BP 2011 Annual Report Download - page 45

Business review: Group overview
BP Annual Report and Form 20-F 2011 43
Our risk management system
Our enhanced risk management system focuses on three levels of activity:
• First,thesystemhelpsfacilitateday-to-dayriskmanagementinthegroup’s
operations and functions, with the approach varying according to the types of
risk we face. Risks are to be identified and managed, and actions to improve the
management of risk are to be put in place where necessary. Our aim is to address
each different type of risk as well as we can – promoting safe, compliant and
reliable operations.
• Second,forourbusinessesandfunctions,risksarisingaretobecollated
periodically, risk management activities are to be assessed, and any necessary
further improvements or actions are to be planned. The system is designed
to facilitate this by incorporating a standardized form that we call the risk
management report (RMR) for businesses and functions to report consistently
the risks they face for management consideration, challenge, resource allocation
and intervention.
• Third,thesystemfacilitatesexecutiveandboardoversightandgovernanceover
the management of significant risks. It requires executive team level involvement
in the finalization of risk management activities and improvement plans for
the group’s most significant individual risks. Using the consistent bottom-up
risk identification and assessment process, coupled with top-down executive
overview, the system requires that the most significant risks requiring oversight
are identified. Oversight of the management of these risks is to be provided
through regular review by the board or one of its committees.
Drawing on this input, our enhanced risk management system assists us in our:
• Understandingoftheriskenvironmentforinputintoourstrategy.
• Understandingofwhichrisktypesweoperatewith,givenourstrategy.
• Identicationandassessmentofactualspecicrisksandthepotentialexposure
they may represent.
• Decision-makingonhowbesttodealwiththoseriskstomanageouroverall
potential exposure.
• Activemanagementofidentiedrisks.
• Reportingtomanagementandtheboardabouthowthoserisksaremanaged,
and monitoring of our potential exposure.
• Obtainingofassuranceovertheeffectivenessofthemanagementofthoserisks.
• Interventionsforimprovementsinthemanagementofthoseriskswhere
necessary.
• Considerationoftheeffectoftheexternalenvironmentandourbusiness
activities on the principal activities of our risk management system.
Left Operations at BP’s
Shah Deniz platform,
Azerbaijan. Located
offshore, 40 miles
south east of Baku,
Shah Deniz is thought
to hold 1 trillion cubic
metres of gas.
Right BP’s state-of-the-
art Houston monitoring
centre provides real-
time communications
between rigs in the
Gulf of Mexico and
experts based onshore.