BP 2013 Annual Report Download - page 53

Strategic report
BP Annual Report and Form 20-F 2013 49
Our management of risk
BP manages, monitors and reports on the principal risks and uncertainties
that can impact our ability to deliver our strategy of meeting the world’s
energy needs responsibly while creating long-term shareholder value;
these risks are described in the Risk factors on page 51.
Our management systems, organizational structures, processes,
standards, code of conduct and behaviours together form a system of
internal control that governs how we conduct the business of BP and
manage associated risks.
BP’s risk management system
BP’s risk management system is designed to be a simple, consistent
and clear framework for managing and reporting risks from the group’s
operations to the board. The system seeks to avoid incidents and maximize
business outcomes by allowing us to:
• Understand the risk environment, and assess the specific risks and
potential exposure for BP.
• Determine how best to deal with these risks to manage overall
potential exposure.
• Manage the identified risks in appropriate ways.
• Monitor and seek assurance of the effectiveness of the management
of these risks and intervene for improvement where necessary.
• Report up the management chain to the board on a periodic basis
about how risks are being managed, monitored, assured and the
improvements that are being made.
Our risk management activities
Facilities,
assets and
operations
Business
segments
and functions
Executive
and corporate
functions
Board
Day-to-day risk
management
Identify, manage
and report risks
Business and
strategic risk
management
Plan, manage
performance
and assure
Oversight and
governance
Set policy
and monitor
material risks
Day-to-day risk management – management and staff at our facilities,
assets and functions identify and manage risk, promoting safe, compliant
and reliable operations. For example, our group-wide operating
management system (OMS) integrates BP requirements on health, safety,
security, environment, social responsibility, operational reliability and
related issues. These BP requirements, along with business needs and the
applicable legal and regulatory requirements, underpin the practical plans
developed to help reduce risk and deliver strong, sustainable performance.
Business and strategic risk management – our businesses and
functions integrate risk into key business processes such as strategy,
planning, performance management, resource and capital allocation, and
project appraisal. We do this by collating risk data, assessing risk
management activities, making further improvements and planning new
activities. By using a standardized risk management report, we aim for a
consistent view of risks across BP.
Oversight and governance – the board, executive and functional
leadership provide oversight to identify and understand significant risks to
BP. They also put in place systems of risk management, compliance and
control to mitigate these risks. Executive committees set policy and
oversee the management of group risks, and dedicated board committees
review and monitor certain risks throughout the year.
BP’s group risk team analyses the group’s risk profile and maintains
the group risk management system. Our group audit team provides
independent assurance to the group chief executive and board, through
its committees, over whether the group’s system of internal control is
adequately designed and operating effectively to respond appropriately
to the risks that are significant to BP.
Risk governance and oversight
Key risk governance and oversight committees include the following:
Executive committees
Executive team meeting – for strategic and commercial risks.
Group operations risk committee – for health, safety, security,
environment and operations integrity risks.
Group financial risk committee – for finance, treasury, trading and
cyber risks.
Group disclosure committee – for financial reporting risks.
Group people committee – for employee risks.
Resource commitment meeting – for risks related to
investment decisions.
Group ethics and compliance committee – for risks associated
with legal and regulatory compliance and ethics.
Board and its committees
BP board.
Audit committee.
Safety, ethics and environment assurance committee.
Gulf of Mexico committee.
Board committees
For information on the board and its committees see page 71.
Our risk profile
The nature of our business operations is long term, resulting in many of
our identified risks being enduring in nature. Nonetheless, risks can
develop and evolve over time and their potential impact or likelihood may
vary in response to internal and external events.
As part of BP’s annual planning process, we review the principal risks and
uncertainties to the group. We identify those as having a high priority for
particular oversight by the board and its various committees in the coming
year; the risks identified for particular review in 2014 are listed below.
These may be updated throughout the year in response to changes in
internal and external circumstances. The oversight and management of the
other risks is undertaken in the normal course of business – throughout the
business and in executive and board committees.
Further details of the principal risks and uncertainties we face are set out in
the Risk factors on page 51. There can be no guarantee that our risk
management activities will mitigate or prevent these, or other, risks
from occurring.
Gulf of Mexico oil spill
There is a wide range of risks arising out of the Gulf of Mexico accident and
oil spill. These include legal, operational, reputational and compliance risks.
BP’s management and mitigation of these risks is overseen by the board’s
Gulf of Mexico committee, which seeks to ensure that BP fulfils all
legitimate obligations whilst protecting and defending BP’s interests.