BP 2013 Annual Report Download - page 76

BP Annual Report and Form 20-F 201372
The IAB is chaired by BP’s previous chairman, Peter Sutherland. Its
membership in 2013 included Kofi Annan, Lord Patten of Barnes, Josh
Bolten, President Romano Prodi, Dr Ernesto Zedillo and Dr Javier Solana.
The chairman and chief executive attend meetings of the IAB. Issues
discussed during the year included events in the Middle East, the US
budget deficit and BP’s activities in Azerbaijan and North Africa.
Board effectiveness
Induction and board learning
On joining BP, non-executive directors are given a tailored induction
programme. This includes one-to-one meetings with management, the
external auditors and site visits to operations. The induction also covers
governance, duties of directors and the board committees that a director
will join.
To help develop an understanding of BP’s business, the board continues its
learning through briefings and site visits. In 2013, the board received
briefings on BP’s code of conduct, the group’s values and key business
developments including legal updates, the economic outlook and the
BP Energy Outlook. At its board meetings in Houston and India, the board
met local management.
Non-executive directors are expected to attend at least one site visit per
year. During 2013, the board made a number of visits, including to
Canadian oil sands operations, India and the Gelsenkirchen refinery in
Germany. Members of the SEEAC made site visits to BP’s operations in
Alaska and Tangguh. The chairman and Iain Conn, chief executive of BP’s
Downstream segment, visited the Whiting Refinery in the US. After each
site visit, the board or appropriate committee is briefed on the impressions
gained by the directors attending the visit.
Board visit to India
In 2013, the BP board met for the first time in India to gain an
understanding of the opportunities and challenges in the country. In
2011, BP acquired a 30% stake in 21 oil and gas production-sharing
contracts operated by Reliance Industries in India; the deal represents
one of the largest ever foreign direct investments into the country.
The board visited the Kakinada onshore terminal and discussed the
complexities of geology off the east coast of India with representatives
from Reliance. During the visit, the board also met with government
dignitaries and business partners.
In meeting the Honourable President of India, Pranab Mukherjee, BP
chairman Carl-Henric Svanberg affirmed, “We are working closely with
the government of India in its quest for energy security. I am confident
that, working together with our partners Reliance Industries, our
combined capabilities, experience and expertise in deep water will
support the efficient and cost-effective development of India’s energy
resources.”
Board activity
The board’s activities are structured to enable the directors to fulfil their
role, in particular with respect to strategy, monitoring, assurance and
succession. The diagram below shows the main areas of focus by the
board during 2013.
•Groupriskprocess.
•Globaleconomicclimate.
•Russia.
•Reputationmanagement.
•Deliveryofthe
10-point plan.
•Chiefexecutive’sreport.
•Capitalinvestmentreview.
•Projectsframework.
•Businessreview.
•BP’sactivitiesinIndia.
•Competitoroutlook.
•Strategyprinciples.
•Exploration.
•Strategyawayday.
•Organizationalcapability.
•Groupnancialoutlook.
•Quarterlyandfullyear
results.
•AnnualReportand
Form 20 -F.
•2014plan.
•Shareholderdistributions.
Risk
Performance
Strategy
Finance and
planning
•Employeefeedback
survey.
•BPbrandandglobal
reputation.
•Investoraudit.
•Otherinvestorfeedback.
•Boardevaluation.
•Codeofconductand
BP values.
•AGMfeedback.
•VisitstoCanadianoil
sands, India and
Gelsenkirchen refinery
(Germany).
Reputation
Board
development
Board activities
Risk and assurance
During the year the board through its committees, regularly reviewed the
processes whereby risks are identified, evaluated and managed. The
effectiveness of the group’s system of internal control and risk
management were also assessed (see Internal Control Revised Guidance
for Directors (Turnbull) on page 110).
The annual plan and the group strategy are central to BP’s risk
management programme. They provide a framework in which the board
can consider significant risks, manage the group’s overall risk exposure and
underpin the delegation and assurance model for the board in its oversight
of executive management and other activities. The board and its
committees (principally audit, SEEAC and Gulf of Mexico committees)
monitored the group risks which had been allocated following the board’s
review of the annual plan at the end of 2012.
Those group risks reviewed during 2013 included risks associated with the
global economic climate, the delivery of BP’s 10-point plan, the group’s
exposure to Russia and reputation management. The board considered at
the half year whether any changes were required to the allocation of group
risks and confirmed the schedule for oversight of these risks.
The group risks allocated for review by the board in 2014 include delivery of
BP’s 10-point plan and geopolitical risk associated with BP’s operations
around the world. The board’s monitoring committees (audit, safety, ethics
and environment assurance and Gulf of Mexico committees) were also
allocated a number of group risks for review over the year: these are
outlined in the reports of the committees on page 74. Further information
on BP’s system of risk management is outlined in Our management of risk
on page 49.
International advisory board
BP’s international advisory board (IAB) advises the chairman, group chief
executive and the board on geopolitical and strategic issues relating to the
company. This group has an advisory role and meets twice a year –
although its members are on hand to provide advice and counsel when
needed.