In the recent scientific article by Mykhailo Rushkovskyi for “Green, Blue & Digital Economy Journal” one can find an outlook of the fundamental trends of the last decade related to climate change, as well as interstate and global economic campaigns to slow it down, which create a powerful new determinant for multinational enterprises (MNEs) in corporate governance, risk management and the sound management of climate risks and opportunities.
The analysis is based on recent studies by leading international scientists such as the International Energy Agency and the Economist Intelligence Unit, authorized UN bodies, universities, and the MNE Task Force on Climate-related Financial Disclosures.
The results of the analysis showed that climate risks and opportunities already have a clear monetary value and impact on MNE. Today’s efficient business faces the need to build an effective system for managing such risks, which, in addition to its direct effect on MNE, will also be an important signal to stakeholders, which, in turn, can reduce the cost of capital raised and increase revenues level. For some EU countries, it will soon become mandatory to highlight climate risk management principles and approaches in annual reports. Internal models are being developed to show the impact of cli-mate change on the business of MNEs (e.g. an increase of 1.5 °C, 2 °C, 4 °C in total temperature).
A unified approach to climate risk management is therefore becoming a topic of great importance to MNEs and their stakeholders, including regulators, investors, shareholders, and society. The analysis provides an in-depth understanding of the main factors of climate-risk management for MNEs, as well as its practical implications arising in the global economy.
The Chair and deputy Chair of the IRMs Energy Special Interest Group (SIG), Alexander Larsen and Grant Griffiths review the role of risk management within the Energy Industry and discuss their observations and recommendations. The SIG has created a committee which is not just limited to oil and gas but encompasses other parts of the industry including renewables and nuclear.
Energy is vital to everything we do, it powers cars, homes and businesses. There are approximately 7 billion people in the world and astonishingly, almost 1 billion of those still don’t have access to electricity, prominently from developing nations. Therefore there is still huge amount of work to do to get electricity to everyone in these regions.
There is an ongoing transition in the energy industry taking place around the world moving from the oil and gas sectors to the use of renewables and electricity. Several challenges are facing the industry, due to the growth in population and the corresponding increase in demand.
With the ever increasing threat from climate change, there is a requirement to do the right thing for the environment. In addition to decarbonisation there is also new technology and digitisation transforming the industry.
“There is a drive towards doing the right thing for the environment, all stakeholders and investors in the industry”
Grant Griffiths, Deputy Chair of IRM Energy SIG
Risk management is at the heart of the decision making and strategy within the energy industry. The IRM SIG prepare research and publication discussing risk management in the energy industry and how well it is embedded and understood.
As 2020 has presented unprecedented challenges with Covid-19 there has also been challenges with OPEC and the global oil and gas prices. There are changes in global supply chain, transition in energy and diversification of energy supply.
A lot of these risks present as threats but can they can also be opportunities. Resilient and flexible organisations have been able to react to the pandemic by adapting their business models and quickly mobilising their workforce to be home based while continuing operations.
Risk Management needs to be embedded throughout the organisation to help key decision makers an ensure there is a positive risk culture. Staff need to be trained at all levels so when they see a risk they know who to report it to and how. Ultimately risk and resilience training can decrease the threats risk presents and increase opportunities.
“Staff are a critical component of successful risk management.”
Alexander Larsen, Chair of IRM Energy SIG
The IRM offers training to all levels of an organisation and courses are put together by risk practitioners and industry experts. Looking to the future, risk techniques such as horizon scanning and scenario testing will help an organisation be prepared for any possible event. Risk awareness and embedding risk processes will determine how successful an organisation will be in driving strategic decisions in the energy industry.
As Chair of the Energy Special Interest Group for the IRM, Alexander Larsen was asked to provide an overview of the role of risk management within the Energy sector in the current climate.
Risk management is a part of every aspect within the Energy industry; operations, production, safety or related to projects and decision making, schedules and budget.
From a strategic point of view for the Energy sector, there is a consideration for entering the renewables market. Is this the right move?
Entering into the renewable market may result from buying another organisation or merging. Need to consider whether the organisations are compatible with their business models and ensure the right investments and technology.
Risk Management is a key part to all these strategic decisions. Therefore, it’s important that sufficient training is provided, not just to Risk Managers but the board, executives and all key decision makers.
The IRM offer courses to all levels of an organisation and training is put together by risk practitioners and industry experts.
With the devastating effect of Covid-19, organisations and economies are suffering more than ever around the world. Risk Management plays a vital role in creating agile resilient organisations and now is the time to think about the future.
