BP 2011 Annual Report Download - page 130

128 BP Annual Report and Form 20-F 2011
Corporate governance
the audit programme proposed each year, the committee looks at
whether it believes key risks facing the company have been appropriately
addressed. The programme for 2011 was approved by the committee in
January 2011.
The general auditor met privately with the committee once during the year,
without the presence of executive management or the external auditors.
This is complemented by regular meetings with the committee chair
between meetings.
The committee reviewed with the general auditor the number and
expertise of his team’s staff resources. The internal audit function provides
a source of skilled staff to many parts of the company and to maintain its
resources the general auditor recruits from both inside the company – to
bring in deep business expertise into the team – and externally – to bring
professional auditing skills. The committee has sought assurance that
these resources are sufficient to fulfil the function’s role, and the general
auditor has undertaken benchmarking work with other major companies in
the industry. In addition, an external review on internal audit effectiveness
has been undertaken in 2012. This review concluded that BP had an
effective internal audit function that compared favourably with other
complex and industry equivalents.
During 2011 the committee was satisfied that internal audit had
the appropriate access it required to information and that management had
committed to the provision of that information and had responded to the
results of audit findings in a timely manner.
Other activities
The committee monitors fraud and misconduct through quarterly updates
from the general auditor and any non-compliance with the BP code of
conduct through quarterly reports by the group ethics and compliance
officer. Actions arising are monitored to close out. The annual certification
report of compliance with the code of conduct, which is signed by the
group chief executive, is also reviewed by the committee.
The company’s employee concerns programme OpenTalk has
been adopted by the committee for whistle-blower monitoring, and all
financial issues that have been flagged are reviewed by the committee.
The quarterly reports the committee receives track trends in both the case
type and time taken to close out queries and reports.
Committee evaluation
Each year the audit committee examines its performance and
effectiveness, and ensures that its tasks and processes remain
appropriate. In 2011, the committee used an internally-designed
questionnaire administered by external consultants. The same question
set was used as in 2010 so that any trends could be identified. Key areas
covered included the clarity of its role and responsibilities, the balance
of skills among its members and the effectiveness of reporting its work
to the board. Specific areas identified for focus in 2012 included trading,
provisioning and the effectiveness of internal audit. Regarding process,
members noted that fulfilling the committee’s remit had led to lengthy
meetings, but at the same time they recognized a wish to extend deep
dives into specific topics. The committee noted that, in areas of common
interest such as compliance and ethics, it needed to continue to work
closely with the SEEAC. It also commented on the need for pre-read
papers to be well focused to ensure best use of agenda time. Overall the
committee considered it had the right composition in terms of expertise
and had effectively undertaken its activities and reported them to the board
during the year.
Safety, ethics and environment assurance committee
(SEEAC)
Chairman’s introduction
Whilst the Gulf of Mexico committee, as reported elsewhere in this
document, has focused its work on the company’s restoration activities
in the Gulf area and on oversight of ongoing litigation, the SEEAC spent
considerable time over the past year monitoring the group’s response to
the 26 recommendations that were made in BP’s investigation report (the
Bly Report) into the tragic incident in April 2010. Our role has been to seek
assurance on behalf of the board that each of those 26 recommendations
is being pursued globally with pace and commitment. We have received
progress reports at each of our meetings and made visits to meet key
members of the teams in the exploration and production and S&OR
organizations that are leading these changes. This included visiting an
offshore platform to get closer to the front line, two in-depth discussions
with managers in the Houston office and participating in management’s
wells inspection programme. We have put fresh emphasis on getting a
deeper perspective into the organization. In part we have achieved this
through individual committee members undertaking visits and meeting
staff outside the boardroom environment and then reporting back to the
committee at the first opportunity. We believe this approach both deepens
our collective understanding of risk and of management’s controls, and
enables us to make more informed, and hence more valuable, challenges.
We have endeavoured to follow this approach to all of our work undertaken
throughout 2011. As always, for a committee reviewing management’s
assessment and mitigation of non-financial risk, this work has extended
to a wide range of topics. The report below provides more detail but we
would highlight our reviews of risks and risk management in pipelines,
shipping and drilling. We have also taken a deeper look at risks in our
petrochemicals business, including a visit by three members of the
committee to the company’s paraxylene manufacturing facility in Texas.
We have continued to be very well served by L. Duane Wilson’s
independent perspective of the company’s response to the ‘Baker
Panel’ recommendations following the fire and explosion at the Texas
City refinery in 2005. We will shortly be appointing a highly experienced
individual to report independently to SEEAC on the implementation of the
Bly Report recommendations.
Overall this has been a year of significant change which will take
time to fully embed but we believe we have observed real and enduring
progress.
In February 2012 we welcomed to the committee Professor Dame
Ann Dowling who brings deep experience in technology and engineering.
We concluded during the year it would be appropriate for the
SEEAC chairmanship to transfer to Paul Anderson once the restructuring
and reorganization within the company was largely established. This
introduction to the committee’s report is therefore written by both of
us. We share the same commitment to monitor closely, and provide
constructive challenge to, management in its drive for safe and reliable
operations at all times. We believe that the extensive breadth and depth of
committee members’ experience will serve us well in the endeavour which
is so central for a company whose business encompasses the production
and distribution of hazardous materials.
Paul Anderson Sir William Castell
Chairman (from December 2011) Chairman (to December 2011)
Committee members
Paul Anderson – committee chair (from 9 December 2011)
Sir William Castell – committee chair (to 8 December 2011)
Frank Bowman
Antony Burgmans
Cynthia Carroll
Professor Dame Ann Dowling (from 3 February 2012)
Committee role and structure
The role of the SEEAC is to look at the processes adopted by BP’s
executive management to identify and mitigate significant non-
financial risk, including monitoring process safety management, and
receive assurance that they are appropriate in design and effective in
implementation.
The committee met nine times in 2011 including a joint meeting
with the audit committee at which the general auditor’s report on internal
control and risk management systems for the year was reviewed in
preparation for the board’s report to shareholders in the annual report. In
that joint meeting the committees reviewed the internal auditor’s audit
programme for the year ahead to ensure both committees endorsed the
coverage. SEEAC also reviewed the planned work of the S&OR audit
function and noted an enhanced focus on integrating audit work across the
company. The SEEAC and audit committee worked together, through their