BP 2010 Annual Report Download - page 94

Corporate governance
Other board activities in 2010
At the start of each year the board plans and agrees a forward agenda for
its work and that of its committees so that it can balance its workload and
achieve its tasks (namely, strategy, risk and the oversight of the company’s
performance and operation of the system of delegation). Our forward-
planning process allows for urgent issues to be accommodated – and
following the Gulf of Mexico incident, the focus of the board’s activities
shifted in response to the challenges and activities taking place.
This process also gives the board the ability to deal with pressing
and ongoing business. These included a review of opportunities in Russia,
the global economic outlook, the 2011 annual plan, group risks, Alternative
Energy and BP’s HR function. The board considered the group’s statutory
reports and the broader aspects of corporate reporting, received regular
updates on the group’s financial outlook and discussed the company’s
financial results.
The independent expert appointed to provide an objective
assessment of the BP US Refineries Independent Safety Review Panel
(Duane Wilson) made his annual presentation to the board. Further details
on his activities are outlined in the report of the SEEAC below.
The board and risk management
One of the tasks of the BP board is to ensure that the company is run
effectively and that the material risks to the group are identified,
understood and that the systems of risk management and internal control
are in place to manage these risks.
Integral components in discharging this task are:
• Regular reviews of the material risks to the group and their recognition
in the company’s annual plan.
• Ensuring through the board’s system of delegation that its approach to
risk is adopted by the group chief executive (GCE) and that decisions
are taken in accordance with this system.
• Maintaining through the board and its committees clear oversight of
the system of internal control and risk management established and
maintained by the group chief executive.
The board’s monitoring of risk
Each year the board reviews the key group risks and how they are
managed as part of the annual group plan. The board decides which risks
will be monitored by the board and which will be allocated to the
committees with appropriate reporting to the board. A high-level work
programme for the board and its committees is set on the basis of a
forward agenda that reflects the board’s core tasks and the key group risks.
Geopolitical and reputational risks are considered by the board. Reports
are received from the committees to whom specific risk oversight has been
allocated. The audit committee monitors the management of financial risk
while the SEEAC monitors the management of non-financial risk. In addition,
the Gulf of Mexico committee was formed in 2010 specifically to oversee the
activities of the Gulf Coast Restoration Organization.
Under BP’s governance framework, authority for the executive
management of BP is delegated to the group chief executive (subject to
defined limits and monitoring). Executive management has responsibility
for the delivery of projects (for example, the development of upstream
projects is managed by a specialist group known as the Global
Projects Organization).
The board’s committees review the reporting by business and
function, which includes the safety and environmental performance of
projects. The committees receive regular reports from the group
compliance and ethics, the internal audit and the safety and operational risk
functions. The audit reports highlight the key findings and management
actions arising from that work.
As part of the board’s risk oversight activities, the audit
committee and SEEAC hold an annual joint meeting to assist the board in
assessing the effectiveness of the company’s internal control and risk
management systems.
BP’s general auditor (head of the internal audit function) reports on
audit work on risk management activities across the group and attends
meetings of both the audit committee and SEEAC. The general auditor and
the group compliance and ethics officer have direct access to the chairs of
both committees. Meetings are held both with and without the presence
of management.
Delegation
Accountability
Ernst & Young
Internal audit
Finance function
General counsel
External market
and reputation
research
Independent Expert
BP goal
Governance process
Delegation model
Executive limitations
Delegation
Accountability
GCE’s delegations
Group chief executive
Executive management
Delegation of authority
through policy with
monitoring
Assurance through
monitoring and reporting
Safety & operational
risk function
Group compliance
offi cer
Independent advice
(if requested)
Monitoring,
Information and
Assurance
GORC
Group
operations risk
committee
GFRC
Group
financial risk
committee
GDC
Group
disclosures
committee
GPC
Group people
committee
RCM
Resource
commitments
meeting
BP Board Governance
Principles
Owners/shareholders
Board
Nomination
committee
Remuneration
committee
Chairman’s
committee
Audit
committee
Nomination
committee
Remuneration
committee
Chairman’s
committee
Audit
committee
SEEAC
Gulf of Mexico
committee
BP governance framework
Strategy/group risks/annual plan
92 BP Annual Report and Form 20-F 2010