INSIGHT | RISK & INSURANCE
Risk impact
Schedule delay
Severe cost overruns
Project costs Above, figure 3: Interrelation between risk, schedule and cost SOURCE: RISKCONSULT GMBH
The core principles of the IPD concept can be
summarised as follows: ● Early involvement of all key stakeholders to integrate expertise as early as possible (also referred to as Early Contractor Involvement (ECI))
● Financial transparency through the application of the open-book concept, joint decision-making and development of project objectives.
● Early identification and quantification of risks ● Joint risk management and risk assumption, including remuneration dependent on project success (incentive contract)
● Exchange of knowledge and information through technical tools
● Equal position in the project team and unanimous decision of the core participants
● Mutual, comprehensive exclusion of liability and avoidance of legal proceedings through internal conflict resolution mechanisms
The ideal methodology for the practical application of the IPD concept is the introduction of a Digital Twin (DT). This is a representation of a tangible or intangible object or process from the real to the digital world. DT has become a household word in large infrastructure projects as technological advances in modeling and simulation make it applicable. Elements of a DT include, at the beginning, input and
system integration of data on cost, schedule, risk and budget. In the Project Risk Twin (PRT), the data are linked
to appropriate software. Then, an integrated cost and schedule risk analysis, including uncertainties, is carried out by means of simulation. The analysis results are usually processed and presented in the form of individually tailored dashboards.4
28 | Summer 2023
Based on the core principles of the IPD concept, early
participation of a suitable project insurer would make synergies possible and likely lead to beneficial results. One of the few unique selling propositions of
established, globally active project insurers is the immense wealth of experience resulting from their involvement in countless major international projects. This concerns both the experience with major losses and their causes, as well as the enormous expertise in loss prevention. In the context of risk inspections carried out by
insurers, the sharing of experiences from previous projects, so-called ‘Lessons Learned’, was repeatedly considered particularly valuable by the project engineers, based on the authors’ experience. Especially with the contribution of these experiences
from previous projects, suitable project insurers could make a valuable contribution to hazard analysis and risk assessment in the context of IPD. Large international insurers and reinsurers also have
additional expertise that the other project participants can only contribute to a limited extent or not at all. These include, in particular, highest standards in natural hazard analysis, fire protection expertise, experience in the area of environmental damage and the resulting reputational risk, cyber risk assessment and relevant experience in the ESG area. Early and active involvement of the potential project
insurer would thus have the great advantage of bringing additional valuable expertise to the IPD. Furthermore, the involvement of the insurer in the risk
management concept could lead to the acquisition of more attractive and risk-aligned insurance conditions for the project. These could include, for example, more favorable premium rates, advantageous deductibles or a broader scope of coverage.
Relative frequency
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