Risk Management of BP PLC: A Case Study

This article examines the risk management practices of BP PLC, a multinational oil and gas company. It discusses the company's history, risk assurance, risk monitoring, and risk communication. The article highlights the importance of effective risk management for sustainability and the need for improved communication within the organization.

APPLE REPORT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
RISK REVIEW................................................................................................................................1
Risk assurance of BP Plc.............................................................................................................1
Risk monitoring of BP.................................................................................................................2
RISK COMMUNICATION AND CULTURE...............................................................................3
Evaluation of clarity and effectiveness of communication risk...................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
The British Petroleum Company PLC now known as BP PLC is a MNC which deals in
oil and gas and is based in London, UK. This company is one of the top most company out of the
world seven top oil and gas major companies. This company has been operating in all the sectors
related to this market. In the total turnover it is considered to be the sixth largest company of
energy production. This company is vertically integrated and has its operation in all the oil and
gas industry which also includes exploration and production. This company also deals with
refining distribution marketing petrochemicals generation of power and also trading of these
products. BP PLC has also shown some interest in renewable energy sources such as biofuel and
wind power. The operations of this company are spread worldwide and it has operations in more
than 70 countries which a production of 3.6 million barrels per day. This company also holds a
lot of reserves with a total of 18.441 billion barrels equivalent of oil. All around the international
market this company as around 19,000 service stations.
Recently it has been seen that BP has been facing many risks. The risk is mainly due to
its lack in sustainability. The practises of this company has been harming the environment in
multiple ways. Bangor mental record of this company shows that it has been violating the rights
of global warming, dumping of hazardous substance in the environment, air pollution and also
the indigenous rights. In Colombia, it has been involved in damaging the farmland off the
Canadian oil sands. Including all these violations this company has also been the part of several
accidents. One of which was in Texas city in 2005 where are you finally exploded, in 2007 one
of its refineries release toxic substance in the atmosphere a following that in 2010 in the caption
see a chemical leak caused hazardous explosion and harmful gas leak in the oceans. Oil spills in
the ocean are considered to be very damaging for the ecosystem. This is how this company has
affected the human health in the following ways and has been facing civil and criminal suits due
to the political influence and experience in the market (Kraft and Crandall, 2019).
RISK REVIEW
Risk assurance of BP Plc
Risk assurance is the process which involves different tiers of internal process which
includes management and controlling for financial control of security and inspection for
compliance and internal audit. The incident occurred for BP PLC Was mainly due to the reason
that its operational management was very poor Ann failed to manage the risk involved. This
1

happened because the corporate executives placed a very low priority under safety of the
operations of the company (Pranesh and et.al., 2017). The history of oil spills which is connected
to this company has demonstrated a very poor operational risk management in the past few years.
There has been many tragedy incidents such as refinery explosion in 2005 and through the Bay
oil spell in 2006 and 2007. As the company did not take any actions immediately after these
incidents, these incidents started becoming more and more serious and affected the Gulf of
Mexico in the process. The failure of this company was the inspection of the oil rig which was
prescribed by the government regulations. However, the BP deep water horizon oil rig missed a
total of 16 inspections. This shows that this company has failed previously in providing risk
assurance of its operation time after time. Since the events of 2010 the company has realized the
impacts it has had on the many people. People including customers, colleagues, partners and
shareholders all around the world. The company has take full responsibility on what has
happened and now in the attempt of fixing it is ready to take actions which include a
sustainability review. For providing the risk assurance to the people this company has discussed
how oil spills affected the business and the changes it needs to ensure that such events do not
take place in the future. This company plans on doing so with the help of a sustainability report
that will cover the wide range of issues and ways on acting on them with deep analysis (Riazi,
2021).
Risk monitoring of BP
Risk monitoring is said as the ongoing process for management of risk. In the initial stage
of risk management the identified risk is involved with agreement made for designing and
controlling of risk. In this process of Risk monitoring risk management tracks the risk and
executes an identified and continuous process of management of risk. The explosion which
occurred in Deepwater Horizon offshore oil rig in the April 2010 was one of the most disastrous
encounter which BP had to face. Just like that many other accidents this company was part of
several other such incidents which was the reason of safety violation of this company (Sari,
2020). According to the Risk monitoring of this company it did the following things wrong, With
the help of effective communication in this organization it would have been successful in
ensuring that the right people are associated with right risks on timely basis. Scenario planning
could have helped the organization to identify the risks in which there are no solutions and such
situations can be analysed (Khan and et.al.,2019). It is considered important for the member of
2

the board of the company to provide an oversight to the risk management and also serve as an
investor's best interest. It is important for BP to learn from its mistakes and understand that
avoiding risks is not just enough and it is helpful for understanding the key risks which the
company faces by taking risks carefully(Wei, 2020).
RISK COMMUNICATION AND CULTURE
Evaluation of clarity and effectiveness of communication risk
British petroleum or BP suffered a major incident in the Gulf of Mexico, an oil spill
which was caused by the lack of effectiveness and communicative methods. BP’s
communication before and after the incident both was not expected as the incident was the fault
of the lack of a well-coordinated communication system within the organization(Bespoke, 2021).
The company not only were not prepared fully but also refused to take the responsibility and
ownership of the incident and blamed it on the suppliers, government and also the local coast
populaces. BP issued many press releases talking about the repercussions of the respective
hazard and how the company is going to help the employees and their families, also took the
initiative of cleaning up the Gulf but did not accept the faults and misshapenness of the incidents.
Some issues which led to such a devastating occurrence are given below.
Over-Reassuring:
Risks should always be expected higher than the usual as it is the most rookie mistake
which a person or in this case a company made. BP’s operations and the risk managers were a bit
too much optimistic which led them to think for the operation as a fairly easy task. The over-
reassurance of the matter led to the negligence and lack of proper communication and
implementation of the precautions which were to be taken in order to avoid such instances.
After the misshapenness caused by the company the CEO at that time also could not
communicate correctly and were concerned about the lowering rate of the oil recovered from the
gulf. The ocean is big and it’s a small part of the ocean which effects the ocean and the
ecosystem which impacts the world and the environment (Sandman, 2010).
Credible Contrition:
Accepting the faults and mistakes is an important factor for any company which creates
problems for many individuals and even the environment. The company did later take stand of
the actions but it was assumed that they did not mean it. The company kept on hiding the facts of
cutting the corners and ignoring the problems and issues arising at the time of planning the
3

