BP 2011 Annual Report Download - page 46

44 BP Annual Report and Form 20-F 2011
During 2011, functions, strategic performance units, divisions and segments
within BP were requested to prepare RMRs using the new, common approach.
This helped provide an overall data set of the key risks identified, an assessment
of their potential impact and likelihood on a consistent basis, information on how
they are being managed and any actions planned or in progress to improve the
management of risk. Based on these RMRs, together with additional executive
overview, a single group RMR has been prepared. Those risks identified on the
group RMR as requiring particular group-level oversight in the coming year have
been allocated to specific board and executive committees for oversight and
monitoring. These are discussed below. Also see Risk factors on pages 59-63
for a description of the material risks we face in our business.
Risk management can also be a foundation for creating value. The
willingness to take and appropriately manage certain risk is fundamental to the
success of any commercial enterprise. For example, in our upstream business
we consciously place significant amounts of capital at risk in exploring for new
hydrocarbon resources. Where this exploration is successful, we would generally
expect it to lead to future increases in our proved reserves and future cash flows.
However, exploration expenditure may not yield adequate returns, for example in
the case of unproductive wells or discoveries that prove uneconomic to develop.
Safety and operational risk function
We have redefined and strengthened the scope and accountabilities of the
group function for safety and operational risk (S&OR), creating a new team
independent of business line management to drive safe, compliant and reliable
operations in BP. The S&OR function, which continues to build towards its
full staffing complement, includes S&OR teams which have been formed to
work alongside line management but are independent of them. In pursuit of
safe, compliant and reliable operations, S&OR personnel can assist, challenge
and escalate or intervene as necessary to promote and assure the operating
businesses’ systematic and disciplined application of global standards on safety
and operational risk. The function helps provide assurance as to whether line
operations are carried out in accordance with the group’s operating management
system, and seeks to facilitate more comprehensive and assured S&OR risk
action plans for operational units, more incisive interventions on emerging risk
situations, and improved investigations and learning from significant incidents.
How we seek to manage our risks
The following is a summary of how we seek to manage the risks we have
identified as having a high priority in 2012. There can be no guarantee that our
risk management activities will mitigate or prevent these, or other, risks from
occurring.
Strategic risks
In response to risks associated with the general macroeconomic outlook and
changes in prices and markets, we monitor early warnings from our treasury
team and customer-facing businesses. To manage our liquidity, financial capacity
and financial exposure risks, we apply our financial framework (see Liquidity
and capital resources on page 103) and we conduct liquidity stress testing and
scenario-planning interventions.
Our management of risk
Above BP’s Cooper River
petrochemicals plant in
South Carolina operates
two PTA units. PTA is
used in the production of
plastic bottles.
Below Working with Falex
Corporation, Air BP has
developed a faster and
more reliable way to test
aviation lubricants.