What can we do to prepare for another pandemic?
How will we cope with another lockdown?
How can we support our employees and customers?
To be prepared for any incident and make risk-based decisions, an effective risk and resilient framework is key. Organisations must assess emerging risks and face a post Covid world where more technology and less face to face interaction will become the new business norm.
Dr Mark Vine has over thirty years experience as an HSE Manager and Management Consultant with extensive experience in oil and gas, chemicals, government, transport, insurance, NGO’s and development banks. His experience covers the full lifecycle from mega and major projects through to operations.
Mark is a recognised subject matter expert in HSE MS and Operations Management Systems (OMS) development, implementation and assurance with a focus on sustainability, Environmental and Social Governance (ESG), process safety, behavioural based safety, asset integrity management and Operational Excellence (OE).
LR Consultants is a unique boutique consultancy that provides high value management consulting services to the global energy, chemical process, mining, banking and financial service industries.
LR Consultants is headquartered in Dubai, United Arab Emirates and is supported by an extensive global network of highly experienced independent consultants with executive and senior management industry experience in capital projects delivery and operational excellence.
1 OVERVIEW
As a business leader or senior manager it is natural that you should be continually asking questions that challenge to improve the performance of your business management system.
LR Consultants experience suggests that the following questions reflect the foremost concerns of business leaders:
Are you increasingly frustrated that your projects or business strategy is failing to deliver expected and timely results to your key performance indicators?
Is your projects or business management system overly complex, costly to operate and/or experiencing low recognition and involvement amongst your workforce?
In a rapidly changing business world is your projects or business management system not proving to be resilient and is it unable able to respond effectively to market changes and emerging risks?
Is your project or business management system unsuitable to deliver compliance to the Environmental Social and Governance (ESG) expectations of donor financing institutes who follow IFC Equator Principles and World Bank requirements?
If the answer to any of these questions is affirmative then the solution should be to invest in Operational Excellence.
This LR Article provides the basics to Operational Excellence (OE) and how to achieve the benefits through the transformation to an enterprise wide Operating Management System (OMS).
2 WHAT IS OPERATIONAL EXCELLENCE?
There is no unique internationally accepted definition of OE. Some of the more well known definitions are provided in Table 1.
“Operational Excellence achieves and sustains outstanding levels of performance that meet or exceed the expectations of all their stakeholders”
OE is not the same as Continuous Improvement (CI) which has been promulgated by the ISO suite of management system standards. A comparison of the LR Consultants OE cycle against the ISO CI cycle is provided in Figure 1.
Figure 1 LR Operational Excellence and ISO Continuous Improvement Cycles Compared
A CI business is one that follows a process of improve, sustain, measure and monitor. The business then repeats the cycle over and over again to create a culture of CI. A significant downside is that CI often has no goal or destination to meet and it can be a slow and unreliable journey to deliver results.
OE delivers integrated performance across revenue, cost, and risk. Conversely to CI, it focuses on meeting operating and stakeholder driven results through the CI of the operational processes and culture of the organisation.
The goal of OE is to develop one single, integrated enterprise wide management system with a strategic results and stakeholder based direction, driving visualised risk optimised business processes and workflows. The second component of OE, a culture of Operating Discipline, is commonly described as “doing the right thing, the right way, every time”. According to BTOES this Operating Culture is built upon the guiding principles of leadership, integrity, questioning attitude, always problem solving, daily CI mind set, level of knowledge, teamwork and influencing workforce behaviours.
An OE organisation is more agile and able to identify and manage emerging threats and to rapidly transform itself than its CI counterpart. OE organisations are inherently more resilient and adaptable to changes to stakeholder concerns and market conditions.
These relationships can be visualised using the LR Model for OE shown in Figure 2. The LR Model (under development) is designed for high risk or safety critical industries (oil and gas, power, chemicals, pharmaceuticals, transport, mining and nuclear) and to meet the requirements of sustainability. It is fully compliant with IFC Equator Principles and ESG requirements.
The LR OE Model delivers ISO compliance as a minimum requirement and has Plan-Do-Check-Act (PDCA) as an integral part of its DNA. It delivers sustainable business results and can be applied across the cradle to grave to rebirth business lifecycle.
Figure 2 LR Risk Optimised Model for Operational Excellence
Figure 2 depicts “Risks” as a separate element associated with business process controls. In reality “Risks” are distributed and embedded in all elements of the LR model. Risk management is critical to ensuring that business strategy and processes are optimised and prioritised towards meeting key performance indicators. Emerging risks require timely management and worker adaptation of existing business or operating processes in order to ensure that the business remains resilient to changing market conditions and aligned with any adjustment to business strategy.
