A critical examination of risk management in offshore projects
The shipbuilding industry, particularly in some Asian countries, is currently experiencing a difficult time resulting from a sluggish market situation and the increasing risk of buyers’ repudiation. Offshore newbuilding projects in the maritime sector are usually capital-intensive. When the market is in downturn and the values of offshore vessels or rigs (OVORs) depreciate, the risk of OVOR orders being cancelled is significantly increased. Being unable to deal properly with this kind of situation may bring about huge losses to the parties of the contract, both to shipyards and to the owners of OVORs. Newbuilding of OVORs differ significantly from the newbuilding of conventional ships, although the existing risk management of OVORs is based on a system adopted to suit conventional ships. Based on existing knowledge and the scholarship available in the public domain, and on the primary data collected in several phases of fieldwork, this study intends to critically examine a number of major issues relating to risk management in offshore newbuilding projects. The paper concludes with a proposed risk-management strategic framework and some practical suggestions for the builder.
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