It'snecessarytopayattentiontothefactthatunplannedincreaseofoperationaltimemaybecomeonemorefactorof violation ofqualitative factors of material resources (in particular this concernsenvironmental conditions influence), exceeding norms ofnaturaldecreasewhen storingand transportingof construction materials. MRqualityandquantitymismatchtospecifiedMRmayleadtotimeincreaseorrequirement of additional operations related toquality controlofincoming resourcesto Supply Chain Link and itscoordination with contractorsofmaterial flow parameters. So, it'srecommendedtouse “risktree” toolwhenidentifyinglogistical risksin supply chainsof construction organizations.

Risksituationsdependingonthelevelofinfluenceonany risk object can be classified basing onfailure situations (table2).

Table 2. Characteristics of different risk level events

Risk situation	Characteristics of risk occurrence effect
	Working Capacity	Consequence scale (impact)	Reserve Use	Attraction of additional resources	Recovery period	Plan modification level
Defect	+	1 operation (1 Supply Chain Link)	+	-	Min	-
Fault	Critical situation	+	1 process (several SCL)	Available reserves are not sufficient or will be fully used	+	Min	Current
	Dangerous situation	+	Several processes (several SCL)	No reserves or lack of reserves	+	Middle	Operational
	Frustration	-	Many processes (many SCL)	No reserves or lack of reserves	+	Top	Tactical
	Catastrophic situation	-	Most part of processes (logistic system)	No reserves or lack of reserves	+	Max	Strategic

Toeliminatethefailureit'senoughinternalresources (reserves) of process (orobject). Failureconsequencesmaybeexpressedbothwithintargetvaluesandits violation, i.е. it's more likely that it will not lead torisk event occurrence. Themaindifferenceisaconsequenceeliminationoffailuredoesnotrequireany special measures andmanagementinfluences will only be directed forreserve compensation.

Indefectsituation,theachievementoftargetparametersrequirescontrol actions, consisting ofadditional resources attraction, plan modification. Thelevelofsituationinfluenceonobject, probabilityof risk event occurrenceandscale ofconsequences are defined by risk object vulnerability factors. Thesearecausespertainingtotheobject,leadingtoriskeventoccurrenceand conditioned byprocess disadvantagesinSCL, usingtechnologies ofmerchandise flow or methods and material flow management tools.

Riskfactorsarecauses, appropriatetoriskobject and lead torisk situation occurrence (fig. 8).

Figure 8.Analytical model of logistic risk identification



Identificationofriskandvulnerabilityfactorsisahigh-prioritytask of supply chain diagnostics, permitting to developadequate measuresforprevention ofnegative consequencesfor risk situation occurrence.



2. Practical steps of SCM costs optimization within the context of risk management in international construction projects by the of Power of Siberia Gas pipeline

2.1 Analysis of the Power of Siberia international gas pipeline construction project logistics specificity and existing supply scheme description (on the segment "Chayanda-Lensk")

The Power of Siberia is an under-construction main gas pipeline for supplying gas from Yakutia to Primorsky Krai and the countries of the Asia-Pacific region. It is an international joint project between Gazprom and China, worth $55 to $70 billion, which will become a common gas transportation system for the Irkutsk and Yakutia gas production centers and will transport gas to Russian consumers in the Far East and China (the eastern route) (Gazprom official site).

The length is about 3,000 km. The diameter is 1,420 mm. Export productivity is 38 billion cubic meters per year (Gazprom official site).The international format of interaction and intensive cooperation impose on the project high-level commitment in terms of compliance with construction deadlines. This is due to contractual obligations on of Russia to start gas supplies to China from 2022.

The Power of Siberia will contribute to the social and economic development of the Far East. The gas pipeline will create conditions for gas supply and gasification of Russian regions, development of modern production facilities. However at the beginning of the project it is difficult to perform work prescribed by local contractors in the project because of lack their professional skills and capabilities (Sokolov S.M., Shemyakin S.A., 2011).

In September 2014, Gazprom began construction of the first section of the Siberian Power pipeline - from the Chayandinskoye field in Yakutia to Blagoveshchensk (the border with China) - with a length of about 2200 km. At the second stage, a section will be built from the Kovykta field in the Irkutsk region to the Chayandinskoye field, that is, about 800 km. At the third stage, it is planned to expand gas transmission capacities on the section from Chayandinskoye field to Blagoveshchensk (Gazprom official site).

Pipeline laying is carried out in a closed way (in a trench). In accordance with (the project documentation), the construction is divided into 10 sections with an average length of 200 km. Along the construction line, the objects of temporary logistics infrastructure are located for construction purposes. In the course of construction, continuous construction of new and dismantling of old temporary infrastructure facilities is required.

The route of the gas pipeline runs in extreme natural and climatic conditions, overcoming marshy, mountain and seismically active areas, areas with permafrost and rock soils. Absolute minimum air temperatures on the territory of the passage of the Power of Siberia is in January and varies from -62 °C in the Republic of Sakha (Yakutia) to -41 °C in the Amur Region (Gazprom official site). Absolute minimum air temperatures on the territory is 36°С.