OE has been formally defined by the European Foundation for Quality Management (EFQM) through their EFQM Model for OE shown in Figure 3.
Figure 3 EFQM Model for Operational Excellence (EFQM, 2018)
The EFQM Model is a globally recognised management framework which allows organisations to achieve success by measuring where they are on the path towards transformation, helping them understand the gaps and possible solutions available, and empowering them to progress and significantly improve their organisation’s performance.
Both the LR Consultants and EFQM Models for OE can both be used in enterprise wide management system design, implementation, benchmarking and transformation for immature and mature businesses alike.
A key difference between the LR and EFQM approaches is that the LR OE Model has been designed for safety critical industries and is able to distribute risk criticality through all elements and processes of the model. Risk optimised business processes are shaped and prioritised by the critical findings of the enabling risk assessment. This is a key reason why ISO management systems create the risk silos and traditionally fail to manage systemic process safety and asset integrity risks.
3 FUNDAMENTAL CONCEPTS AND THEMES FOR OPERATIONAL EXCELLENCE
The fundamental concepts of OE (shown in Figure 2) outline the essential foundation for achieving sustainable excellence for any organisation. The concepts can be used as the basis to describe the attributes of an excellent organisational culture. They can also serve as a common language for senior management.
OE covers a number of risk themes (with a focus on risk reduction results) that should be assessed and managed for all projects, facilities, activities, products and services for which your business is partially or wholly responsible or accountable. An illustration of the OE risk themes typically used in capital intensive safety critical industries is provided in Figure 5.
4 OPERATIONAL EXCELLENCE AND OPERATING MANAGEMENT SYSTEMS (OMS)
OE Models can be used to design, develop, benchmark and transform the enterprise wide management system.
Many organisations are commercially driven to satisfy the disparate needs of the many ISO management system standards often creating overly complex, inefficient and costly to operate management systems. ISO driven management systems, particularly in the case of safety critical industries fall far short in managing process safety and asset integrity risks.
The solution to efficient and effective OE delivery is to develop an Operating Management System (OMS), also referred to as an Integrated Management System (IMS). The term OMS is preferred in this Article.
An OMS is a complete framework that combines all aspects of an organisation’s systems, processes, and any standards that the business follows.
An OMS is used for controlling risk, delivering high performance and achieving Operational Excellence.
“Operating” applies to every type of company activity, including concept design, engineering, construction, commissioning, operations, inspection, maintenance and decommissioning, throughout the entire value chain and lifecycle of the business and its products.
The development of an OMS that incorporates Equator Principles and ESG requirements fully satisfies the project financing requirements of donor Banks and External Credit Agencies.
An illustration of an OMS framework created from the integration of individual ISO and non-ISO management systems is provided in Figure 6. An important part of integration is to upgrade the minimum requirements of ISO based management systems to incorporate industry best practice.
Figure 6 Integration of Individual Management Systems into an OMS
5 WHAT ARE THE BENEFITS OF OMS AND OE?
The benefits of OMS and OE investment to your business are summarised in Table 2.
Table 2 Summary of OMS and Operational Excellence Benefits
Written by Alexander LarsenCFIRM, IRM Energy SIG Chair & Ghislain Giroux Dufort MIRM, both of Baldwin Global
The Institute of Risk Management recently released a thought leadership document based on a survey of the Energy industry. As part of the survey results, there were a number of articles contributed and featuring in the final report.
This was one of the featured articles. To download your own copy of the publication, please CLICK HERE for the IRM site
How much appetite for risk does your organisation have to achieve objectives or seek new challenges? Are staff and managers aware? are the senior management team or board even aware? Is the organisation ready to reach for the stars?
Some organisations operate in high risk environments (think SpaceX, Virgin galactic and NASA) whilst other less so. No matter the industry however, establishing risk appetite and tolerance levels (and monitoring over time the actual risk profile against them) is essential to the long-term success of any organisation, whether in the energy industry or other sector of activity.
When discussing risk appetite, people tend to think of bland and non-informative risk appetite statements, or overly quantified and financial risk appetites. Both of these have limited value and often restrict risk taking rather than allow risk taking. In many cases space travel, air travel or other high risk activity should not be possible according to risk appetite statements. How can we expect to achieve great things and remain competitive with such appetite statements?
