Improving Regional Sulawesi Downstream Oil and Gas Construction Risk Management: A Literature Review

Managing risk effectively is critical for the success of businesses, particularly in high-stakes industries such as downstream oil and gas construction. This sector can be defined by complex initiatives that are highly vulnerable to financial, immediate, and operational hazards. Effective risk management not only reduces possible losses but also improves decision-making and resource allocation, therefore guaranteeing the achievement of project objectives. This study constructs a conceptual framework to establish a Risk Management Process that aligns with organizational needs by integrating elements from two globally recognized frameworks: PMBOK (Project Management Body of Knowledge) and AACE (Association for the Advancement of Cost Engineering). The proposed methodology combines the strengths of both frameworks to address the key project management requirements and resolve cost- and schedule-related challenges, which are critical in downstream oil and gas projects. The framework's development uses Multiple Attribute Decision-Making (MADM) methods to systematically identify and prioritize relevant risk management qualities. The initial screening utilized tools including Likert-scale analysis and Non-Dimensional Scaling, while ordinal ranking and weighting factor methods ensured conformity with organizational priorities and objectives. This systematic approach facilitated the identification of the most relevant risk management techniques from PMBOK and AACE, resulting in a tailored strategy designed to enhance project performance. The study's findings highlight the necessity of integrating strategies to address industry-specific challenges, providing a practical and adaptable framework for risk management in complex projects. This conceptual framework establishes a foundation for future empirical research and can be applied across many sectors and enterprises to enhance risk management effectiveness.

Introduction

Risk is the probability, it can be positive or in a negative way for a scenario or event occurring that would affect the objectives, actions, or results of the project. It refers to uncertainty about possible occurrences influencing the result of a project either successfully or unsuccessfully. Risk could come from several sources including operational errors, technical problems, outside market conditions, or human error. The idea of risk includes not only the likelihood of occurrence but also the degree of its consequences, which might change depending on the surroundings of the project (Paccar, 2024).

On the other hand, risk management is a systematic approach aimed to find, assess, and solve the hazards that might impact project goals. It consists of the procedures and tools that let companies foresee, control, or benefit from hazards all through the course of a project. Good risk management guarantees early recognition of possible hazards and proper action to either prevent or reduce their impact, therefore optimizing chances that could present themselves (Beckerset al., 2020). Risk management’s overall objectives are not only to lower the possibility of negative effects but also to maximize resources and decision-making by means of proactive uncertainty addressing (Kraidiet al., 2021).

Projects with higher project success rates usually result from companies which regularly apply formal risk planning and closely monitor and control risk events (Zwikael & Ahn, 2021). Improved project outcomes are much correlated with regular application of organized risk management techniques (Obondi, 2022). Although better project results and higher success rates are clearly connected to structured risk management techniques, the company’s present performance points to major difficulties in this regard (Beckerset al., 2020). An assessment of 45 continuous projects found that 56% encountered schedule and cost overruns of 10%, while 36% faced overruns of up to 25% of their initial baseline (Wisnugroho, 2020), providing space for development in risk management practices.

Combining and customizing a conceptual framework created from AACE and PMBOK to match the organizational needs closes the gap (Iqbalet al., 2024). The analysis aims to pinpoint the most relevant steps for enhancing the organization’s risk management practices. The framework was created by evaluating the most relevant risk management steps for the company at the planning, executing, and monitoring & controlling stages (Lesnieet al., 2021). This evaluation was carried out based on a combination of methods from PMBOK and AACE, which were then adjusted to the specific needs of the company (Hulett & Arrow, 2022). With the availability of a tailored framework designed specifically for the needs of companies, this study makes a significant contribution in improving the effectiveness of risk management (Suvvari & Saxena, 2023). The framework will help companies in identifying, evaluating, and managing risks in a more structured manner that is customized to meet their particular operational requirements. Furthermore, the structure enhances decision-making at every level of the project, from planning to execution to control. Businesses are expected to reduce possible losses, maximize possibilities, and boost the overall success of their initiatives by using this more concentrated method (Zaheriet al., 2022).