Due to the low level of population and development of the region, which is largely due to its natural severe climatic conditions, The transport infrastructure of the region is unsatisfactory, which makes it difficult to deliver the necessary cargo and construction personnel. Most of means of transport have a seasonal character. Rivers can be used during the navigation period on average from May 10 to October 10, and winter roads, which make up the majority of highways, operate on average from December 20 to April 20. Year-round communication is possible only through air transport, as well as on a few sections of permanent highways with a hard surface.

From the existing transport corridors, we can distinguish:

- Railway, the nearest railway stations to the construction site are Lena and Lena-Vostochnaya stations (is located 756 km from the starting point of construction, Chayandinskoye field (Project documentation) of the East-Siberian Railway (OJSC RZD), which have direct communication routes with port facilities in the city of Ust-Kut.

- Federal highway Vilyui is a projected highway which is under-construction and planned to connect the Irkutsk region and the Republic of Sakha (Yakutia). It is assumed that the route will pass from Tulun Irkutsk region through Bratsk, Ust-Kut, Mirny with an end point in Yakutsk. Currently, there are sections of the future route from Tulun to Ust-Kut and from Mirny to Yakutsk; the remaining sections are mostly represented by winter road. The total length of the federal highway in the territory of Yakutia and the Irkutsk Region is 2,850 km, of which 2,026 km are covered with a hard surface; 824 km is a winter road. From Ust-Kut to TasYuryakh, its use is possible only in winter from mid-December to mid-March. (Project documentation); Automobile road beginning in Vitim, and passing through Talakan and Tas Yuryakh. Its capacity is up to 50 thousand tons per season. Due to its location, it cannot cover all the needs of the project logistics to the full extent. (Project documentation);

- Inland waterway passing through the settlements: Ust-Kut, Vitim, Peleduy, Lensk (the use is possible only during the summer shipping season from June to August). (Project documentation). River Lena is the main Inland waterway of communication in the area of construction, in the middle course of which the port of Lensk is nearest to the cargo handling stations.

- In the upper course of the river Lena in Ust-Kut it is situated the port Osetrovo, which has direct communication with the railway station in Ust-Kut. The Osetrovsky river port has the opportunity to carry out cargo handling and storage in the port territory, cargo transshipment to ships and its transportation along the Lena River to Lensk. Receipt of goods from the railway is carried out through the station Lena. The port of Osetrovo (Ust-Kut) and the quays in Ust-Kut have their own fleet. For storage of material and technical resources and construction equipment, there are indoor and outdoor warehouses, storage areas for pipes. The port has various lifting equipment, road transport. The throughput in the navigation period is up to 1 million tons

- Lenarechtrans has a production base in Ust-Kut which includes warehouses and access railway tracks of non-common use. For storage of MTR and construction equipment on the quay, there are covered, warm and open storage facilities. There are various lifting equipment, road transport, leased fleet. Throughput in the navigation period is up to 60 - 90 thousand tons per navigation. In winter, up to 40 thousand tons per season.

- Berth of JSC "Alrosa Terminal", located in the settlement Polovinka, has the opportunity to process up to 100 thousand tons of cargo in a maximum weight of up to 30 tons per season. The railroad cul-de-sac for 30 wagons connected with the Lena station is equipped with portal and gantry cranes.

- In Lensk, operations for unloading (shipping) from river cargo transport of various purposes are carried out by Almasdortrans JSC ALROSA CJSC. There is an opportunity for temporary storage in open areas. Floating, gantry and truck cranes, forklifts, various road transport, own fleet are at their disposal. The throughput in the navigation period is up to 200 thousand tons.

- Air transport is represented by five airlines operate air transportation, two of which are state-owned - the main airline of AK AK Yakutia and the regional airline of the Polar Airlines. The airport network includes 32 airports, including 2 airports of federal importance (Yakutsk, Tiksi) and 104 air landing sites. The airport of Lensk is a regional airport, located 3 km to the north-west of the city of Lensk. The airport in Lensk provides regular flights with airports of neighboring regions (uluses) of Yakutia, as well as with Yakutsk and Irkutsk.

- Air transport (helicopter transportations) are planned to be used for the delivery of shift construction personnel. In the area of work, helicopter transportations are carried out by Mirninsky aviation company AK "Alrosa" (CJSC)

The conditions of existing transport infrastructure conclusions

The existing transport infrastructure of the construction area is represented by all types of transport. The bulk of cargo in the current system transportation of the Republic of Sakha (Yakutia) is carried out by water transport.

