I have been reading Atul Gawande’s The Checklist Manifesto.
It is an entertaining and thought-provoking book. It really made me think about how better checklists in F1F9 can help us create better models and deliver an improved process for our clients.
Gawande highlights the similarities between the surgical profession and two other complex, high-skill undertakings: the construction of large buildings and flying airplanes.
While people working in construction and aviation depend on adherence to checklists to get things right, many doctors and nurses have not yet embraced this practice.
Gawande makes a compelling case for the use of checklists in other professional fields, including business, investment decisions and the law.
In the oil and gas industry, management rely on economic and financial analysis to make multibillion dollar investment decisions. Producing this analysis is not a trivial task. Analysts must consolidate and incorporate months or years of work by cross-functional teams.
There are more factors involved than any one person can keep in their head. The analysis has to take account of issues such as:
- Business Structure (Shareholding, type of venture - SPV)
- Development and Operating Timeline
- Capital Cost (Exploration, Facility Design, Expenditure Profiles, Renewal)
- Production and Sales Volumes (Reserves, Material and Energy Balance, Plant Availability)
- Revenue (Prices Feedstock and Sales)
- Operating and Maintenance Cost (fixed vs. variable, cyclic, incremental, once off)
- Working Capital
- Fiscal (Tax and Tax Allowances)
Years of knowledge, experience and organisational memory may be captured by a good checklist.
All too often, our checklist of attributes is a model from a colleague that has just been floating around in the office.
More and more companies are recognising the risks associated with modelling, and are realising that the cost of an inefficient, ad hoc approach is too great to bear.
Our latest ebook "The oil & gas modelling checklist" delivers a comprehensive checklist and supporting ebook which takes you through some of these risks.