Research Method

This research adopts a phased approach to develop a tailored Risk Management Process specifically for the Regional Sulawesi Downstream Oil and Gas Construction Project. The methodology consists of four systematic steps, as illustrated in the diagram. The methodology consists of four systematic steps, as illustrated in Fig. 1.

1. Problem Identification/Issue Exploration: First, it is important to identify the main problems and concerns of the present situation. This requires looking at the problems and inefficiencies in the present system. This stage provides basis for creating a more relevant and effective framework (Zhao, 2024).

2. Literature Review: The second step is an in-depth review of key research and industry standards. This stage provides the theoretical foundation for establishing a robust risk management process by researching best practices and procedures from well-known frameworks, such as PMBOK and AACE.

3. Identification of Process Mapping from International Standards: The third stage is to create a framework of certain risk management strategies fulfilling internationally recognized criteria. This phase ensures that the tailored framework considers the particular needs of the Sulawesi project and conforms with world best standards.

4. Built Selected Criteria for Risk Management Process: Built Selected Criteria for Risk Management Process: At last, the fourth step is building the customized framework by choosing and modifying the criteria most relevant to the situation of the project. This stage aggregates the information acquired in the previous ones to create an effective and practical risk management strategy for the project.

Fig. 1. Study flow diagram.

Result and Analysis

Tailored Project Risk Management

Under uncertain conditions, risk assessment applying a hybrid PMBOK (Project Management Body of Knowledge) model emphasizes the mix of qualitative and quantitative methods to control project risks. This approach has considerable advantages from both ways by combining qualitative approaches—which allow subjective assessment and risk classification—with quantitative methods providing quantified, data-driven insights. This combination method generates a more comprehensive risk evaluation. Furthermore, the model’s comply with the internationally recognized industry standard guarantees consistency and improves its flexibility in several project settings (Barghi & Shadrokh sikari, 2020).

Effective risk management allows petroleum companies to reduce losses and allocate resources more efficiently toward productive activities. To achieve this, it is recommended that companies design customized risk management frameworks tailored to their specific operational needs, enabling them to optimize resource use and improve their industrial structures (Doerga, 2022).

As outlined in Table 1, the comparison of the risk management processes between the PMBOK and AACE frameworks provides a structured view of their respective strengths and weaknesses.

Table I. PMBOK and AACE Comparison

Risk management framework	Pros	Cons
PMBOK	1. Clear and Defined Structure: The PMBOK (Project Management Body of Knowledge) offers a well-defined and straightforward framework for managing project risks. Every step of the risk management process is described in depth, including planning, monitoring, and control (Amaro & Domingues, 2023).	1. Complexity: The PMBOK, due to its detailed and comprehensive nature, can appear complex and confusing, particularly for inexperienced Project Managers, and may seem excessive for smaller projects (Rodrigueset al., 2023).
	2. Global Standard: The worldwide benchmark for project management is PMBOK. It offers a uniform structure and is extensively applied by many different companies worldwide (Barghi & Sikari, 2020).	2. Not cost and schedule specific: The PMBOK is more foucs with general project management than it is with focus related to costs and schedules. This might be a disadvantage on projects where cost and schedule are important issues (Alwaly & Abdulmajid Alawi, 2020).
	3. Comprehensive: The PMBOK addresses risk identification, qualitative and quantitative analysis, risk response planning, and risk control among every aspect of risk management. This guarantees a comprehensive way of handling project risk (Farajiet al., 2022).	3. Requires Training: PMBOK implementation involves training and knowledge of the technique. Project teams struggle to implement this approach without sufficient training (Simonaitiset al., 2023).
	4. Flexibility: The PMBOK approach is adaptable enough to be used on several kinds of projects in several sectors. Customizing the procedures and tools allows one to satisfy the particular requirements of the project (Zaheriet al., 2022).
AACE	1. Focus on Cost and Schedule: The Association for the Advancement of Cost Engineering (AACE) focuses on managing costs and schedules, which makes it a great resource for projects that are strongly affected by these factors (Srinath & Varghese, 2023).	1. High specialization: The AACE technique is quite specialized and may not be appropriate for some sorts of projects where there is less emphasis on cost and timing (Marier-Bienvenueet al., 2017).
	2. Detailed Methodology: The Association for the Advancement of Cost Engineering offers a comprehensive methodology and quantitative methodologies for risk analysis, including Monte Carlo analysis, to assist in the evaluation of risks that have an impact on cost and schedule (Qaziet al., 2021).	2. Lack of flexibility: AACE’s highly concentrated approach to quantitative analysis could be rigid and challenging to apply to projects using a more qualitative approach to management (Srinath & Varghese, 2023).
	3. Integration with Cost Engineering: By combining with cost engineering methods, the AACE approach enables a more comprehensive and in-depth management of cost-related risks (Yanget al., 2022).	3. Requires specialized expertise: AACE required certain knowledge in cost engineering and quantitative analysis, which might not be present on every project team (Nabawy & Khodeir, 2020).
	4. Use of Best Practices: AACE encourages the application of industry standards and best practices proven successful in controlling risk on big and challenging projects (Simonaitiset al., 2023).

