Project finance risk evaluation of the Electric power industry of Serbia

“…FMEA has been also implemented in organisations to classify internal risks (Jóhannsson, 2015). FMEA is applied to evaluate three factors of project finance risk in the energy sector, with each factor including a set of risk indicators (Makajić Nikolić et al, 2011). FMEA is a preventive process to assign specific resources to the riskiest elements (Chang, 2009).…”

Section: Rpn = S* O* Dmentioning

confidence: 99%

Using EWGM method to optimise the FMEA as a risk assessment methodology

Mashaqbeh

Khan

2019

Concurrent Engineering

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Failure Modes and Effect Analysis (FMEA) is a proactive, highly structured, and systematic approach for failure analysis. It has been also applied as a risk assessment tool, by ranking potential risks based on the estimation of Risk Priority Numbers (RPNs). This paper develops an improved FMEA methodology for strategic risk analysis. The proposed approach combines the Analytic Hierarchy Process (AHP) technique with the Exponential and Weighted Geometric Mean method (EWGM) to support risk analysis. AHP is applied to estimate the weights of three risk factors: Severity (S), Occurrence (O) and Detection (D), which integrate the RPN for each risk. The EWGM method is applied for ranking RPNs. Combining AHP with EWGM allows avoiding repetition of FMEA results. The results of the developed methodology reveal that duplication of RPNs has been decreased, and facilitating an effective risk ranking by offering a unique value for each risk. The proposed methodology focuses not only on high severity values for risk ranking but also it considers other risk factors (O and D), resulting in an enhanced risk assessment process. Furthermore, the weights of the three risk factors are considered. In this way, the developed methodology offers unique value for each risk in a simple way which makes the risk assessment results more accurate. This methodology provides a practical and systematic approach to support decision-makers in assessing and ranking risks that could affect long-term strategy implementation. The methodology was validated through the case study of a power plant in the Middle East, assessing 84 risks within 9 risk categories. The case study revealed that top management should pay more attention to key risks associated with electricity price, gas emissions, lost-time injuries, bad odor, and production.

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“…Both global rating agencies and academic researchers have studied the subject of internal ratings (Allison & Tufts, 2015;Bae & Damnjanovic, 2018;Korean Ministry of Land Infrastructure and Transport, 2016;Medina & Marty, 2018;Morgan Stanley, 2014;Nikolića, Jednak, Benković, & Poznanić, 2011;Piney, 2003;Renigier-Biłozor, Wisniewski, Kaklauskas, & Biłozor, 2014;Ribeiro & Ferreira, 2017;Standard & Poor᾽s, 2014). Taking into consideration relevance to this study and concreteness of information, six previous studies are selected: Bank for International Settlements (BIS, 2001); Moody's (Medina & Marty, 2018); Standard & Poor᾽s (2014);Renigier-Biłozor et al (2014); Failure Mode and Effect Analysis (FMEA) (Nikolića et al, 2011); and the Korean infrastructure guidelines (Korean Ministry of Land Infrastructure and Transport, 2016) (see Table 1).…”

Section: Applications and Limitations Of Previous Studiesmentioning

confidence: 99%

Internal Credit Rating Framework for Real Asset Investment

Bae

2019

International Journal of Strategic Property Management

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Real asset investment, which is assumed to be worthier than traditional assets in regards to exposure to income volatility, has become central to investment portfolios in financial institutions. However, the features of illiquidity and uniqueness involved in an individual real asset deal require private investors to review the full dimensions associated with the transaction structure. Banks and global credit rating agencies assess the quality of products by relying heavily on qualitative research executed by human insights and experiences. Such an approach ensures the comprehensiveness of the review process but it requires excessive resources in time and money. This study presents an internal rating system that instantly screens features of a deal proposal and provides a rating compatible with the global rating standard. The result shows that the outcomes created by this model are mostly clustered from BBB to BB. These findings match the average ratings for real assets, as determined by global rating agencies, which strengthens the practicality of the proposed model.

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Project finance risk evaluation of the Electric power industry of Serbia

Cited by 29 publications

References 21 publications

European Union Oil Import Dependency Risk Analysis

European Union Oil Import Dependency Risk Analysis

Using EWGM method to optimise the FMEA as a risk assessment methodology

Internal Credit Rating Framework for Real Asset Investment

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