The state of the road system today is unsatisfactory Extreme climatic conditions in combination with the poor development of all-terrain land transport (absence of permanent interstate roads, objects of transport and warehouse infrastructure, electric mains and other communications in the construction project, areas) in the Republic of Sakha (Yakutia) lead to high seasonality of the functioning of the entire transport system, the length of delivery time, and significant additional costs for storage of goods. The above factors influencing on transport logistics of gas pipeline construction introduce high level of uncertainty typical for all extended objects of construction. This fact in its turn creates opportunities for use of supply model with maximum intermediate accumulation. Above we have already mentioned that the strategic objectives of construction logistics of such facilities are to meet the schedule and budget of the project. And if there is a risk of failure of the project's timing or exceeding the budget, in our case due to the international nature of the project and high level of obligations the highest priority will be given to meeting deadlines.

Existing supply scheme

In accordance with the current procurement plan, the cargo is delivered by barges on the Lena River during the summer shipping periods for 2 years in the amount of 160 thousand tons of pipes and machinery in the 1st year and 62 thousand tons of pipes in the 2nd year (as demonstrated by the model with intermediate accumulation). Overall, in 2 years, it is planned to deliver 207 thousand tons of pipe and 15 thousand tons of equipment to the port of Lensk from the Lena railway station in the city of Ust-Kut through the Osetrovo port along the river.(Project documentation).

Within this task, this volume does not include:

- Inert materials mined on site;

- Fuel supplied to the construction site by a contractor;

- Rotational personnel delivered to the place of work on time.

The construction is planned against the current of gas from the city of Lensk.



2.2 Optimization of selected transport scheme (SCM) reducing logistic costs of the

In this work, we focus on solution of logistics tasks for servicing the first construction site Chayanda-Lensk which runs from the delta of the Chayanda river to the central part of the Lena ulus and is 207.2 km.

Assuming that the economic results from the use of the model with intermediate accumulation can be optimized, in the context of solving this problem:

1. We will try to minimize the time of intermediate storage of materials. To this end, we will analyze the possibility to arrange the delivery of the entire volume of pipes and equipment for 1 year, with the distribution of cargo across all potentially possible temporary infrastructure facilities that can be used.

2. To optimize the logistics processes, let's calculate the necessary number of temporary storage depots and determine their locations, as well as the necessary volumes of stocks for each of the warehouses along the Chayanda-Lensk construction site. To do this, we will consider the option of building from two ends: from the junction point of the gas pipeline to the Chayandinskoye field and from Lensk.

Let's begin the solution of this problem by testing our assumption that the construction from two points is more economically feasible for the cost of logistics.

To do this, let's calculate the length of the service areas, using a graphical method for determining the rational boundaries of segments of the main pipeline route described in subchapter 1.2..

To solve the problem, we will determine the capacity of the existing infrastructure suitable for use along the gas pipeline construction line (fig 9 ).



Figure 9.Proposed transport scheme for cargo delivery to the facilities of the Power of Siberia

At the selected section of the gas pipeline construction (Chayanda-Lensk), the temporary wharf of the Vitim settlement (which is not provided for by the project) can be considered as point A, but it is suitable for unloading and temporary storage of 35 thousand tons of cargo (The estimate is based on data of SURGUTNEFTEGAS (Yktimes.ru. (2013)).

In case of using a temporary terminal in Vitim settlement, the distance a is a route along the hard road from Vitim to Talakan and along the existing technological passage from Talakan to the junction of the gas pipeline to the field. The length of the route is 153 km.

Point B is the port of Lensk, which has a storage capacity of 160,000 tons of cargo. The distance b represents the route for the delivery of cargos from Lensk to the gas pipeline, the length of which is 20 km

The difference in the cost of transportation of one ton of cargo per km of road to the pipeline route from point A and from point B is insignificant so that it can be neglected. Thus, we can calculate the rational boundary of the service areas according to the formula: l1`= (207+20-153)/2.

Where l1` = 37 km is the length of the first section adjacent to the deposit. Taking into account the fact that the construction of 1 km of the pipeline requires 1 thousand tons of pipes, this implies the accumulation of 37 thousand tons of pipes in the temporary port of Vitim. The processing capacity of the port is limited to 35 thousand tons of cargo. (The estimate is based on data of SURGUTNEFTEGAS (Yktimes.ru., 2013).

Where l2` = 207-37= 170 km is the length of the second section adjacent to the port of Lensk. This implies the accumulation of 170 thousand tons of pipes in the port of Lensk. (The processing capacity of the port is limited to 160 thousand tons)

It is also necessary to add to this volume the construction equipment for laying the gas pipeline in the corresponding service areas, the volume of which is 15 thousand tons. The equipment should be distributed over storage areas in direct proportion to the pipe volume. For the first section, this volume is 3 thousand tons, for the second - 12 thousand tons.

Thus, it is necessary to accumulate 40 thousand tons of cargo at point A (Vitim port) and 182 thousand tons at point B (Lensk port).

Due to the limited processing capacity of the ports of Lensk and Vitim, the use of calculated service areas is impossible.

In addition, in order to overcome this problem, we need to organize another temporary storage facility, which can be located in the settlement of Peleduy, 19 km from Vitim down the river. (fig.10).