Multiple Attribute Decision Making (MADM)

The goal of the Multiple Attribute Decision-Making Problem (MADM) is to rank possibilities or choose the best alternative by analyzing several attributes at once (Keeney & Raiffa, 2020). MADM takes into consideration a number of criteria or aspects that influence the decision-making process, in contrast to single-attribute decision-making (Gachie, 2022). Due to the complicated nature of the problem, the decision information frequently alters, making MADM more challenging in practice, especially in large-scale decision-making settings (Qinet al., 2023).

Synthesis of Findings

Both the PMBOK and the AACE models have their own pros and cons when it comes to managing project risks. The PMBOK is a well-known standard around the world that has a clear structure and covers all parts of risk management while still being adaptable to different industries and project types (Project Management Institute, Inc., 2021). For smaller projects or new managers especially, its complexity and emphasis on broad project management rather than cost and schedule-specific concerns might provide difficulties. AACE, on the other hand, specializes in cost and schedule control and offers thorough approaches and cutting-edge quantitative tools including Monte Carlo analysis (Sobieraj & Metelski, 2022). The proposed framework as shows in Fig. 2.

Fig. 2. Proposed framework.

Conclusion

The study aimed to develop a tailored risk management framework by integrating elements from the AACE and PMBOK frameworks to align with the company’s specific standards and needs. By conducting a comparative analysis of the strengths and weaknesses of PMBOK and AACE, the study highlighted that while PMBOK provides a clear, comprehensive, and globally recognized structure, it may lack specificity in addressing cost and schedule-related issues. On the other hand, AACE offers a detailed, quantitative focus on cost and schedule management, but its highly specialized approach may limit flexibility and applicability in broader contexts.

The research used the Multiple Attribute Decision-Making (MADM) approach to methodically assess and rank risk management techniques in order to overcome these constraints. To find dominating features, the framework included first screening methods including non-dimensional scaling and Likert-scale comparisons. Following this was the application of ordinal ranking and weighting factor analysis to guarantee fit with the particular requirements and goals of the company, therefore encouraging objectivity and accuracy in the final framework design.

The framework provides a structured and adaptable platform for empirical investigations to build risk management methods for different areas and businesses. It provides scalable inputs to meet varied operational difficulties while maintaining global standards by merging the PMBOK and AACE frameworks. Likert scales, Non-Dimensional Scaling, and weighting factor rankings make evaluation flexible and objective, making it relevant to different business scenarios. Customizing the product for geographical, cultural, or industry-specific characteristics makes it more relevant and useful. Future empirical research might use this paradigm to examine its efficacy in different locations or industries, assess its adaptability, and refine it for broader uses. The framework fosters ongoing improvement and cross-industry learning as a best practice, increasing risk management solutions.

The tailored risk management process balances PMBOK’s comprehensive and flexible approach with AACE’s cost- and schedule-specific strengths for optimal results. This framework fits the organization’s needs, helping it manage risks, improve decision-making, and complete projects.