BP 2010 Annual Report Download - page 95

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Corporategovernance
Corporate governance
BP’ssystemofinternalcontrol
Theboardisresponsibleformaintainingasoundsystemofinternalcontrol
anddelegatestheestablishmentandmaintenanceofthissystemtothe
groupchiefexecutive.Managementsystems,organizationalstructures,
processes,standardsandbehavioursareallcomponentsofBP’ssystemof
internalcontrol.
Managementofriskandoperationalperformanceisoneofthe
threeelementsofBP’ssystemofinternalcontrol.Businessesidentify,
prioritize,manage,monitorandimprovethemanagementofrisksona
day-to-daybasistoequipthemtodealwithhazardsanduncertainties.The
keyrisks,andhowtheyaremanaged,arereportedupthroughthelineina
consistentmannertoenablebusinessplanning,appropriateintervention
andultimatelyboardoversight.
Thisenablestheidenticationofthemostimportantrisk
managementactivities.Auditprocessesaredesignedtoconsiderwhether
selectedriskmanagementactivitiesaredesignedandoperatingeffectively.
Investmentsandoperations
BP’soperationsandinvestmentsareconductedandreportedinaccordance
with,andassociatedrisksaretherebymanagedthrough,relevant
standardsandprocesses.TheserangefromOMS(whichisthestructured
setofprocessesdesignedtodeliversafe,responsibleandreliable
operatingactivity),togroupstandards(whichsetoutprocessesformajor
areassuchasfraudandmisconductreporting),throughtodetailed
administrativeinstructions.
BPhasanestablishedinvestmentapprovalsandassuranceprocess
whichprovidesasetofpoliciesandproceduresforallitsinvestment
decisions,includingBP’sdecisionstoinvestinpartner-operatedorjoint
ventureactivities.Theseincludeaconsistentsetofeconomicassumptions
usedtoevaluateprojects(includingoilandcarbonpricing),togetherwithan
assessmentofnancialandnon-nancialrisk,economicreturnandother
factorsthatmayberelevant.Potentialinvestmentsmustalsobescreened
againstBP’sgroup-denedpracticeonenvironmentalandsocialmatters.
Materialcommitments(includingthoseinvolvinglong-term
commitmentsorwhichpotentiallyinvolvereputationalissues)arereviewed
andendorsedbyanexecutive-levelcommittee–theResource
CommitmentsMeeting(RCM).TheboardiskeptupdatedoftheRCM
activitiesthroughthecirculationofRCMminutesinadvanceofeachboard
meeting.Theboardannuallyconsidersareviewofcapitalprojectsandtheir
performanceagainstinvestmentcriteria.
BP’s system of internal control
Elements include: Risk management
• Risk management system
Board and executive governance • Group risk categories and
of the group group risks
• Board governance principles, • Operating Management
including executive limitations System (OMS)
• Board committees• Group standards
• Executive committees • Processes and practices
• Group plan and planning processes
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• Financial framework
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The assignment of authority
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• Operating performance reviews
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• Management information
• System of delegation
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• Group financial risk committee
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• Group operations risk committee
Integrity and ethical values
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• Code of conduct
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• Certification
Management philosophy
and operating style
• Group strategy
• Organizational structure
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Competence framework
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• Leadership framework
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• Learning and development
Clear lines of communication Management of people Employee concerns
• Internal communications • Performance objectives • OpenTalk
• External communications • HR policies and procedures • Fraud and misconduct
reporting standard
Executiveteamandcommittees
Thegroupchiefexecutiveandhisseniorteamaresupportedbyexecutive-
levelsub-committees,thatareresponsibleforandmonitorspecicgroup
risks:thegroupoperationsriskcommittee(GORC),thegroupnancialrisk
committee(GFRC),thegrouppeoplecommittee(GPC),theresources
commitmentsmeeting(RCM)andthegroupdisclosurecommittee(GDC).
Thesecommitteesprovideinputanddatatotheriskmanagement
processbytheexecutive,asdothegroupcomplianceandethicsfunction,
thesafetyandoperationalriskauditfunctionandthegroup’snancial
controlteam.
TheGCEconductsregularperformancereviewswiththebusinessesand
keyfunctionstomonitorperformanceandthemanagementofriskandto
interveneifnecessary.Peoplemanagementisbasedonannualand
long-termobjectives,throughwhichemployeesaredirectedtowards
deliveringspecicelementsofthegroupplanwithinagreedboundaries.
BPhasanannualcerticationprocessinwhichteamleadersare
askedtodiscusswiththeirteamsandthensubmitacerticateregarding
theirandtheirteam’sunderstandingofandadherencetoBP’scodeof
conductandthereportingofanybreaches.
BPAnnualReportandForm20-F2010 93