Taking enterprise risk management on with a truly integrated head-on approach is necessary. Over time, the response teams altered the established response structure to ensure support and authority flowed rapidly to local leadership and communities. Golderberg, S 2011, January 6. We have been working with boards and risk management teams to improve processes and reporting as well as embedding into business areas understanding of this topic. Its primary objective is to reduce the different risks related to threats caused by environment, technology, humans, organizations and politics. The damage to the Gulf, its species, and the people who depend on it is almost incalculable.
The incident came as the culmination of a series of less serious accidents at the refinery, and the engineering problems were not addressed by the management. Commercial and recreational fishing has resumed, with some restrictions in areas that were closed by the Deepwater Horizon oil spill. What seems abundantly clear is that there is a large and ever growing gap in the ability of large global corporations to identify, alter and manage operational risks. Business Studies for A2 Hamberg, J. These risks can be treacherous for the firm April 2010 in the Gulf of Mexico was one of the biggest accidents in the history of oil spill after releasing more than 200 million gallons or 4. Or consider at the risk to companies that do not meet from business customers.
The pressure to rapidly apply the lessons from the disaster in the Gulf will benefit those who develop, or acquire, next generation innovations able to better manage the risks revealed. The operation is not going to succeed if we continue in this manner. The governance framework generally consists of explicit and implicit contracts between the firm and the stakeholders for distribution of responsibilities, rights and rewards; secondly it establishes procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles and third, it establishes procedures for proper supervision, control, and information-flows to serve as a system of checks-and-balances. The implementation of robust, proven systems and tools for planning and implementing the management of large numbers of vessels at extremely close quarters, including storyboarding and a centralized, onsite control regime British Petroleum, 2010. Because a splintered approach to enterprise risk management has been the norm, with silos of risk management within organizations, the result has been that risk is often poorly defined and buffering the organization from risk realization is; pardon the pun, risky at best.
This story shows how risk management can, and does, work. Complex systems fail in complex ways. However, luck runs out eventually and panic, chaos, confusion set in; eventually leading to collapse. Complexity theory recognizes that such complex projects require an open system, such as an anthill, that can react to the unexpected quickly and revert back to the norm or to a new norm. Firms usually formulate strategies in order to manage or mitigate risk by transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. So far, the oil giants seem to be pursuing only the first part. The Gulf oil spill disaster has shown that even large organizations can learn to successfully apply complexity theory.
Smart executives, therefore, engage with their social and political environments helping shape the rules of the game and reducing the risk of being hemmed in by external affairs. A dispersed management team that was focused locally became the most effective management methodology to combat the spill. Part of this buildup has been from the poor initial estimates of the magnitude of the spill. News reports have offered some insight, but early reports often contain information later proven inaccurate. Once potential sources of risk have been identified, it will also need preparing a plan for reducing the risk mitigation plan for risks that are chosen to be mitigated. The creation of that capability is the purpose of strategy.
Hillson, 2003 , BoD performs the regular reviews of the risks and recognises the same in the annual plan of the British Petroleum as a Group. Online Journal Last name, First. The assumption that we will continue to dig up more carbon-emitting fossil fuels may be called into question in a serious way by the Gulf oilpocalypse. Between 2010 and 2013, Bob was executive vice president of the production division, accountable for safe and compliant exploration and production operations and stewardship of resources across all regions. Corporate governance, enterprise risk management and compliance Corporate governance has traditionally defined the ways that a firm safeguards the interests of its financiers investors, lenders, and creditors. Since planned movements were not possible in advance, this complex operation required a new system that would allow the dynamic movement of vessels, in a safe and expedient manner.
The corporate image is the lifeline of any industry or company. They've learned to absorb the shockwaves that change brings and can use that energy to transform their companies and their careers. Exhibit 1: Rapid buildup of people and vessels involved in the cleanup efforts British Petroleum, 2011 Consider Exhibit 1 and understand the magnitude of this situation. A complex and comprehensive view of the location of the surface oil, coupled with robust communication among leadership, airborne units, and responders on the water, became the most effective way to deploy the necessary resources. They were able to concentrate on the likely events and prevent them the easy part of loss control , while ignoring the less likely catastrophe. And, while risk management technology may be available; dependence on its output should never become the cornerstone of enterprise risk management. This false premise creates a reaction time gap.
What Happened On Board the Drilling Rig Deepwater Horizon? They did not worry as much at all about the low frequency, high-consequence accidents—the real disasters. The wells were leaking insulating agent called Arctic pack, consisting of crude oil and diesel fuel, between the wells and ice. The Associated Press and Reuters contributed to this report. How does this get us to sector leadership? One can see the relationship between the change to a distributed, local management and the spill response effectiveness. Again on March 8, 2010, a kick was encountered, this one more severe than the one the prior October. It takes a culture that gives little respect to the concept of risk management for so many disastrous mistakes to be possible.
Why, for example, has each attempt to stop the leak been done in a serial fashion? The issue was that having a distant central authority gave the appearance of a lack of addressing the local issues at hand. The disaster caused billions of dollars in damage to hundreds of miles of coastline and wreaked havoc on the Gulf economy. Deming recognized the folly in working for the sake of procedure rather that finding the goal and making every effort to achieve it. In order to understand the magnitude of the number of vessels being deployed, consider that according to 2009 estimates, China has approximately 300 vessels in its navy and Australia has 51 vessels in the Royal Navy Measuring the Chinese fleet, n. Cookies also allow us and third parties to tailor the ads you see when you visit our site and other third party websites in the same online network, including social networks. No other wildlife is considered as part of this process. While these have been less tragic than the gulf spill, more are certain to come.
It would guarantee success and failure, and it is unpredictable. Deepwater Horizon containment and response: Harnessing capabilities and lessons learned. In addition, allowing for a local command post with local support and resources was better accepted than having some distant operations dictate decisions. But the oil companies have done the same thing. Interested readers may refer to my past columns that outline how those responsibilities are best carried out.