BP 2014 Annual Report Download - page 50

BP manages, monitors and reports on the principal risks and uncertainties
that can impact our ability to deliver our strategy of meeting the world’s
energy needs responsibly while creating long-term shareholder value;
these risks are described in the Risk factors on page 48.
Our management systems, organizational structures, processes,
standards, code of conduct and behaviours together form a system of
internal control that governs how we conduct the business of BP and
manage associated risks.
BP’s risk management system
BP’s risk management system is designed to be a consistent and clear
framework for managing and reporting risks from the group’s operations to
the board. The system seeks to avoid incidents and maximize business
outcomes by allowing us to:
 Understand the risk environment, and assess the specific risks and
potential exposure for BP.
 Determine how best to deal with these risks to manage overall potential
exposure.
 Manage the identified risks in appropriate ways.
 Monitor and seek assurance of the effectiveness of the management
of these risks and intervene for improvement where necessary.
 Report up the management chain and to the board on a periodic basis
on how significant risks are being managed, monitored, assured and the
improvements that are being made.
Our risk management activities
Facilities,
assets and
operations
Business
segments
and functions
Executive
and corporate
functions
Board
Day-to-day risk
management
Identify, manage
and report risks
Business and
strategic risk
management
Plan, manage
performance
and assure
Oversight and
governance
Set policy
and monitor
principal risks
Day-to-day risk management – management and staff at our
facilities, assets and functions identify and manage risk, promoting safe,
compliant and reliable operations. BP requirements, which take into
account applicable laws and regulations, underpin the practical plans
developed to help reduce risk and deliver strong, sustainable performance.
For example, our operating management system (OMS)★ integrates BP
requirements on health, safety, security, environment, social responsibility,
operational reliability and related issues.
Business and strategic risk management – our businesses and
functions integrate risk into key business processes such as strategy,
planning, performance management, resource and capital allocation,
and project appraisal. We do this by using a standard framework for
collating risk data, assessing risk management activities, making further
improvements and planning new activities.
Oversight and governance – functional leadership, the executive team,
the board and relevant committees provide oversight to identify,
understand and endorse management of significant risks to BP. They also
put in place systems of risk management, compliance and control to
mitigate these risks. Executive committees set policy and oversee the
management of significant risks, and dedicated board committees review
and monitor certain risks throughout the year.
BP’s group risk team analyses the group’s risk profile and maintains
the group risk management system. Our group audit team provides
independent assurance to the group chief executive and board, as to
whether the group’s system of internal control is adequately designed and
operating effectively to respond appropriately to the risks that are
significant to BP.
Risk governance and oversight
Key risk governance and oversight committees include the following:
Executive committees
Executive team meeting – for strategic and commercial risks.
Group operations risk committee – for health, safety, security,
environment and operations integrity risks.
Group financial risk committee – for finance, treasury, trading and
cyber risks.
Group disclosure committee – for financial reporting risks.
Group people committee – for employee risks.
Resource commitment meeting – for investment decision risks.
Group ethics and compliance committee – for legal and regulatory
compliance and ethics risks.
Board and its committees
BP board.
Audit committee.
Safety, ethics and environment assurance committee.
Gulf of Mexico committee.
Board committees
For information on the board and its committees see page 58.
Risk management processes
As part of BP’s annual planning process, we review the group’s principal
risks and uncertainties. These may be updated throughout the year in
response to changes in internal and external circumstances.
We aim for a consistent basis of measuring risk to allow comparison on
a like-for-like basis, taking into account potential likelihood and impact, and
to inform how we prioritize specific risk management activities and invest
resources to manage them.
Our risk profile
The nature of our business operations is long term, resulting in many of our
risks being enduring in nature. Nonetheless, risks can develop and evolve
over time and their potential impact or likelihood may vary in response to
internal and external events.
We identify those risks as having a high priority for particular oversight by
the board and its various committees in the coming year. Those identified
for 2015 are listed on page 47. These may be updated throughout the year
in response to changes in internal and external circumstances.
The oversight and management of other risks is undertaken in the
normal course of business throughout the business and in executive
and board committees. For example market pricing and liquidity reviews
are conducted on a regular basis by the board and executive committees,
including the group financial risk committee, to consider how we respond
to market conditions and when making or reviewing investment decisions.
For further information see page 10.
There can be no certainty that our risk management activities will mitigate
or prevent these, or other risks, from occurring.
Further details of the principal risks and uncertainties we face are set
out in Risk factors on page 48.
Our management of risk
BP Annual Report and Form 20-F 201446