But this will require the construction of a temporary terminal due to the complete absence of coastal infrastructure in Peleduy. According to estimates, the processing capacity of this facility should be 30,000 tons of cargo (Council of Deputies of the Municipality "Poselok Peleduy" of the Lensk District of the Republic of Sakha., 2006).

The estimated cost of constructing a temporary terminal in Peleduy and temporary storage facilities in Peleduy and Vitim will be 150 million rubles (the estimate is based on an analysis of the value of other temporary objects of a similar type).

Taking into account the construction of temporary logistics infrastructure facilities (temporary storage facilities in Vitim and Peleduy, as well as the terminal in Peleduy), in order to accept all the cargo required for the construction of the first section of the Chayanda-Lensk gas pipeline, it is necessary to distribute the stock in the following manner:

- Lensk: 148 thousand tons of pipes, 12 thousand tons of equipment;

- Peleduy: 29 thousand tons of pipes, 1 thousand tons of equipment;

- Vitim: 30 thousand tons of pipes, 2 thousand tons of equipment.

Further, within the framework of the solution of the problem for both construction options:

1. From one end (against the current of gas, from Lensk);

2. From 2 ends (from the junction point of the gas pipeline in the Chayandinskoye field and from Lensk).

We will determine the costs for the delivery of goods from temporary storage facilities in Lensk, Vitim and Peleduy to the pipe-welding facilities of the construction site.

We will use Excel for calculations.

In the first case, the estimated cost of delivering the required volume of cargo to all pipe welding facilities on the construction line of the pipeline section in question from the warehouse in the port of Lensk is: 986,778,000 rubles. (See Annex1, Table 1 Delivery cost of materials and equipment to the pipe-welding bases according to plan).

In the second case, the estimated cost of delivering the required amount of cargo from Lensk, Vitim and Peleduy in the organization of construction from 2 sides is: 694,153,200 rubles. (See Annex1, Table2. Delivery cost of materials and equipment to the pipe-welding bases according to proposed model)

Let's also consider the cost of storing the goods before they get into work.

In the first case, a full accumulation of warehouse stocks is expected, which is going to take place during 2 years and requires the storage of part of the cargo in the port and on temporary storage facilities. The cost of storage in this case will be: 500,000,000 rubles. (See Annex 2, Table 1. Cost of temporary storage of all materials and equipment according to plan)

In the second case, the period of delivery of the total cargo volume is supposed to be reduced to one year, which reduces the storage period of the cargo. The cost of storage in this case will be: 229,200,000 rubles. (See Annex 2, Table 2. Cost of temporary storage of all materials and equipment according to proposed model)

Let's calculate the cost of delivery from the railway station in Ust-Kut through its port along the Lena River.

In the first case, the delivery of the full volume of cargo of 222 thousand tons is planned to the port of Lensk. Estimated shipping cost is: 3,769,560,000 rubles.

(See Annex 3, Table 1. Shipping cost according to plan)

In the second case, the delivery of cargo is divided into two parts:

- 160 thousand tons of cargo are delivered to Lensk;

- 62 thousand tons of cargo are delivered to the ports of Vitim and Peleduy.

Estimated cost of delivery of the total cargo volume is: 3,671,600,000 rubles. (See Annex 3, Table. 2 Shipping cost according to proposed model) Consequently, the economic efficiency of the formulated proposals is to shorten the storage time of cargo in the port of Lensk and the corresponding costs and also to reduce the leverage of transportation via temporary technological passage along the gas pipeline and considering all the above factors.

1 The total costs for logistics, subject to construction, as planned in the project, (against the current of gas from the city of Lensk) are: 5,256,338,000 rubles. (See Annex 4, Table 1.Total costs of supplying according to plan).

2 The total costs for logistics, subject to the use of the proposed construction scheme (from two ends) and the delivery of goods in 1 year are: 4,744,953,000 rubles. (See Annex 4, Table 2.Total costs of supplying according to proposed model)

Table 3.

Name	Costs in thousand rubles	Costs in thousand rubles
The delivery cost of required volume of cargo to the pipe-welding base	986 778	694 153
Total cost of temporary storage of all volume of cargo	500 000	229 200
The cost of delivering of cargo from the railway station in Ust-Kut by river transport to port Lensk	3 769 560	3 671 600
Construction of temporary storage facilities in Vitim/ Peleduy	0	150 000
Total costs of supplying pipe-welding bases by required materials and equipment	5 256 338	4 744 953

In the case of using the proposed logistics scheme, the possible savings in the cost of supply of construction in the Chayanda Lensk area is5,256,338,000 rubles - 4,744,953,000 rubles = 511,385,000 rubles, which is about 10% of the cost of logistics of the construction project.

Taking into account the fact, that the entire linear part of the Power of Siberia gas pipeline can be conditionally divided into 8 sections each of which is about 200 km long. One of such sites is Chayanda-Lensk, on example of which the problem was solved. It can be assumed that using the proposed approach to the organization of supply of construction will save 4.1 billion rubles on logistics.

