BP 2010 Annual Report Download - page 33

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Businessreview
Business review
Digital infrastructure is an important part of maintaining our
operations, and a breach of our digital security could result in
serious damage to business operations, personal injury, damage
to assets, harm to the environment and breaches of regulations.
Thereliabilityandsecurityofourdigitalinfrastructurearecriticalto
maintainingtheavailabilityofourbusinessapplications.Abreachofour
digitalsecuritycouldcauseseriousdamagetobusinessoperationsand,in
somecircumstances,couldresultininjurytopeople,damagetoassets,
harmtotheenvironmentandbreachesofregulations.
Business continuity and disaster recovery – the group must be
able to recover quickly and effectively from any disruption or
incident, as failure to do so could adversely affect our business
and operations.
Contingencyplansarerequiredtocontinueorrecoveroperationsfollowing
adisruptionorincident.Inabilitytorestoreorreplacecriticalcapacitytoan
agreedlevelwithinanagreedtimeframewouldprolongtheimpactofany
disruptionandcouldseverelyaffectbusinessandoperations.
Crisis management – crisis management plans are essential to
respond effectively to emergencies and to avoid a potentially
severe disruption in our business and operations.
Crisismanagementplansandcapabilityareessentialtodealwith
emergenciesateverylevelofouroperations.Ifwedonotrespond,orare
perceivednottorespond,inanappropriatemannertoeitheranexternalor
internalcrisis,ourbusinessandoperationscouldbeseverelydisrupted.
People and capability – successful recruitment and development of
staff is central to our plans.
Successfulrecruitmentofnewstaff,employeetraining,developmentand
long-termrenewalofskills,inparticulartechnicalcapabilitiessuchas
petroleumengineersandscientists,arekeytoimplementingourplans.
Inabilitytodevelophumancapacityandcapability,bothacrossthe
organizationandinspecicoperatinglocations,couldjeopardize
performancedelivery.
Inaddition,signicantmanagementfocusisrequiredinresponding
totheGulfofMexicooilspillIncident.AlthoughBPsetuptheGulfCoast
RestorationOrganizationtomanagethegroup’slong-termresponse,key
managementandoperatingpersonnelwillneedtocontinuetodevote
substantialattentiontorespondingtotheIncidentandtoaddressthe
associatedconsequencesforthegroup.Thegroupreliesonrecruitingand
retaininghigh-qualityemployeestoexecuteitsstrategicplansandto
operateitsbusiness.TheIncidentresponsehasplacedsignicantdemands
onouremployees,andthereputationaldamagesufferedbythegroupasa
resultoftheIncidentandanyconsequentadverseimpactonour
performancecouldaffectemployeerecruitmentandretention.
Treasury and trading activities – control of these activities depends
on our ability to process, manage and monitor a large number of
transactions. Failure to do this effectively could lead to business
disruption, nancial loss, regulatory intervention or damage to
our reputation.
Inthenormalcourseofbusiness,wearesubjecttooperationalrisk
aroundourtreasuryandtradingactivities.Controloftheseactivitiesishighly
dependentonourabilitytoprocess,manageandmonitoralargenumberof
complextransactionsacrossmanymarketsandcurrencies.Shortcomings
orfailuresinoursystems,riskmanagementmethodology,internalcontrol
processesorpeoplecouldleadtodisruptionofourbusiness,nancialloss,
regulatoryinterventionordamagetoourreputation.
FollowingtheGulfofMexicooilspill,Moody’sInvestorsService,
StandardandPoor’sandFitchRatingsdowngradedthegroup’slong-term
creditratings.Sincethattime,thegroup’screditratingshaveimproved
somewhatbutarestilllowerthantheywereimmediatelybeforetheGulfof
Mexicooilspill.Theimpactthatasignicantoperationalincidentcanhave
onthegroup’screditratings,takentogetherwiththereputational
consequencesofanysuchincident,theratingsandassessmentspublished
byanalystsandinvestors’concernsaboutthegroup’scostsarisingfrom
anysuchincident,ongoingcontingencies,liquidity,nancialperformance
andvolatilecreditspreads,couldincreasethegroup’snancingcostsand
limitthegroup’saccesstonancing.Thegroup’sabilitytoengageinits
tradingactivitiescouldalsobeimpactedduetocounterpartyconcerns
aboutthegroup’snancialandbusinessriskproleinsuchcircumstances.
Suchcounterpartiescouldrequirethatthegroupprovidecollateralorother
formsofnancialsecurityforitsobligations,particularlyifthegroup’scredit
ratingsaredowngraded.Certaincounterpartiesforthegroup’snon-trading
businessescouldalsorequirethatthegroupprovidecollateralforcertainof
itscontractualobligations,particularlyifthegroup’screditratingswere
downgradedbelowinvestmentgradeorwhereacounterpartyhad
concernsaboutthegroup’snancialandbusinessriskprolefollowinga
signicantoperationalincident.Inaddition,BPmaybeunabletomakea
drawdownundercertainofitscommittedborrowingfacilitiesintheevent
weareawarethattherearependingorthreatenedlegal,arbitrationor
administrativeproceedingswhich,ifdeterminedadversely,might
reasonablybeexpectedtohaveamaterialadverseeffectonourabilityto
meetthepaymentobligationsunderanyofthesefacilities.Creditrating
downgradescouldtriggerarequirementforthecompanytoreviewits
fundingarrangementswiththeBPpensiontrustees.Extendedconstraints
onthegroup’sabilitytoobtainnancingandtoengageinitstrading
activitiesonacceptableterms(oratall)wouldputpressureonthegroup’s
liquidity.Inaddition,thiscouldoccuratatimewhencashowsfromour
businessoperationswouldbeconstrainedfollowingasignicant
operationalincident,andthegroupcouldberequiredtoreduceplanned
capitalexpendituresand/orincreaseassetdisposalsinordertoprovide
additionalliquidity,asthegroupdidfollowingtheGulfofMexicooilspill.
BPAnnualReportandForm20-F2010 31