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!1!!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!’05D’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!!2!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!g. Recommendations!(10)!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!h. BP:!The!FollowDUp!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?!!3!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!iv. Strategy!did!point!to!stock!price!as!the!“only!measure”!of!success!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!can!we!be!resilient?)!iv. Real!tradeDoff!between!efficiency!and!redundancy/excess!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!!4!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,!I T, !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!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!d. Liability!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,!employerDemployee,!animals!e. Life!(Premature!Death)!i.


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FSU RMI 2302 - Final Exam Study Guide

Course: Rmi 2302-
Pages: 10
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