2.3 Relevant logistical risks identificationmodel of the Power of Siberia international gas pipelineconstruction project(on the segment "Chayanda-Lensk")

Withinthisworkwewilltestmethodologicalapproachestoidentification andanalysis of logistic risksas well asselection of measures to eliminate (mitigate) its negative consequences based onthe first construction siteof international main gas pipeline Power of Siberia (Chayanda-Lensk).

Toidentifyprojectrisks, includingrisksappearedbecauseofadditionaloptimizationof transportprocess flow diagram we will usea structure developed earlierand indicate:risk objects, risk factors, subjects and possible risk situationsand events (fig. 10).Further, wewillindicateandassesspossibleconsequences in the result of risk events occurrence for the project. Withinthefirstsiteconstructionproject(Chayanda-Lensk) underthematerialflowwemean:deliverytotheplaceofconstructionperformance 207thousandstonesofpipesand 15thousandstinesofequipmentinaccordancewithoptimizedtransport chart for 1 yearusing an additional infrastructure (Peleduj and Vitim terminals) andmodification ofConstruction Management Plan and accordinglyMR delivery (in 2 ends of construction site)



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Figure 10.Analytical model of “Power of Siberia” first site construction project logistic risk identification

Themainobjectofriskis a material flow (fig. 11).

Risk Factors

- Uncertainties

- Construction site

- Environment/ambient medium

- Caused by scale cooperation andcoordination of actions ofmany participantsCP

- Informational flowsincludingcollection of information at the stage ofplanning

- Related to financial flows

- Accidents

- Force-majeure events

- Commercial risks

- Reaction

- Intended actions ofthird parties (LEcompetitors, contractors) (IPlocalsetc.) directed forprocess strength.

Figure 11. Supply Chain of “Power of Siberia” firstsite constructionproject

Therisksubjectsareentitiesdirectlyinvolvedinthe process of distribution. In this casethis is manufacturers and suppliers, contractors (transport agents: carriers, owners of infrastructure for storagepassingetc.) customer (Gazprom TransgazTomsk LLC), investor (PJSC Gazprom) andconstruction contractors (MR consumeron the site of construction).

Inthiscaserisksituationsareunplannedmodificationsofmaterial flowin context of parameters: quality (MR state), volume anddeadlines (supply schedule).Bythedegreeofriskwedividesituationsinto 2 categories: failure(incomplete execution of work withinany parameters) andfrustration (fullwork non-fulfillment under any of parameters).

Comparingthemainfactorsandrisksubjectsandalsoparametersofrisksituations, appearing on similar objects construction projectswe will receive a detailed classifierof risks related to the considering project(tab 4):

Table 4.Defining of the main risks of the projectPower of Siberia construction first site

Subjects/ Factors

Suppliers

Transport agents

Contractors

Customers

Investors

Carriers

Infrastructure owners

Risk event parameters

Q

V

T

Q

V

T

Q

V

T

Q

V

T

Q

V

T

Q

V

T

Uncertainties

Construction sites

Compliance of POS withdeveloped project documentation

-

-

-

-

-

-

-

-

-

v

v

v

v

v

v

v

v

v

Compliance of operational pacewith PPR

-

-

-

-

-

v

-

v

-

v

v

v

v

v

v

v

v

v

Provision of equipment and human resources

-

-

-

-

-

-

-

-

-

v

v

v

v

v

v

v

v

v

Environment

Climate factors

-

-

-

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

Contractor equipment

-

-

-

v

v

v

-

-

-

-

-

v

-

-

v

-

-

v

Transport infrastructure development

-

-

-

v

v

v

-

-

-

-

-

-

v

v

v

v

v

v

Population level in construction region

-

-

-

-

-

-

-

-

-

v

v

v

-

-

-

-

-

-

Human Factor

Qualification

-

-

-

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

Cooperation

-

-

-

v

v

v

v

v

v

v

v

v

-

-

-

-

-

-

Coordination

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Informational flow

Information acquisition atplanning stage

-

-

-

-

-

-

-

-

-

-

-

-

v

v

v

v

v

v

SCParticipantsdatareliability

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

v

v

v

SC Participants information rate

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

v

v

v

Financial flow

Quality ofplanning

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Quality of performance

v

v

v

v

v

v

v

v

v

v

v

v

-

-

-

-

-

-

Accidents

Commercial risk

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

Force-majeure event

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

Reactions

LE

Competitors

-

-

-

-

v

-

-

v

-

-

-

-

-

-

-

-

-

-

Contractors

-

-

-

-

v

v

-

v

v

-

-

-

-

-

-

-

-

-

Individual

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v



Supplier Risks:

- Customer/Investor hasn'tmade payment at an agreed volume and time

- Customer/Investorhas failed to sign Supply Agreement due date

- Commercial risks

- Force-majeure events

Carrier Risk 1:

- Supplierhasn't delivered Material Resources (MR)within the time limit

- Infrastructure Owner (IO) (Station/dock)isn't ready to acceptMR at an agreed volume and time

- Intended countermeasure of 3 persons

- Commercial risks

- Force-majeure events

Risks of Infrastructure owner (Station/dock):

- Carrier 1 hasn'tdeliveredMRat an agreed volume and time(rather often because ofcargo dispatch delay)*

- Carrier 1 has deliveredMR (partially) of improper quality (defected)

- Customer/Investorhasn't made payment at an agreed volume and time

- Customer/Investoruntimely has signed storage and transloading agreement

- Commercial risks

- Force-majeure events

- Intended countermeasure of 3 persons

- Due to lack of coordinationIO is not ready to acceptMRat an agreed volume and time

- Due to climatic factorsMR transloading and keepingby IO was partiallyor fully damaged.

- Due to lack ofprocess coordination andabsence oftime-sensitive informationIP can't transferMRat an agreed volume and time

- Due to climatic factorsIOfails to transferMR forCarrier 2 at an agreed volume and time

- Carrier 2 isn't ready to acceptMRat an agreed volume and time

Risks of Carrier 2:

- IO hasn't deliveredMRat an agreed volume and time

- Io delivered cargo(partially or fully) of improper quality (defected)

- Customer/Investor hasn't made payment at an agreed volume and time

- Customer/Investor untimely has signed contract of carriage

- Commercial risks

- Force-majeure events

- Carrier 3 isn't ready to accept MR at an agreed volume and time

- Intended countermeasure of 3 persons

- Due to climatic factorsCarrier 2 fails to acceptMRat an agreed volume and time

- Due to climatic factorsCarrier 2 fails to transportMRat an agreed volume and time

- Due to lack of process coordination and absence of time-sensitive informationCarrier 2 fails toacceptMRat an agreed volume and time

- Due to lack of qualification of Carrier 2MRwas partiallyor fullydamaged.

- Due to lack of process coordination Carrier 2 transportedMR towrong pointof destination

Risks of Carrier 3:

- Carrier 2 hasn't transferred МР at an agreed volume and time

- Carrier 2 delivered MRof poor quality

- Customer/Investor hasn't made payment at an agreed volume and time

- Customer/Investor untimely has formedcontract of carriage

- Commercial risks

- Force-majeure events

- Intended countermeasure of 3 persons

- Civil engineering contractor isn't ready toacceptMRat an agreed volume and time

- Due to climatic factors Carrier 3 fails to accept MR at an agreed volume and time

- Due to climatic factors Carrier 3 fails to transport MR at an agreed volume and time

- Due to lack of process coordination and absence of time-sensitive information Carrier 3 fails to accept MR at an agreed volume and time

- Due to lack of qualification of Carrier 3 MR was partially or fully damaged.

- Due to climatic factorsMR transporting by Carrier 3was partially or fully damaged.

- Due to lack of process coordination Carrier 3 transported MR to wrong point of destination

Risks ofContractor:

- Carrier 3 hasn't transferred МР at an agreed volume and time

- Carrier 3 delivered MR of poor quality

- Customer/Investor hasn't made payment at an agreed volume and time

- Customer/Investor untimely has formedthe construction contract

- Commercial risks

- Force-majeure events

- Intended countermeasure of 3 persons

- Due to climatic factors the Contractorfails to perform worksat an agreed volume and time

- Due to lack of process coordination and absence of time-sensitive informationthe Contractor isn't ready to acceptMRat an agreed volume and time

- Due to lack of qualification of Contractor MR was partially or fully damaged.

- Due to lack of process coordination Contractor transported MR to wrong point of destination.

Risks of Customer/Investor include all abovementioned project risks as well asrisks ofplanning according totime and expenses andattraction (qualification) of contractors.So, havinganalyzedsupplychain, factorsandparametersweobtainedgeneralprojectriskclassifierof the firstsection of gas pipelinePower of Siberia, including alsorisks, appearing in the result ofoptimization steps, supply algorithm andabovementioned in subchapter 2.2 logistic expenses. It's necessary to note that,aiming to optimizelogistic expenses,wefacenotonlywithappearanceofnewriskssuchas «Cargodispatch», whenduetolackofprocesscoordinationCarrier2 andCarrier 3 can deliver and unload by mistake any agreed volume of material resources to wrong point of destinationbutrisk increase ofplan non-fulfillmentrelating to deliveryatan agreed volume and time because of each chain link load increased on40%, that may requirenot only additional resources butalso more precise coordination and cooperationof all chain participants.

Further, we'llstudyandevaluaterisksdependingonitsoccurrencepossibilityand negative effect onproject results, i.e.level of logistic budget increase. Withinthisevaluationwe'llcompareexpensesizeforriskmanagementandcost saving volume for logisticsin the result of delivery scheme optimization.Andalso, we'lldevelopmonitoringschemerelating to risks and measure statusand its management.