Looking at the high-level risk appetite statements, they are nearly always:
A) Too broad to gain any significant use out of the statement
How can decisions realistically be made from a statement such as we “will not accept any risk that affects our reputation”?
B) Rehashes of the corporate objectives or taken from other targets such as HSE accident rates
An organisation could have endless risk appetite statements that would allow no risks to be taken if this was the case.
C) Inconsistent with objectives
How can an energy company operate in an environment where a risk appetite statement says “we will not accept project delays of x” or “we will
not accept loss of life.” The nature of the business is projects and delays, while operating in countries such as Iraq or Afghanistan goes against “we will not accept loss of life”. The statements are too broad and lack detail or real decision-making value.
D) Never change
Once an organisation sets a risk appetite statement, they rarely change, and why would they? It’s a very high-level statement that can only be written in a small number of ways.
E) Don’t consider the risks
The risk appetite statements we have seen are almost exclusively linked to objectives, which doesn’t take into account the actual risks or opportunities that the organisation faces.
Most organisations struggle with putting together even the high-level type of risk appetite statements. They often spend a lot of time and resources on trying to perfect high-level statements that don’t provide much decision- making value, or on overcomplicating the statements, which again leads risk appetite to being ineffective.
In this article we highlight a methodology that provides decision-making value to quantified risk appetite statements by linking corporate objectives to leading key risk indicators (KRIs) established at the source of risks that may affect the achievement of those objectives. This approach provides a warning system that increases the chance that organisations may take action before risks materialize as well as ensuring that organisations are not spending too much money over controlling risks. In other words, allowing them to take more opportunity or spend the money more wisely elsewhere!
Objectives v risk
While the whole point of risk management is to identify and manage risks to the objectives, risk appetite statements tend to focus solely on objectives, for example aspirations of zero accidents or deaths. Risk appetite therefore ends up driving risk identification rather than the risks driving the risk appetite.
Assume an organisation has 5 key objectives, and 5 major risks. Once targets and acceptable deviations relative to targets have been set for key objectives, how does
the organisation manage to minimize the chances of deviating from key objectives? The answer is to focus on the major risks to key objectives and to set risk appetite statements for these risks rather than only on objectives. Assuming that risks change more often than objectives, we can also expect the appetite statements to change more frequently too.
One other major benefit of linking appetite to risk is that we can actually map the risk through to the relevant key risk indicators (KRIs) with individual risk appetite ranges for each KRI as shown in Figure 1 overleaf.
Figure 1: Baldwin Global’s Key Risk Indicator and Risk Appetite Model
How to set risk appetite and key risk indicators in your organisation
In our experience, high-level risk appetite statements based on each major risk can be put together in a half-day workshop with management teams. Detailed quantified risk appetite statements based on KRIs established at the source of risks will require some
more time depending on the nature of the risk and availability of data and expert opinion. It is important to run workshops rather than setting these statements in isolation. Not only does it ensure everyone is aware of the risk appetites, but there is the added benefit of increasing risk knowledge and building a positive risk culture while also gaining a variety of views and experiences to develop the appetite statements.
Of course, when setting statements, it is important to consider the wider implications for the organisation. Rather than setting a figure for what is acceptable in terms of accidents or deaths for example, AirSafeCo, the fictitious airline company example below in Figure 2, decided to look at improvements to long term trends and focus on not accepting an increase in the trend. This presents a more sensitive approach to safety risk and its management over time, rather than having an “acceptable” number of casualties or fatalities.
In addition to the general risk appetite statement written in Figure 2, more specific and quantified statements should be established based on leading key risk indicators linked as closely as possible to the source of the risk. Figure 3 illustrates such a statement for AirSafeCo’s three top components of Safety Risk: Crash, Turbulence and Tarmac delays.
Figure 2: AirSafeCo’s General Risk Appetite Statement
Figure 3: Examples of KRIs and how to build a risk appetite linked to them
The Green Zone represents the quantified risk appetite for each risk component: the amount of risk the company is willing to accept in order to achieve its objectives.
The Orange Zone represents the first level of tolerance and may require, for example, an investigation into the reasons for this deviation. The Red Zone represents the highest level of tolerance where immediate action is required. More risk tolerance zones may be inserted to provide various levels of analysis and/or action. Leading KRIs of crashes might be, for example, near miss events. In turn, one could then search for leading indicators of near miss events, and so on. Each industry and company should find or create leading KRIs that are causally correlated to their key risks and linked to their impact on corporate objectives.
