What can end the business.
WHAT THE LARGEST RISKS ARE
A serious safety incident Client concentration Non-payment or delayed payment Contract loss at renewal Oil price and activity cycles Currency exposure Regulatory or qualification lapse
WHY ACTIVITY CYCLES MATTER
Sector activity moves with prices, and service demand falls sharply in downturns.
WHAT THAT MEANS
Fixed costs built during activity become unsustainable when it falls.
WHAT TO ESTABLISH
Cost structures that can contract.
WHAT TO PREFER
Variable arrangements over fixed commitments, where possible.
WHY CLIENT CONCENTRATION MATTERS
A single operator frequently represents most of a service company's revenue.
WHAT TO MEASURE
The proportion from your largest client.
WHAT TO DO
Develop others deliberately, and consider adjacent sectors.
WHAT ADJACENT SECTORS EXIST
Power generation Industrial and manufacturing Marine Construction
WHY
Capability in this sector transfers, and it smooths the cycle.
WHAT TO ESTABLISH ABOUT CURRENCY
Whether costs and revenue are in the same currency.
WHY
Imported equipment against local-currency contracts is a serious exposure.
WHAT TO DO
Price with allowance, and include adjustment mechanisms where possible.
WHAT TO MAINTAIN
Registrations and certifications, without lapse.
WHY
Losing qualification excludes you from bidding entirely.
WHAT TO BUILD
Reserves sufficient to survive a downturn.
WHY
Downturns in this sector are prolonged.