1. Cumulative effect of proposed "Risk costs" SCM model use estimation

The previous chapters provide description and testing of supply chains optimization models in order to cut the logistic costs in construction of continuous linear-type facilities, as well as identification of related risks, resulting and increasing in the projects out of such optimization. Finally we obtained the data on possible reduction of the transportation logistics budget by 10% and made an individual risk classification code for each part of the project supply chain as in the case of the 1st part of the cross-country gas pipeline “Power of Siberia”.



2.2 Evaluation of relevant logistical risks impact and cost of its elimination

The present chapter contains description of quantitative and qualitative risk assessment. Qualitative assessment applies descriptive characteristics of risks or conditional estimations in points, and makes possible description and assessment of risks in short terms, arrangement of their ranking, identification of reasons and factors, impacting the risk level, as well as set off the priority management risks. Consequences of risk realization are assessed both in terms of financial losses and the non-financial effect. Financial effect is assessed relative to financial indicators. Nonfinancial effect under our study is assessed relative to reputational exposure, from the perspective of international construction inclusively. Assessment is done for each identified risk by 2 components of risk indicator: probability and effect. Qualitative assessment results will be used for quantitative risk assessment. For each qualitative category of probability and risk realization effect there is a relevant conditional value in points under the five-mark grading system. Qualitative risk assessment identifies indicators, representing probability and risk effect on targets of the company, the project or the supply chain part, using the expert estimates.

Risk assessments are done based on the below main principles:

- Risk assessment methodology unity;

- Continuous update of data (initial data update), used for qualitative risk assessment;

- Openness of procedures, implemented at every stage of the qualitative risk assessment;

- Verifiability of the qualitative risk assessment results;

- Unification of the rating scales.

Thebelowgeneralapproachesareusuallyusedforthe qualitative probability estimate, both separately or combined:

- Useofhistoricalrecordstoidentifytheeventorthesituation, accrued in the past, allowing for extrapolation of its occurrence probability in future. Theapplieddatashouldrelatetosystemsandequipmentunderassessment, companies or types of activities, as well as requirements of company performance;

- Use of forecasting approaches for probability estimate, such as scenario analysis. Subjectthehistoricalrecordsarenotavailableorunreliable, itisrequiredfor probability estimate to study the possible events in future and assess their relevance and effect;

- Useofexpertestimationsin systemized and structured process of probability estimate. Allavailabledata, includinghistoricalrecords, dataonsystemfeatures, companyprofileandtesting data should be used for expert estimations

Inordertoanalyzetherateofriskeventsoccurrenceandtoprovidetheeconomicappraisaloftheirnegativeimpactinthe 1^stconstruction area of the cross-country gas pipeline “Power of Siberia”the historical records from other constructional objects of PJSC Gazprom were used, as well as interviewing of the top-management from the below listed companies, done by the supply chain subject:

- Gazprom PJSC,

- Gazprom Transgaz Tomsk LLC.,

- Stroytransneftegaz JSC,

- Osetrovsky river port JSC

- Lenskoye Joint River Shipping Company JSC,

- STG Logistics LLC

Complexityofthismethod (interviewingof top-managementof companies - parties of supply chain) was separation of the project risks from the individual risks of the interviewed companies.

Forallrisks, exceptofstrategicones, probabilityisestimatedbythe qualitative rating scale, consistent for all structural divisions, presented in the table 5.



Table 5.Qualitative estimate scale for risk realization probability

Qualitative assessment	Scoring	Interpretation method
		Descriptive	From the point of view of historical data	Probability %
Very high	5	Event will almost exactly take place	Several risk events were realized within the last year in the project	above 80%
High	4	Event is more likely to happen than not	Several risk events were realized within the last year in one of the projects	50-80%
Average	3	Event can happen	One risk event was realized within the last year in one project	20-50%
Low	2	Event is likely not to happen, than otherwise		5-20%
Very low	1	Event is highly unlikely to happen		Below 5%

Probability category is interpreted by 3 methods:

- Thedescriptivemethodbymeansofqualitativecharacteristics (verbal constructions) provides for probability category interpretation on the subconscious comprehension level. Descriptivemethodapplicationshouldtakeintoaccounttheuncertainty of qualitative characteristics of the probabilitycategories andessential subjectivity of experts, assessing the probability, while interpretation of the probability category.

- Inthecontextofhistoricalrecordsthedataonrealizationofriskeventsisinterpretedbasedontherealriskeventrealization rate (number of risk events, came about within the defined time frame), defined for 3 levels of management:

- Corporate,

- Project

- Logistic (part of supply chain).

- As % probability.

Evaluationofdetrimentaleffectandconsequences is also done using the scale. Allformsofdamagearevaluatedaccordingtothe 5-levelsystem, comprisingthe below categories with the related conditional values in points:

- Critical (great damage) - 5 points;

- Significant (extensive damage) - 4 points;

- Essential (medium damage) - 3 points;

- Unessential (small damage) - 2 points;

- Minor (negligible damage) - 1 point.

