BP 2012 Annual Report Download - page 119

Corporate governance
Corporate governance
BP Annual Report and Form 20-F 2012
117
Risk in BP
Risk management is the foundation for reinforcing safety, building trust
and growing value. In 2012 BP continued to review, refresh and enhance
its management of risk.
The role of the board
One of the key tasks of the board is to satisfy itself that the material risks
to BP are identified and understood and that systems of risk management,
compliance and control are in place to mitigate such risks. The board
requires the group chief executive to operate with a comprehensive
system of controls and internal audit to identify and manage the risks that
are material to BP.
Board governance includes monitoring committees comprised of those
directors best suited to serve on them, including the audit; the safety,
ethics and environment assurance; and the Gulf of Mexico committees.
The role of executive management
The group chief executive maintains BP’s system of internal control. The
system of internal control comprises the holistic set of management
systems, organizational structures, processes, standards and behaviours
that are employed to conduct the business of BP. The system is designed
to meet the expectations of internal control of the Corporate Governance
Code in the UK and of the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in the US.
Key elements of the system include: BP’s set of corporate values,
behaviours and code of conduct; group strategic framework, including risk
management; how the company is organized and managed; and how we
verify that the system is working. BP’s risk management system is an
integral part of its system of internal control, and is designed to be a
simple, consistent and clear framework for managing and reporting all risk
from the group’s operations to the board.
Executive committees are established by the group chief executive to
assist him in discharging his board delegations. Their role includes setting
policy, making decisions and overseeing the management of risks and
performance. The executive committees are: executive team meeting
(ETM); group operations risk committee (GORC); group financial risk
committee (GFRC); group disclosure committee (GDC); group people
committee (GPC); resource commitments meeting (RCM); and group
ethics and compliance committee (GECC).
Review of risk management
In 2012, the review to enhance the clarity, consistency and simplicity of
BP’s risk management system was completed.
We have embedded common language, concepts and templates for
consistent reporting on risks and risk management; enhancements to
board and executive processes; and greater alignment of risk
management activities and business processes. These improvements
build from BP’s existing management systems, standards and practices.
A group risk team, effective 1 January 2013, has been established to hold
a view of the group risk profile to inform key businesses processes and
decisions; co-ordinate group risk reporting activities; and maintain the
group risk management system.
Risk management structures
Internal audit
BP board
Main board audit committee
Group chief executive
Executive team
Gulf of Mexico committee SEEAC
Resource
commitments
meeting
Day-to-day risk management
Code of conduct Operating management
system People management
system Financial management
system
Group people
committee
Group disclosure
committee
Group
financial risk
committee
Group
operations risk
committee
Group ethics and
compliance
committee
Leadership teams
How we verify
Businesses Functions
Group risk management reporting and risk management action plan
Enterprise wide risk views to inform key business process
Group risk team