How to maximize return on investment, surveillance of risk and mitigate risk for an oil sector equipment supplier

Abstract

In this thesis an oil & gas equipment supplier’s business risk is examined in order to obtain information that can be used as an injection by the management to achieve the highest Return on Investment (ROI) possible. The strategic risk is analyzed and recommendations for managing the risk are suggested in relation to the specific business case. This thesis also aims to qualitatively assess risk involved in increasing the market value by combining decision-making tools and risk theory. In addition to assessing the risk related to increasing the business case’ competitive advantage, this thesis is also aimed at supporting the decision-makers in their strategic planning towards a higher market value with a model that will aid the strategy development. The Strategic Risk Approach (SRA) is used as the basis for this thesis’ methodology and is accompanied with the Analytical Hierarchy Process (AHP) and risk theory to provide a view on the business risk related to an equipment supplier in Oil & Gas through a possibilistic approach. Some of the business case’s employees was gathered from different departments to participate in the exercise of relative prioritization of the intangible assets. The same group responded to two surveys related to the SWOT analysis, were opportunities and threats to the competitive advantage and their characteristics were to be ranked in terms of risk. This thesis resulted in a business risk approach which the business case may use to minimize, monitor and review risk related to maximizing the ROI. The intangible assets where prioritized and acted as the main objectives in the further examination of the firms characteristics. A list of opportunities and threats were established and categorized through a three-dimensional system according to the individual findings’ rankings on likelihood of occurring, manageability and impact on competitive advantage through the first survey. Recommended measures to be implemented or conducted in order to enhance the opportunities and reduce the threats were found based upon the characteristics of the firm. These measures were rated in the second survey in terms of their relative impact on the threat or opportunity’s likelihood of occurring. Through the SRA-approach and risk analysis internal and external indicators were identified and characterized on their impact on the relative prioritization of the intangible assets. The indicators are suggested to be kept under surveillance by the business case as they may provide useful information on which intangible assets are the most important under different circumstances.