A solution that encompasses simultaneous evaluation of financial, risk and operational performance, in particular, the inclusion of extreme value risks in the decision criteria will be developed. This will include both an extreme risk weighted NPV calculation and also a set of extreme risk evaluation criteria that provide visibility of the tail end risks, for example ‘value at risk’. This will be robust enough to incorporate a range of data that varies in completeness, format and quality, ensuring the solution is practicable and does not rely on an unrealistic availability and quality of data. The solution will also support rapid ‘what-if’ scenarios analysis to support agile decision making. This will allow users to quickly test different assumptions and decision criteria. A generic business modelling platform will be developed that will allow a decision maker to holistically evaluate projects and investments based on these criteria.The project will demonstrate the power of the new risk modelling techniques as an investment decision support solution through three high value investment case studies. A stage gate will be undertaken after the first case study and Cranfield University will review the event tree and conduct Peer Review before refinement and progression to an additional two case studies.Through application to a number of case studies it is expected that a generic business modelling platform will be developed, that could be utilised on future investment decisions. The project concludes with an appraisal of the investment in software and training required to deliver embedded implementation within NGGT.
Benefits
Success will be the application of the extreme value analysis in providing a consistent and detailed approach to a range of NGGT investment projects either ongoing or forecast as part of the Network Development Process (NDP). The approach should be innovative in systems modelling, encompassing financial, asset and operational modelling to address extreme value events (low probability/high impact asset failures), alongside the ability to facilitate stakeholder engagement in investment decision making.
The success of the solution will be:
- A dynamic model that supports rapid scenario analysis, so that scenarios and assumptions can be tested in a timely fashion.
- A flexible product that has the ability to be applied to multiple investment decisions
- Strong financial modelling ability ensuring the monetised impact of risks and investment options are robustly modelled.
- A number of scenarios run that produce a risk-adjusted NPV as well as articulation of the extreme risk scenarios, providing visibility of the tail end risk and confidence it is accounted for in the NPV calculation.
- Reporting capabilities using the Power BI Dashboards application
- Use as a high-level simulation tool of network activity and performance. It does not replace dedicated hydraulic model tool in this role, but provide a tool to rapidly run a wide range of network scenarios. In this role it can provide decision support that can inform high level analysis and identify where more detailed hydraulic or engineering modelling or analysis need to be carried out.