Risk workshops may provide expert opinion on KRIs and appetite and tolerance levels. But having the right data to validate those opinions is essential too, and it is therefore important to understand what the components and causes of risks are, in order to understand what information is required. As an example, for an oil & gas facility in a sensitive area, the risk of “major loss of life” could come from a terrorist attack, major accident or natural disaster. Once you have identified the components and causes of major risks, KRIs can be established which allow individual risk appetites set at their source.
Also note that Figure 3 is two-sided: the right side indicates positions of increasing risks, while the left side indicates positions of reducing risks – but at an increasing cost. Since risk management is not free, trade-offs may have to be made when deciding on risk appetite and tolerance, and the cost of managing a risk to its appetite and tolerance can also be monitored using this approach.
How does this help decision-making and risk reporting?
One of the roles of risk management is to enable boards of directors and senior management to make better strategic decisions. Too often, organisations limit themselves to reporting risks independently, through risk registers and heat maps. This is very limiting and often out of date. Additionally, risks rarely change significantly which means the top 3 or 4 risks (in terms of likelihood and impact) are discussed at length whilst the others get missed. What should be done is to integrate risk assessment and reporting within business cases for decision making purposes.
Figure 4: Example of Risk Reporting based on Appetite
As we have seen earlier, risk visualisation is a far more effective method of viewing risks for decision-makers, offering an alternative view of what the top risks might be. The approach to risk appetite and KRIs that we have so far discussed offers yet another alternative to the traditional risk register approach to reporting. It provides real-time snapshots of the status of risks to the business and a perspective on their trends. The top three to four risks on most risk registers are usually very well managed, and senior management would be better off discussing the other risks that might be less well managed. A visually effective reporting template allows for such focus on relevant risks and is demonstrated in Figure 4 above.
Looking at the reporting example in Figure 4, the output from the KRIs and the related risk appetites shows clearly which risks are most pressing. Senior Management and the Board would be able to tell quickly which risks are within their appetite and which ones lie outside their appetite or tolerance levels. A focus on the last five quarters of Safety risk shows that KRIs have gradually improved over time towards the Green Zone, a sign that enhanced safety risk management has paid off in this example.
Conclusion
Whether they operate in the field of transportation, energy, or any other sector, including not-for-profit ones, organisations need to take risks in order to achieve their objectives and to thrive.
In the words of Sir Richard Branson, “Unless you risk something, the world stands still”, something which his Virgin brand always seeks to do (Changing the world) from space travel to hyper look and hyperspeed travel to greener air travel. “We take a lot of calculated risk, but we make sure that no one risk is going to topple everything. Protecting the downside is critical”
Where risk appetites and tolerances have already been determined, it is counterproductive to be over-managing risks. One of the unique aspects of this approach to risk management and reporting, aside from focusing on risks that really need attention, is that it also exposes risks which may have too many controls and where resources would be better spent elsewhere.
Alexander Larsen & Ghislain Giroux Dufort of Baldwin Global talk through how risk managers can use risk management as an effective decsion making tool. As originally published in Strategic Risk Magazine
Risk Management has for a long time been looked upon as a process that stops bad things from happening rather than an effective decision-making tool that helps organisation’s form and improve their strategy, meet objectives and provide competitive advantage.
Reporting
If risk management is a decision-making tool, and identifying risks is an exercise in preparing for the future, then why do so many reports insist on looking at last quarter instead of looking forward? Additionally, too many reports focus on the old Risk Matrix or Risk Register approach of looking at the top risks based soley on Likelihood and Impact.This often results in the same risks staying on the risk register for years, or senior management focussing too much on the top 5 risks and not getting time to discuss the rest.
It’s no wonder senior management see this as an assurance exercise rather than something that should be adding value to the business.
So how can we fix it?
There are three key areas that need to be addressed.
A) linkage to strategy and objectives.The two inform each other. Linking these two allows more productive discussions at senior management level and provides real value to future development of strategy and a chance to consider emerging risks.
B) Risk visualisationin order to truly engage top management, we need to look at how we can move towards a visually-inspiring presentation of risk.
C) Timely and effective information.We need to move away from looking back at the last quarter or 6 months and move towards having up-to-the-minute information as well as having leading indicators.
Know your audience
When presenting to executive committees and Boards, a dynamic and interactive approach to risk visualisation such as that which Nico Lategan at Transport for London developed, and which is shown in Figure 1, may add value by summarising the risk register. The ability to filter out specific objectives or risks or focusing on areas of vulnerabilities at the click of a button whilst in a meeting is highly effective when discussing scenarios or strategies and demonstrates the true power of risk management in decision-making. An example of linking risk to objectives can also be seen clearly in Figure 2.
