Mitigating capital project risks through strong governance

Large capital projects are subject to a multitude of different risks that can significantly influence an investment’s performance and its overall financial impact for an organization. As such, identifying and mitigating these various risks are essential to effective capital investment.

In today’s volatile financial environment, however, properly evaluating capital project risks can prove to be challenging. With markets, geopolitics and regulations constantly shifting, it’s not always apparent what your organization should be prepared for, how it can protect itself from unexpected events that could potentially affect a large project’s outcome, or just how flexible it needs to be in adapting to the current conditions.

The first line of defense in managing capital project risks is the establishment of a strong system of governance. Strong governance drives accountability at the operational level and allows for risks to be integrated directly into the investment decision making process at the management level. The ideal system will keep your organization’s risk appetite in check, and ensure that the right balance of controls are in place at the administrative, project and vendor levels. The makeup of this balance is subject to your organization’s portfolio objectives and larger corporate strategy.

To learn more about constructing a strong system of governance for capital projects, read KPMG’s whitepaper, Capital Project Governance.