BP 2011 Annual Report Download - page 44

42 BP Annual Report and Form 20-F 2011
The role of the board
The board is responsible for the direction and oversight of BP as set out in its
governance principles, which include that it will 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, through
its governance principles, 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. See Risk management: from operations to the board
on page 122.
Our 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 COSO
(Committee of Sponsoring Organizations of the Treadway Commission) in the US.
Key elements of the system include: the control environment; the
management of risk and operational performance; and the management of people
and individual performance. As such, BP’s risk management system is an integral
part of our 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.
Review of risk management
In 2011, we initiated a review of our risk management system. The review
considered the group’s existing risk management system, along with good
practices in risk management from outside the company, with a view to
identifying what might be done to enhance the clarity, simplicity and consistency
of our risk management system.
Using the findings of this review, we have begun implementing
enhancements to the way we manage and report risks. This has involved the
development of common language, concepts and templates for consistent
reporting on risks and risk management; designing enhancements to board and
executive processes; and greater alignment of risk management activities and
business processes. These improvements build from our existing management
systems, standards and practices and we will continue to embed these in 2012.
See the information on Safety and operational risk on page 65 for examples of
enhancements to the S&OR function and management of safety and operational
risks.
Putting safety and risk management at the heart
of the company is the foundation for building trust
and creating value. In 2011 we began a process
to review, refresh and enhance our management
of risk.
Our management of risk