project. Zhi Dongsheng, Chief of New Industry Research Dept., RC/SASAC said, “We look forward to President Henrik O. Madsen’s next visit to SASAC. The accomplishment of this project would be a nice topic to enhance the communication and exchange.”


About DNV- RC/SASAC joint project on QRM

The research project applied DNV’s Risk Based Project Life Cycle Analysis (VCA) approach and Mont Carlo simulation. The research focused on real project application and concluded that the approach can help to do a more systematic risk analysis; to give decision makers more comprehensive, concrete and direct information on how the risks can impact the project life span cash flow and the financial performance results; the risk analysis approach itself will give management of the project a clear direction of what risks are the major tasks for them to manage during the decision and project execution phase.