Figure 1
Figure 2
Nico Lategan, in the recent Institute of Risk Management “Fuelling the debate” energy publication, suggests that Senior Management teams tend to be made up of “big picture” people who appreciate being able to visualise their organisation’s strategy along with all the risks and opportunities and all the interconnectivity involved, which often leads to stimulating discussions and prompting several key decisions.
Whilst the examples above are proving effective for boards, in some cases, discussion may require more detailed information and alternative visualisation should be considered. Using bowtie diagrams for example, where you can dig deep into root causes, look at controls and their effectiveness, and link causes to lower level risks within the organisation, have been highly effective in these circumstances. The common theme is interactivity and visualisation depending on the makeup of senior management.
Risk Prioritisation
Engaging senior management by using risk visualisation is only half the battle however. Ensuring that risks are prioritised based on risk appetite and up to date information is vital to ensuring that risk management is actually adding value. One approach that has proven popular with board members has been using KRI’s and Risk Appetite.
There is much debate around risk appetite statements that are often qualitative or aspirational, limited to acceptable variations around corporate targets which, whilst looking good on paper, don’t add much value. For example, let’s assume fictitious airline company AirSafeCo states that it aims for a customer satisfaction index of 80%, plus or minus 5%. This is a nice aspiration but says little of how much risk the company is really willing to take.
A Better approach might be if the company identifies the major risks that drive such variation around the target, as well as leading key risk indicators (KRIs) that alert of changes in these risks. By establishing risk appetite statements at the KRI level, AirSafeCo obtains an early warning system that allows to be alerted of risks to customer satisfaction objectives and to take action before it is too late.
Figure 3
Figure 3, a powerful visualization tool in itself, illustrates how to use this approach. Let’s say AirSafeCo wants to be in the top quartile of the industry in terms of passenger safety (strategic objective). It identifies three associated risk components: crash, turbulence, delays on the tarmac. Risk components have different sources and manifest themselves differently. For each major risk source, leading KRIs are sought and risk appetite statements set for these KRI. For example, the time to buckle up during turbulence announcements may be such a leading KRI.
Specific and quantified statements for leading KRIs are created that consider both the level of risk and the cost of managing the risk (due to the number and cost of treatments).
Once this system is in place, it can be used to make decisions and take action at the required frequency: in real time, daily, quarterly, etc. When a KRI drifts away from risk appetite (the green zone), different actions are taken depending on the magnitude of the variation (orange and red zones in Figure 3). It is important to remember that a sensible action may be to actually reduce spending on control and take more risk, thus freeing up more resources to manage other risks or take advantage of opportunities.
This approach to risk appetite and KRIs provides real-time snapshots of the status of risks to the business and a perspective on their trends (as demonstrated in Figure 4), as opposed to the traditional likelihood vs impact matrix which often misses the mark.
Figure 4
Figure 4 shows which risks are most pressing based on approved risk appetites for top risks. Such visualization tool also provides a perspective on how risks have improved or worsened over time, most likely due to management action, as demonstrated with Safety over 5 quarters. With leading KRIs and an adequate monitoring frequency, this table also allows for timely decision-making before risks materialize.
All companies and organisations, including not-for-profit ones, need to take risks in order to achieve their objectives and to thrive. This approach helps to make timely decisions on risk levels and cost of risk.
Over 150 risk managers, insurance professionals and CEO’s attended the impressive Four Seasons Hotel in Jumeirah Beach, Dubai, for the 2016 Middle East and Africa Risk & Insurance Awards held by Strategic Risk & Global Reinsurance Magazine.
I had personally only attended a couple of Awards Ceremonies over the years and never as a nominee for an award. Lukoil, who I was respresenting, had gone all out by reserving what ended up being a full table of Lukoil executives and managers. Feedback was positive from organisers too suggesting that the attendees had brought a level of enthusiasm and support rarely seen at awards ceremonies.
I have to thank my colleageus for their genuine and enthusiastic support and top management for reserving the table in the first place.
It was a fantastically successful night for Lukoil who were nominated in 2 categories, Risk Communication Strategy of the year & Risk Manager of the year, something that only a handful of other companies managed to accomplish. Even more impressive was the fact that Lukoil won awards in both categories they were nominated for! No other company succeeded in winning more than one award making it a fantastic evening for the oil and gas company who has been pushing ahead with Risk Management despite pressures in the market and with other oil giants cutting their staff in the thousands.