operation(Corsi, 2018). The company was neglecting the fact that the incident was because of the
unprofessional behaviour from the part of the company’s decisive management. The casual
approach of the company towards the incident was not expected from a company of this stature.
BP did eventually accept their fault but with minimum or no shame towards the world and the
amount of lives they put at stake.
Credible compassion and determination:
Accepting the faults and acting upon them is what the company should have done but the
company could not fulfil the expectations of the world. BP tried to help the harmed and
compensate the families of the individuals lost in the incident but could not cope up with its own
decisions. The corporate compassion is something which took over the loss of the individuals
and the creatures lost in the hazard. The company did not express itself for the happening nor did
it communicate properly to reach out to the people and the environment in need. This whole
hazardous event was because of the lack of proper communication, but the company did not
realize this and made the same mistake again and again. The company had to recalibrate the
happening and reach out for helping the victims and taking stand for the actions (Kondratenko,
2017).
Accepting the faults:
BP misbehaved immensely which led to the loss of many lives of not just people but also
the environment. Infarct the company was not letting go of irrelevant excuses and trying to
defend its integrity by making false allegations. The defence was inappropriate which was
completely worthless as the company loss at least half of its shareholder value. It seemed to have
been a unwise and imprudent behaviour from the part of the company.
The assessment of the probable risks and magnitude of the different risks which could be
hindering the project is what the company should have done but instead it became over
optimistic and ended up causing so many lives and damaging the environment as well.
CONCLUSION
With the help of this project it can be concluded that the BP's risk management should
have been better so that it could have handled risks a lot better and achieve greater results in
sustainability. BP Plc is a very well-known company and should understand that it needs to act in
the favour of the people and the environment (Jarrell and Ozymy, 2020). This is not just
important for improving the image of the company and also important for the company to
4

develop sustainability. Company's like BP which run a great risk to the environment needs to
check its operations several times so that its can be made sure that they do not affect the
environment. This can be only achieved by the company if it has proper procedure for risk
management. With the help of Risk management the companies will understand the issue and
that can be used for finding solution later. This company has been found to be speaking about
situations which had no solutions, for the management of these issue this company should first
identify these issue so that the operations can be stopped till proper solutions are found. It is very
well understood by the company that it cannot solve the accidents which has already happened,
although the company can invest in the charitable institutions which are look after the ecosystem
of these affected areas of oil spills. This will help the company in developing sustainability in its
operations. From the above evaluation it is understood that the company has had difficulties in its
communication which has been the main issue of incidents that has happened. For the
development of communication in this organization it can take the help of strategies and theories
which can improve the communication of the organization. It is important for the organization to
take actions against the department which is not working properly.
5

REFERENCES
Books and Journals
Bespoke, A., 2021. Corporate Success Stories in the UAE: The Key Drivers Behind Their
Growth. human resources. 27. p.30.
Corsi, G., 2018. New York City v. Big Oil.
Jarrell, M.L. and Ozymy, J., 2020. Deepwater Horizon, Environmental Justice, and the
Prosecution of Federal Environmental Crimes in the US Gulf Coast. Environmental
Justice.
Khan, M.T., and et.al.,2019. Sugarcane biofuels and bioenergy production in Pakistan: Current
scenario, potential, and future avenues. In Sugarcane biofuels (pp. 175-202). Springer,
Cham.
Kondratenko, N., 2017. A study on economic factors influencing recovery of investment activity
in oil and gas industry: An analysis on major international companies. Academy of
Strategic Management Journal. 16(4). pp.1-12.
Kraft, B.C. and Crandall, R., 2019. A Framework for Considering Climate Change Impacts in
Project Selection for Deepwater Horizon Restoration Efforts. Wetlands, pp.1-7.
Pranesh, V., and et.al., 2017. Lack of dynamic leadership skills and human failure contribution
analysis to manage risk in deep water horizon oil platform. Safety science. 92. pp.85-93.
Riazi, M.R., 2021. Environmental, Economic, and Political Impacts: Case of BP Oil Spill. In Oil
Spill Occurrence, Simulation, and Behavior (pp. 135-162). CRC Press.
Sari, H.C.K., 2020. ANALISIS TERJEMAHAN PROFIL PERUSAHAAN ASING DI
WIKIPEDIA INDONESIA. KREDO: Jurnal Ilmiah Bahasa dan Sastra. 4(1). pp.184-200.
Wei, X., 2020. Accounting for Goodwill in China–A comparison of IFRS and Chinese Gap and
its application by Chinese companies.
Online
Sandman. M.P., 2010. Risk communication lessons from BP spill..[Online] Available trough:
<https://www.psandman.com/col/deepwater4.htm>
6