Valuationofnonfinancialoutcomewithreferencetocompany reputational exposure isdonebymeans ofscaleswithqualitativecategoriesofconsequences/damagesandcorrespondingconditionalestimatesinpoints. Interpretations of qualitative classes, characterizing the outcome of risk realization in regard of the Company reputational exposure are formed based on the below criteria:

- scale of media coverage;

- mediacategory (international, regional, national);

- publicattentionlevel (international, regional, national);

- Response of Governmental authorities (on national, regional or local level).

Table 6.Scale of reputationexposureimpact atriskrealization

Category of implication/damage	Score	Reputational exposure
Critical (greatdamage)	5	Negative attention of international public. Wide negative international media coverage. Response of governmental authorities on regional/national level with potential bans in relation of access to new/existing territorial regions, market niches, financial/taxation tools, as well as issue of licenses
Significant (extensive damage)	4	Public concern at national level. Wide negative national media coverage.Response of governmental authorities on regional/national level with possible imposition of restrictive measures and/or impact on issue of licenses
Essential (medium damage)	3	Regional public concern. Wide negative local media coverage.Some national media coverage and/or attention on the part of local/regional authorities. Negative position of local authorities/public groups
Unessential (small damage)	2	Some local public concern. Some attention on the part of the local media or local authorities, with possible negative impact on company business
Minor (negligibledamage)	1	Public may be aware of some data, but there is no expressed concern. Single negative publications in local media

Financialimplications of risk implementation are assessed by scales, defined by 3 methods:

- Usingtheabsolutevalues of damage (absolute scales);

- Using the materiality levels of deviations between the real and the planned values of financial indicators (in absolute and relative units);

- Using the 2D-matrix of absolute and relative deviations between the real andplanned values of financial indicators.

Impact Scale of financialimplications at risk realization can be settled for 3 levels of risk management:

- Corporatelevel - risks, impactingtheCompanytargetvalues, its structural divisions, which should be considered in planning and forecasting of its business;

- Project level - risks, impacting strategic indicators of the constructional investment project (budget and deadlines);

- Logisticlevel - risks, impacting the key parameters of the supply chain (quality, scope and keeping the deadlines).

Estimationofthresholdsfortheratingscaleoftheriskrealizationfinancialimplicationsshouldassumepossibletransfer from the lower level to the higher level and vice versa in compliance with the diagram in the (fig. 12) below.

Overalllevelofriskrealizationcan be defined with the summary score.

Evaluationoftheriskrealizationimplicationssummaryscoreisthebelowsequence of actions:

1. Definition of risk realization consequences/damage categories rating;

2. Definition of rating for each type of risk realization implications;

3. Definition of total rating of risk realization implications;

4. Definition of total consolidated score.

Risk realization implications ratings - R5, R4, R3, R2 and R1,are defined through the expert assessment methods.

Figure 12. Financial implications relevance ratingscale

Whereby,uponresultsofsurvey, done among the specialist of “Gazprom” PJSC, correlations R2/R1, R3/R2, R4/R3 and R5/R4 should be selected within the range of 2-4. Estimationofrisk realization implications summaryscore canbedonebymeansofproratedratingassessmentsystem, where R2/R1 = R3/R2 = R4/R3 = R5/R4, or using the non-proportional rating assessment system, wherethere is no condition of equality for at least one of the stated correlations.

Ratingofeachformofimplications/damageofriskrealizationisdoneasperthe(table7), stipulating the respective rating values for each category of risk realization consequences/damage.



Table 7.Ratings of categories of implications/damage of risk realization

Consequence/damage category	Score	Rating
Critical (great damage)	5	R5
Significant (extensive damage)	4	R4
Essential (medium damage)	3	R3
Unessential (minor damage)	2	R2
Minor (negligible damage)	1	R1

Totalratingofriskrealizationimplicationsiscalculatedbysummingofratingvaluesofallformsofimplications/damageofriskrealizationandisconvertedintothesummaryscoreasperthe(table 8)

Table 8.Summary score

Total rating	Overall score
>= R5	5
>= R4 and< R5	4
>= R3 and< R4	3
>= R2 and< R3	2
< R2	1

Belowisanexampleofthesummaryscoreestimationforriskrealizationconsequences, donewithuse of theproratedrating system.

As a result of the performed risk assessment, the final point scores for consequences/damage of risk realization are listed in the (table 9).



Table 9.Results of risk realization consequences assessment

Risk definition	Score
	reputational	financial
Risk 1: Customer/Investordidnotmake the scheduled planned investments	4	5
Risk 2: Force-majeure	2	5

Riskrealizationconsequences/damagecategoriesratingsweredefinedand listed in table 10.

Table 10.Category ratings of risk realization consequences/damage

Consequence/damage category	Score	Rating
Extreme (great damage)	5	16
Critical (ext...

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