Risk in Business and Society Final Exam Study Guide Dr Charles Nyce 1 Topic 8 BP Putting Profits Before Safety a Overview i Case Study BP 2 safety issues from 05 06 ii Overriding Themes 1 Corporate strategy public relations culture safety and process management iii Incidents 1 March 5th 2005 Explosion at Texas City refinery 15 deaths 170 injuries 2 March 2016 Oil spill at Prudhue Bay Alaska Alaskan North Slope 3 January 2007 CEO Browne Resigns b Background BP Formation in 1998 Merger of British Petroleum and AMOCO Top 5 in Global Oil over 100 years old0 i Browne as CEO 1995 1 Rebranding a environmentally family b Green Company Climate Change talks 2002 2 Alternative Fuels Solar ii Public Relations 1 Increase in value of brand praised approach iii Corporate Strategy Perspective 1 Growth through M A 2 Do more with less 3 Cost cutting 4 Cost conscious c The First Event Texas City i 1 700 lawsuits ii Was safety first 1 OSHA 2 21 3M fine by OSHA 3 300 violations of OSHA 4 U S Chemical Safety Hazard Investigation Board CSB a BP endangered workers to cut costs b 23 accidents in 30 years c 8 severe 5 Baker report not finished until 01 2007 d The Second Event Alaska i Leak discovered in Prudhoe Bay Alaska 1 Largest US oilfield Alaska North Slope 2 267K gallons largest spill in this oilfield 1 3 Comparison Exxon Valdez approx 30M gallons 4 Comparison Deepwater Horizon 210M gallons ii Corroded pipe 1 P response shut down oil fields 2 8 drop in US oil production 3 16 of 22 miles of pipe needed to be replaced e Browne Steps Down i January 12th 2007 1 Browne steps down in July 2007 2 4 days before report release 3 regarded as one of Britain top businessmen 4 Financial Legacy M A rebranding 5x increase in profits 2 5x increase in share price f The Baker Report i January 16th 2007 release ii Critical of BP s approach to process safety iii Failed to give process safety the same emphasis as other initiatives including environmental and other safety initiatives iv Should have paid more attention to previous incidents chemical releases fires v Refineries did not get the same importance as exploration vi Decentralized management and entrepreneurial culture delegated substantial discretion to plant managers without outlining expectations regarding process safety responsibility or accountability vii Lack of communication viii Contract vs union worker problems i Process safety leadership ii Process safety management system iii Process safety knowledge and expertise iv Process safety culture v Clearly define expectations and accountability for process safety vi Support for line management vii Leading and lagging performance measures for process safety viii Process safety audit ix Board monitoring x Industry leader g Recommendations 10 h BP The Follow Up i Integrity questioned ii One year worst accident and worst oil spill iii Bloated profits iv Bad pipelines v Failed to communicate what was important vi Did organization do what was necessary 2 vii 2010 1 Toxic gas release at Texas City refinery lasts 40 days 2 Deepwater Horizon Oil Spill 2 Topic 8 Strategy Risk The Global Financial Crisis a Overview i Global financial crisis a failure of risk management ii Fiercening of capitalism vs corporate strategy b What is strategy i Strategy should make companies more competitive alert to their circumstances and resilient ii Mistakes in strategy however can be severe strategic risk c Background of Financial Crises d Did strategy cause crises i Probably not ii But did nothing to avert it either iii Warren Buffet sphere of competence internet stocks in the 90 s success iv Strategy did point to stock price as the only measure of v Michael Porter in the 90 s lamented that companies were sacrificing strategy for more faddish concerns e Is there a problem with Strategy i Competitive advantage time shortened ii Positional volatility of leaders 1 How cool is Facebook iii Need for adaptive strategy 1 Instead of developing one strategy based on analysis prediction and deduction 2 Create a set of optimal conditions for the continuous emergence of superior strategies f Strategy Cannot Ignore Risk i Strategy will need to incorporate risk boundaries corporate purpose environment ii Systemic risk is real iii How to build contingencies into strategy to deal with risk how iv Real trade off between efficiency and redundancy excess can we be resilient capacity g Strategy Must Define Boundaries h Strategy Should Redefine Corporate Purpose i Shareholder value is a result not a strategy ii Stability iii Growth iv Employees i Strategy Should Reflect Environment i Demographic trends 3 ii Consumption trends 3 Topic 8 Overview of Risk a Ways to categorize risk i Business Risk prices regulation competition ii Operation Risk potential losses from internal sources manufacturing fraud mismanagement employee mistakes iii Hazard Risk potential losses ex fires auto accident tornado iv Financial Risk potential variation due to financial causes v Strategic Risk potential losses from poor business decisions vi Other Types Legal Liability IT etc 4 Topic 9 Overview of Risk Individuals a Ways to Categorize Individual Risk i Health Property Liability Life Financial ii Not always mutually exclusive b Risk Management for Individuals i Loss Exposures 1 Any condition or situation that presents a possibility of loss regardless of whether loss actually occurs 2 Elements of Loss Exposure a Asset exposed to loss b Cause of loss c Financial consequences of the loss c Property d Liability i Asset exposed to loss real property land buildings and personal property furniture jewelry ii Cause of Loss fire windstorm accidents iii Financial Consequences reduction in property value increased expenses lost income i Asset Exposed to Loss money ii Cause of Loss claim lawsuit iii Financial Consequences defense costs monetary damages iv Specific Types of Liability property owners automobiles employer employee animals e Life Premature Death i Asset Exposed to Loss life ii Cause of Loss death illness accident iii Financial Consequences 1 Wage or non wage earning 2 Child f Life Long Life i Asset Exposed to Loss savings retirement wealth ii Cause of Loss outliving assets iii Financial Consequences g Health 4 i Asset Exposed to Loss health livelihood ii Cause of Loss poor care injury etc iii Financial Consequences ability to earn an income may decrease or cease as in premature death h Financial i Asset Exposed to Loss wealth ii Cause of Loss health disability iii Financial
View Full Document
Unlocking...