Risk Analysis: Submarine Cable Network

Risk Analysis All of the parties involved have been very optimistic for the outcome of this multinational project, since they had been very well prepared to minimize the risks and uncertainties that might come during the completion of this project. Therefore, most people assumed that SCCN as one of the leading greenfield project for submarine cable network in the world that was financed in Australia and New Zealand. Just like any other project ever conducted, this project did not come without any risks involved. Some of the risks identified prior to the execution of the project, they were: Completion Risk, Market Risk, Infrastructure Risk, and Force Majeure Risk. These risk had been excellently mitigated by designing a good financial structure, choosing the best suppliers, good marketing strategies, as well as having well trusted sponsors and other parties that provided a strong back-up for this project. Below are further detailed explanations of each risk. • Completion Risk Completion risk comprises all of the risk factors that are led to the disruption of completing the hardware for this project (submarine cable network) as well as the system for this project. Some of the risk factors are operating technology, operating management, completion and supply. SCCN has successfully mitigated the risk by choosing the most experienced and well-known suppliers to handle the supplies for submarine cable network. In this part particularly, Alcatel and Fujitsu were chosen as the major supplier for the submarine cable network because they are believed to have the ability and financial capacity to deliver the best quality product from their previous involvement in similar projects. Moreover, this project had a contract of fixed in price and fixed in time supply that gave the incentive to the supplier to perform and deliver based on the required standards and the timetable. To minimize the risk further, 5% contingencies are added to the supply contract with another 2.5% as an additional equity support from the sponsors in case the first contingencies had been fully used. • Market Risk Market Risk is explained as an exposed risk due to the output produced by the SCCN, which is the capacity used for the network in this case. This risk also took consideration the existing competitors for this project. At the beginning of the financing process, the sponsors for this project believed that SCCN has so much potential as the most advanced technology that is offered to the market of fibre optic capacity compared to the existing submarine cable such as PacRim East and West, which almost reached their maximum capacity. Backed up with two independent market studies, the sponsors were assured that the future market would be very promising once the project is completed. To mitigate the risk, pre-sales program for the capacity of usage was designed for the assessment of financial viability and the market appetite itself. The pre-sales was offered to the major regional and international carriers with additional incentives bonus program for those who signed up for early commitment. The pre-sales also proposed a flexible basis where the carriers are enabled to choose the segment of capacity based on the scheduled capacity payment rather than up …show more content…
• Infrastructure Risk
In this type of risk, the risk factors that were identified are related to the infrastructure needed to support and complete of the submarine cable network. Factors such as route survey and route selection for the cable network that must be placed in the right area, needing for further research and study in order to get the most efficient route. Therefore this project done the finalization of desktop study and completion of route survey before the financial activity ended in order to mitigate the risk and got the route well planned.
• Force Majeure …show more content…
In case of SCCN, this kind of risk are mitigated by having an excellent design on the part of the cable itself, as well as supporting programs, facilities and infrastructure. The cable were designed to always be available more than 99.99%, with the downtime period predicted to be approximately 50 minutes every 10 years, which represents substantial improvement on the existing average single-strand trans-Pacific cables that only has availability of 98% with 66 days downtime every 10