Assessing the risks
An easy-to-follow guide for identifying, assessing, and mitigating the risks associated with a future green space heat pump project.
What is a Risk Register?
A Risk Register is one of the basic elements included in any feasibility assessment for a project. A Risk Register identifies the risks anticipated ahead of a project start, their potential impact, and describes appropriate mitigating actions to reduce the likelihood of those risks occurring.
A Risk Register comprises four key stages:
Identifying and describing the risks relevant to each task of the project.
Evaluating the probability and impact of that risk if it were to occur.
Explaining what actions are available and required for effective mitigation and treatment of that risk, or for managing the risk if no mitigation is possible.
Re-evaluating the severity of that risk following appropriate mitigation.
A Risk Register should also cover the entire project timeline from the moment of use onwards, including:
Pre-project feasibility
On-going project contracting and construction
Post-construction operation and maintenance.
As such, Risk Registers can be sub-divided into Sections and/or Phases such as: Project Management, Business Case Development, Technical Development, Planning, Procurement, Installation and On-going Operation. Other phases may apply. Equally, risks can be organised thematically, for example ‘environmental’, ‘financial’, ‘managerial’ etc.
Risk Registers are often developed as simple spreadsheets, since they’re easy to create and modify.
Colour-coding
Risk Registers can be coded with colours, or with a numerical system, to clearly indicate the severity of the risks you identify. This should be done both before and after appropriate mitigation measures have been considered.
Colour coding can be done with a simple Green –> Amber –> Red system, from lowest to highest severity. A numerical system can be implemented, for example, by giving ‘Probability’ and ‘Impact’ each a score out of 5 – with multiplication of one by the other giving each risk a score out of 25.
Here’s an example:
| Task | Risk description | Probability of Occurrence | Potential Impact on Project Success | Risk Treatment | Overall Risk Score After Mitigation | |
|---|---|---|---|---|---|---|
| 1 | Confirm regulatory consents (e.g. planning permission). | Regulatory consents not secured due to inadequate information. | Low | Medium | Early engagement with planning and regulatory authorities to understand information requirements and ensuring appropriately qualified people prepare material. | Low |
Building a Risk Register for a Greenspace Heat Pump Project
Below is an example of a risk register, covering some of the issues that are likely to be encountered during the project lifecycle for green space heat pump schemes. It is intended to get the user started with the risk register process – users will need to add to and edit this basic Register to suit the specific barriers and context of the greenspace in question.
| Task | Risk description | Probability of Occurrence | Potential Impact | Risk Treatment | Overall Risk Score After Mitigation |
|---|---|---|---|---|---|
| Phase: On-going | |||||
| All tasks involving internal resources | Capacity limitations and low prioritisation of green space heat project development inhibit progress | Medium | High | Recognition by management of strategic value of green space heat project development. Preparation of a mini-business case for project development itself, focusing on strategy-relevant benefits. Maintaining a clear and achievable project timeline (including decision-points) which allows any time-limited benefits to be secured. Appointment of a project “champion”. | Medium |
| Phase: Opportunity Search and Feasibility Assessment | |||||
| Matching supply and demand within identified constraints | Strong opportunities are indicated in fewer locations than expected, limiting the scope for multiplying the benefits through replication. | Low | Medium | Including opportunities across a range of scales and different types of green space (not necessarily just parks) in the search. | Low |
| Financial evaluation and business case development | Economic and Financial cases are insufficiently strong/conclusive to proceed with the development of shortlisted opportunities. | Medium | High | Highlighting the wider Strategic Case in proposals, especially the project’s contribution to the localisation of energy and decarbonisation (including net-zero pledges where applicable). | Medium |
| Stakeholder engagement | Local stakeholders (e.g. community, commercial) present opposition to proposal. | Low | Medium | Undertaking stakeholder identification and mapping early on in the project. Early engagement with stakeholders whose participation is critical (e.g. potential heat customers). | Low |
| Phase: Project Development | |||||
| Financial modelling | Refinement of technical, financial and management details of proposed scheme results in a weakened business case. | Medium | High | Undertaking value engineering exercise to try to improve the business case; otherwise, revisiting the shortlist of opportunities in case a new frontrunner can be identified. | Medium |
| Customer acquisition and contractual sign-up | Potential heat customers do not connect to scheme: · Property developers opt to install conventional heating systems rather than take up heat supply offer. · Existing heat users decline offer of connection. | Low | High | Engaging with owners/tenants (and/or building managers) of existing buildings and with property developers to persuade them of the benefits of opting for heat supply from green space scheme. | Low |
| Planning and consenting | Regulatory consent (e.g. planning permission where required, natural heritage) are delayed or not achieved. | Low | High | Early engagement with planning and regulatory authorities to identify information requirements, use of appropriately qualified professionals to develop required information, and sharing issues at an early stage to understand regulatory implications. . | Low |
| Procurement | Capital costs exceed estimated budget (e.g. large electrical network connection costs are required). | Medium | Medium | Pre-tender engagement with multiple suppliers to inform the cost estimate on which to base the business case (including a contingency sum). Competitive tendering to secure value for money. | Medium |
| Phase: Operational | |||||
| Revenue generation | Price changes in gas and electricity markets decrease cost savings/net revenues from scheme. | Medium | Low | Pre-construction modelling to review heating fuel and electricity market trends. Incorporation of cashflow buffers and/or medium-term budgeting to be based on the results of a sensitivity analysis which quantifies the impact of a “low”, “medium” and “high” scenario. | Low |
| Technical operation | Technical design flaws or defective installation mean that the system fails to perform to required standards, resulting in i) increased running costs; ii) an under-heated building; and/or iii) operation and maintenance issues. | Low | Low | Adherence to Microgeneration Certification Scheme requirements will help to ensure an effective design and good quality installation for smaller schemes. Larger schemes can require designers/installers comply with CIBSE code of conduct. Construction contract can cover the early period in which technical flaws are most likely to emerge (typically within the first one to two years), and place appropriate remediation responsibility on the contractor. | Low |
| Technical | Equipment fails prematurely and requires replacement. | Low | Medium | Service Heat Pumps annually; ensure they come with a 5-year warranty, providing certainty that no additional costs relating to equipment will accrue in the early years of the scheme’s operation. | Low |