A special mention to Qatar Foundation who have been nominated a few years in a row now for various awards and who i feel a strong affiliation with having helped develop the Risk Management program a few years ago. The risk department have done an excellent job in pushing forward with Risk Management and championing it across the organisation whilst developing it further and continuing to increase risk maturity!
For me personally, its been a tough couple of years here in Iraq. Working in isolation, in a difficult environment, on a shift basis and in a dangerous environment. Its been stressful and challenging but the award has made my effort and time well worth the while and I have to thank Lukoil for the ongoing support of risk management, my colleagues for supporting the process and always being transparent and honest when identifying risk and helping me understand very technical aspects of oil and gas.
This award is a highlight of my career and I look forward to continuing to add value to the risk management professsion anyway I can.
I have already gone into detail in my last post about poisonous snakes, however there are also dangerous spiders to be aware of which are often more difficult to notice due to their size and tendency to find hidden corners in rooms or behind furniture. There are other arachnids to be concerned with in Iraq however and I will be covering them in this post.
1. Poisonous spiders
2. Camel Spiders
One of the scarier spiders, which doesn’t actually fall under the arachnid family, but rather is a cousin of the Scorpion, is the very scary and ugly camel spider. These can grow to a ridiculous size and for arachnophobia sufferers, can only be described as a nightmare. Luckily these are not seen too often and when they are spotted, they tend to be dead already.
3. Scorpions
Scorpions are rife in Iraq. All over camp during certain months, you will see at least 2-3 large ones during a shift, and at least 4-5 baby scorpions per night walking around camp. This isn’t so much a problem since the PPE footwear and even normal shoes will protect you, however when they start wandering into the rooms you have problems.
Companies should keep anti venom, have processes and procedures in place in order to deal with bites and have a procedure with a local hospital in place. Additionally, regular emails should be sent to staff reminding staff of the dangers.
Insects & Other
when it comes to insects and other creatures, it’s comforting to know that most of them aren’t going to potentially kill you, nonetheless, many of the insects in question can be quite annoying to staff either whilst working out on site or taking a walk in the evening or finding them in the rooms.
1. Locust
Locust can be found flying all over camp and landing on you whilst you are out walking or working but what is more surprising is the amount of them that manage to find their way into your room in the middle of the night. You can hear them jumping and walking around the room.
2. Flies
Flies can be an absolute nightmare during certain months. They get in the canteen and crawl all over the food, land on your face whilst you try to eat and generally make it miserable to try and eat. They also manage to get into transport vehicles making any journey very frustrating as you fight to keep the flies out of your ears or eyes.
3. Mosquitos
whilst mosquitos aren’t dangerous the bites they give people leave very large bite marks which are itchy and annoying when you are trying to focus on work. They tend not to be in the rooms too often which is positive but if you try to go for a walk during the summer in the evenings there is a good chance you will end up bitten.
4. Ants
Ants always manage to find a way into rooms. No matter how much you spray the room or keep the room tidy and free of crumbs, they still manage to find their way into the toilet or room. Often this isn’t a big issue however if they get into the room at night and you need to spray them, you end up being unable to sleep due to the fumes of the spray.
5. Cockroaches
Whilst I haven’t noticed too many cockroaches in my room, they are definitely present around the camp and although the majority are quite small, I have seen some absolute beasts that I really wouldn’t be pleased with if I found them in my room.
6. Frogs
Due to the area we are working in being marshland there are a vast amount of frogs around site and camp. This is a major positive for insect control.
7. Lizards and ghekos
Again, like frogs, the more lizards and ghekko seen around camp the better the insect control.
8. Hedgehogs
The presence of hedgehogs in Iraq was a surprise to many of us in the camps. It’s not uncommon to see at least one hedgehog a day. One of the unfortunate things about hedgehogs getting into camp is that they can often get caught in traps set out for dangerous insects or rats. This is something many employees work on avoiding.
9. Ticks
Ticks are rampant during certain times of year and employees need to be very careful with these insects. They are small and can go unnoticed however if they manage to bite into you, there are a number of diseases they can transmit which needs to be checked out by a doctor.
10. Others
Aside from the insects mentioned above, there area an abundance of interesting insects such as stick insects and beetles. Very often however you will come across insects that are not easy to identify such as the insect in the below picture (no doubt people in certain countries will be familiar with them, but certainly in most parts of northern and Central Europe they are not present.
