Implenia’s holistic opportunity and risk management system supports the Group’s strategic priority of “Profitable Growth”. Enterprise Risk Management (ERM) and Business Continuity Management at Group level and Value Assurance at project level are used to identify strategic and operational risks, and initiate measures to improve the risk profile.
A proactive approach to opportunity and risk is a crucial element of successful corporate management. Implenia manages risk as a continuous task based on consistently applied processes integrated into day-to-day operations and clearly defined responsibilities.
Three-line model provides an overriding framework
Implenia uses the Three Lines of Defence model as the overarching framework for its risk management. This defines roles and responsibilities for effective, efficient risk management and counteracts risks along three lines:
First line: the business unit responsible for the identified risks and the efficient mitigation of these risks through controls and measures in day-to-day business.
Second line: processes such as Value Assurance and functions like Performance Management, HR, Legal & Compliance that monitor and support first-line risk management processes. ERM integrates the risk identification and assessment carried out in the first and second line at the Division, function and Group level, and defines the uniform 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 handled effectively and in accordance with the company’s ERM regulations.
Enterprise Risk Management: five top risk clusters identified
Implenia’s ERM regulates the management of strategic and operational risks based on the Group’s markets and business model, as well as its legal and financial risks. These are identified, evaluated, controlled, monitored and reported on an annual cycle using standardised processes so that measures can be formulated. The ERM thus creates a basis for decision-making and helps management achieve strategic and operational goals.
Synchronised bottom-up and top-down process
The internal and external conditions under which Implenia works are constantly changing, so the Group identifies and assesses risks dynamically based on probability of occurrence and likely impact. “With our holistic, integrated ERM, we work with a synchronised bottom-up/top-down process supplemented by ad-hoc activities,” explains Rebecca Gerth, who coordinates ERM at Implenia. Since 2021, Implenia has identified and evaluated risks using the bottom-up process, consolidating them at the Division, function and Group level for and with management. In the top-down process, which is repeated twice a year, management identified the following five top risk clusters in 2022, and included them in the Group Risk Report:
“Procurement”, such as supply chain bottle-necks or high inflation
“Project profitability”, such as project and contract risks
“Economic downturn and reputation”, including recession and ESG risks
“Resources and manpower”, such as shortages of specialists
“Liquidity and financing”, such as rising interest rates
Business Continuity Management, introduced in 2022, allows Implenia to ensure that critical business processes and key functions remain available in crisis situations, or that they can be restored quickly through recovery plans. For example, task forces were set up and immediate action taken in response to potential energy shortages and the war in Ukraine.
Value Assurance: using operational risk management to generate value
Implenia’s Value Assurance approach – an operational risk management tool applied 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 a project. “Value Assurance is the method we use to present a project in a transparent, 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 used the following Value Assurance process since 2019:
Pre-selection with checklist Each potentially interesting project is recorded and assessed. The selection checklist includes clear criteria that tell us whether a project should be tested further or dropped.
Classification Selected projects are classified using an automated matrix tailored to the Division concerned. It divides the 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.
Project selection All projects are assessed by a Value Assurance Committee (VAC), whose members are determined by the project class. Class I projects 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
Approval to prepare a bid is given in a dedicated, project-specific VAC meeting. Bids are presented using previously submitted standardised documents, and the strategy, opportunities and risks are discussed. Approval may be given with adjustments where necessary.
Project reviews with 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 promptly across the entire project period. The 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.
Integrated cooperation To ensure integrated cooperation across the Divisions, since 2022 managers have been systematically asked during the project selection and offer approval phases whether Implenia’s own services from other Divisions have also been identified and considered. “If we use services from a single source, we can offer our customers added value,” explains Axel Metzger. “As part of our Value Assurance process, we want to ensure that we take advantage of this opportunity when-ever possible.”