Opportunities and risks
Managing risks effectively at all levels – with a focus on value generation
Anticipatory, proactive management of opportunities and risks is a central element of successful corporate management. At Implenia, holistic risk management supports the strategic priority of “Profitable Growth”. Implenia carries out risk management as a continuous task based on consistently applied processes and clearly defined responsibilities.
Counteracting risks with the Three Lines of Defence model
Implenia uses the Three Lines of Defence model as the overarching framework for risk management. This defines roles and responsibilities for effective and efficient risk management and deals with risks along three lines:
- First line: the business unit responsible for the identified risks and for the efficient mitigation of these risks through controls and measures as part of day-to-day business.
- Second line: the Value Assurance, Performance Management, HR and Compliance functions. ERM supports the first line by defining the methodology and parameters.
- Third line: internal and external audit bodies. These have a monitoring role, i.e. they provide independent confirmation that Implenia’s risks and opportunities are being treated effectively and in accordance with the company’s ERM regulations.
Enterprise Risk Management: 40 top risks identified
ERM regulates the handling of strategic risks, including market, environmental, legal and financial risks. These are identified, evaluated, controlled, monitored and reported in an annual cycle using standardised processes. The internal and external conditions under which Implenia works are constantly changing, so risk identification and assessment are carried out continuously based on the probability of occurrence and likely size of impact. In 2021, Implenia identified 40 top risks in this way, nine of which are included in the “Group Risk Report”.
Rebecca Gerth, who coordinates ERM at Implenia, explains: “In order to control the risk catalogue from an overarching perspective, risk management was initially done using a top-down process in 2021. From 2022, we are using a synchronised bottom-up/top-down process linked to the strategic plan; this should ensure a holistic, integrated ERM.” In summary, “ERM” refers to the integrated, systematic, forward-looking and targeted management of opportunities and risks. At Implenia it includes the following important tasks:
- ERM strengthens the company’s resilience and protects its reputation.
- ERM helps management achieve strategic and operational goals by laying the foundations for risk mitigation decisions.
- ERM increases the quality and safety of work.
Value Assurance: Using operational risk management to generate value
Implenia’s Value Assurance approach – an operational risk management tool that applies at the project level – is another part of the second line. The goal of Value Assurance is to ensure that bid decisions are based on the relevant facts and data, as well as to optimise profitability estimates and project management throughout the whole life of the project. “Value Assurance is the method we use to present a project in a transparent and standardised way, so that we can evaluate opportunities and risks at every stage of the project,” explains Axel Metzger, Head Value Assurance at Implenia. The Group has been working with the following process since 2019:
Project selection
- Pre-selection with selection checklist The first step is to register and check each potentially interesting project. The selection checklist includes clear criteria that tell us whether a project is worth further testing, or whether it should be dropped.
- Classification Selected projects are classified with the help of an automated matrix tailored to the Division concerned. It divides projects into one of four classes, depending on their complexity and risk profile. Class I is for very complex projects, Class IV is for the least complex ones.
- Project selection All projects are evaluated by a Value Assurance Committee (VAC), whose members are determined by the project class. Class I projects, for example, are decided on by the CEO, CFO and General Counsel, Class II projects by Division management and their Finance and Legal Business Partners, Class III projects by management in the countries, sectors or business units, and Class IV projects by regional management. This ensures that only strategically and financially attractive projects make it through to the bid phase.
Approval to bid
The approval to prepare a bid is given in a dedicated, project-specific VAC meeting of the relevant project class. Bids are presented using previously submitted standardised documents, and the strategy, opportunities and risks are discussed. If the bid is approved, with amendments if appropriate, the result is minuted.
Reviews throughout the project
Project reviews, which include on-site inspections, help us check the progress of a project, identify potential problems and agree steps to exploit opportunities or mitigate risks. Any lessons learned can benefit other bids as well as projects that are already in the execution phase. There is also an early warning system built into performance management, with benchmarks used to identify potential irregularities across the entire project period. The whole Value Assurance process is continuously supported by Operations, Legal and Finance.
With complex projects – i.e. Class I and Class II projects – the team executing the project coordinates regularly with independent Implenia experts to ensure that any discrepancies that occur during execution are picked up as early as possible. On-site visits are made to determine how the project is progressing, how relationships with the client and other project stakeholders are developing, how the financial and legal situation is looking, how the performance is, and what challenges there might be. This information is collected by means of a standardised questionnaire. Project managers then use the responses to initiate measures wherever required.
Comprehensive reviews of Class III and IV projects are carried out through spot-checks at the Division level, so Implenia can efficiently manage the risks of all projects in progress.
Through the strict application of Value Assurance, Implenia ensures that the projects it acquires are strategically relevant and have a significantly improved risk and margin profile. The pre-calculated gross margin has improved by over one percentage point since the introduction of Value Assurance.