1. Risk of changes to legislation causing rejection of visa
Throughout the life of the project there will be a need to renew employee visas. Visa renewal is required annually. This includes blood tests every 6 months. Often there are changes to requirements both in terms of blood tests and visa procedures or documentation requirements. Often there is little consultation and communication is either not efficiently dispersed or it is announced in Arabic with vague interpretations when translated into English. Unless the company is on top of this there is a real risk that visas will be rejected leading to arrests of employees or employees not being allowed back into the country leading to extensive delays in schedule.
2. Risk of changes to legislation causing rejection of equipment
As with the previous risk, changes can be announced at any time with little time for implementation. You could have a piece of equipment arriving in the next week from China with all the paperwork in order only to find that the requirements have changed and you now face a long delay at customs as you work with vendors to replace the paperwork. It’s not unheard of for equipment to be stuck at port for up to 9 months or more.
3. Risk of specific Nationalities visa’s not being renewed
The reliance on a specific nationality of worker is another risk that companies operating in Iraq face. Often contractors will work with their home workforce, which makes sense, however with Iraq still finding its feet politically and with relationships with neighbours being delicate, there is a risk that Iraq implements a ban on certain passport holders (and this has already happened on a couple of occasions) working in the country. This can lead to having to change contract strategy as a contractor you have awarded work to may now be unable to work in Iraq.
It is not just on the Iraqi side however. Certain nations impose bans on their citizens working in specific countries and this too could cause a problem of getting staff.
4. Risk of change to resource procedure requirements
Another risk related to legislation change is that of supply of critical resources such as Diesel. With Diesel being essential to projects during the construction phase when there is limited power supply, any changes to the procedure of obtaining Diesel needs to be communicated clearly. Unfortunately this is often not the case. Even if the company receive clear instruction and follow this new instruction, there is the risk that suppliers or other contractors don’t get the update and a breakdown occurs whereby Diesel no longer gets delivered to site.
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5. Risk of specific countries being blacklisted from providing equipment to Iraqi projects
Yet another risk faced as a result of a change of legislation at government level is that of certain countries being blacklisted from being able to provide equipment on behalf of a project. This can be for numerous reasons from relationship breakdown with a country or a preconception of quality coming out of the country. This again can delay the awarding of a vendor or indeed a vendor may need to be changed mid project.
6. Chemicals or parts requiring more stringent paperwork
As has been the theme in the last few risks, as a company, you need to be ready for change. What may have been accepted at the start of a project may suddenly be blacklisted a year later. Critical Equipment parts or critical chemicals may require army authorization (laser related equipment for example) which can add weeks to months to the process of securing equipment. Paperwork or procedures may change for chemicals that you rely on for operations too, and considering chemicals are topped up on a monthly basis its critical that you hold enough spare chemicals to account for any delivery delay as a result of a change of procedure. Of course many chemicals have a shelf life which means this is not always possible.
Even when a company is prepared and fully understand all the requirements of a change of legislation, delays can still happen if the new legislation itself is a complicated process that causes confusion within local ministries and departments who are new to the process and still need time to go through it a few times. There may even be an unwillingness of some departments or ministries to sign off on the process due to confusion. This is often the case where the authorised signatory is on holiday and due to it being a new process, there is no deputy comfortable to sign off on it.
Paperwork and approvals
1. Delay to decision making process due to incorrect paperwork
So far I have covered a lot of risks that impact schedule or operations but its important to remember that changes like this also impact management. When setting strategy there are certain things that need to be in place or agreed with partners (in this case the Iraqi government or ministry of oil). It could be the need for approval for additional costs to be covered, new projects to be started or to increase number of employees. It could also be decisions on budget, handover dates, etc. Whatever the reason, the company needs these approvals or decisions in order to make its own decisions regarding contracting strategy, long term strategy, budgeting requirements etc.
There will be both internal and external procedures that need to be followed in order to obtain these approvals or decisions. Even if there have been no changes to the procedures and the company has followed the procedure perfectly, the internal processes within the company and the government and their agencies/ministries can be complex, bureaucratic and time consuming. Often decisions may take much longer than planned which can hinder the company in making any of their own decisions. This can end up costing money and impact schedules and strategy not just to the particular project but to the company as a whole having wider impacts on the project portfolio as a whole.
The Institute of Risk Management recently released a thought leadership document based on a survey of the Energy industry. As part of the survey results, there were a number of articles contributed and featuring in the final report.
A Guide to Risk Management 