Dynamically Managing Residual Risk ✓ Solved

Dynamically Managing Residual Risk

An organization's ability to handle risks is measured by the Critical Success Risk Factors (CSF). The CSF highlights essential factors an organization should mandatorily possess to mitigate various risks. The Critical Success Risk Factors play a significant role. To begin with, the British Petroleum facility in Texas experienced an explosion in 2005. This should have led to alteration in the manner in which they operated.

The initial step in the CSF is for the organization to provide support to their pool of employees (Zafar, 2010). In the British Petroleum case in 2005, the explosion did not provide a suitable environment for their employees. The organization paid more focus into making profits at the expense of employee safety. Their stock price decreased by $7 after the explosion. Top management struggled to put a Band-Aid on the problem rather than finding a suitable solution to it.

Employees were not well equipped on how to properly handle and respond to explosions. After the occurrence of the incident, the organization also did not train the employees since they were ignorant to realize that the company had a problem (Hunter & Richard, 2008). The majority of organizations often conduct training for their employees based on lessons learned from unfortunate events to prevent further occurrences of the same. Since they feared that their stock price could experience another further drop, they did not pay attention to the company's problem. An independent investigation was conducted by the US Hazard Investigation Board, and it was found that BP had been negligent in their operations.

The investigation made it appear like the organization's operations were in accordance with federal safety implications. However, this was proven otherwise by the independent investigations, which discovered that safety deficiencies were apparent at all levels of the organization. It was clear that British Petroleum was more concerned with profit maximization than employee safety. No evidence of formal or on-job training was provided.

Focus was more on productivity. According to Critical Success Factors, it is recommended to have competent personnel at all organizational levels to help in risk mitigation. If training had been conducted, the operations of the British Petroleum could have been managed more efficiently, leading to a focus on employee safety rather than profits. The focus on profits ultimately cost them, as their stock value decreased due to the 2005 mishap and the Deep Water Horizon (DWH) explosion and oil spills.

With regard to supporting infrastructure, they had expanded their branches to many parts of the world. Some locations were unstable, and they were accustomed to undertaking several risks. This began with oil exploration in the Middle East, a region rife with internal conflicts, which they knew from the beginning. They accepted all risks that would arise therein, believing that the only way to succeed in business was to take risks. This mindset facilitated an environment conducive to oil exploration and its production.

Although the primary aim of British Petroleum was to produce oil, views changed when John Browne was hired as chief executive officer. He shifted the focus towards creating alternative energy and emphasized employee safety.

The advantage of British Petroleum (BP)'s aggressiveness created opportunities to control their operations. They were willing to venture into adverse parts of the world for business. BP explored over 25 countries, producing more than 4 million barrels daily. While the risks they undertook had negative impacts, their successes can be attributed to the risks they embraced. BP was willing to advocate for change within the organization and the oil industry's culture. John Browne promoted social responsibility and was the first oil organization to publicly announce its intention to invest in alternative energy and environmental protection.

The Texas refinery, acquired by British Petroleum in 1999, became the third largest refinery in the United States. The organization faced prior incidents leading to the 2005 explosion, which could have indicated underlying issues.

The first action British Petroleum should take is to engage in improving their infrastructure. According to the Financial Times, several defects in BP's operations were pointed out that could have been addressed promptly. BP should create better working environments for employees to encompass and mitigate risks. The organization must shift its focus from global business expansion to enhancing existing facilities. This shift could instill a sense of pride among workers, demonstrating that the organization cares about their safety.

Furthermore, British Petroleum should organize training and safety talks. For instance, if an employee dies due to an incident, that incident should be thoroughly reviewed and used as a training tool to prevent similar occurrences in the future. The military employs this tactic across its branches, learning from past mistakes to develop best practices. Should incidents happen again, they would conduct safety stand-downs to reassess operations effectively.

The objective is to determine the incident's cause and address it appropriately. In contrast, British Petroleum has failed to implement policies necessitating facilities for investigating mishaps and conducting preventative strategies (Hunter, 2008). Finally, British Petroleum needs to establish continuity among all facilities in America. The BP case study suggests that each refinery has its distinct safety culture; some promote employee safety while others don't meet safety standards.

In my opinion, BP should seek an independent organization to develop and conduct safety audits across its facilities. Both safety stand-downs and training should occur at each location to reaffirm British Petroleum's stance on employee safety.

The first risk category evidenced with BP is operations management. It is clear that management failed to take appropriate measures to prevent future occurrences of similar events. The second risk category consists of facility and corporate supervisors, indicating a failure in oversight. Internal factors also play a crucial role; the organization’s poor working environment pressured BP to prioritize oil production over safety concerns. Thus, irrational decisions arose from the fear of job loss.

British Petroleum's overarching goal became focused on oil expansion and production, fostering a culture that permitted acceptable risk levels. Lastly, the environmental category demonstrates that BP expanded its exploration efforts into dangerous regions despite inadequate resources for supporting the crew. They often neglected compliance with safety regulations in these locations, undermining the safety and well-being of their employees.

Paper For Above Instructions

Introduction

The management of residual risk within organizations, particularly in high-stakes industries like oil and gas, is a critical component of operational success and employee safety. This paper analyzes British Petroleum's (BP) approach to risk management following significant incidents, particularly the 2005 Texas explosion and the Deepwater Horizon disaster. Utilizing the framework of Critical Success Factors (CSFs), we will explore how BP's organizational culture and decision-making processes contributed to their operational challenges and suggest actionable strategies for improvement.

Critical Success Factors and Risk Management

CSFs are essential for organizations to identify the crucial elements for success and outline strategies to mitigate risks. BP's failure to prioritize safety in favor of profit maximization represents a significant oversight in their risk management strategy. The aftermath of the Texas explosion highlighted a systemic lack of employee training and safety protocols, which were compounded by a corporate culture focused on productivity over safety. Organizations must develop a culture that emphasizes the importance of employee safety, promoting continuous education and adaptive risk management practices (Zafar, 2010).

Case Analysis: British Petroleum's Incidents

The BP explosion in 2005 serves as a stark example of the repercussions of neglecting safety in favor of profits. After this incident, BP's stock prices plummeted, revealing the financial ramifications of poor risk management. Investigations revealed that BP's operational practices were systematically flawed, lacking adequate training and safety measures for employees. This crisis was not an isolated event, as evidenced by the Deepwater Horizon oil spill, which reiterated the failings within BP's operational framework and its culture of accepting risk without adequate oversight (Hunter & Richard, 2008).

Strategies for Improvement

To mitigate future risks and improve organizational effectiveness, BP must undertake several strategic initiatives. First, enhancing infrastructure and ensuring that safety protocols are robust and enforced across all facilities is essential for building a safety-oriented culture. This includes addressing facility defects and investing in safer working conditions. Implementing regular safety audits conducted by independent organizations can help maintain high safety standards and generate accountability within the organization.

Second, comprehensive training programs must be instituted to prepare employees for handling emergencies and preventing future incidents. These training sessions should incorporate lessons learned from past events, adopting practices from organizations with successful safety records, such as military training methodologies that focus on after-action reviews and continuous improvement.

Conclusion

The case of British Petroleum demonstrates that effective risk management is integral to organizational success and employee safety. By focusing on Critical Success Factors and fostering a culture of safety, organizations can prevent catastrophic incidents and promote sustainable growth. BP's future depends on its willingness to reassess its operational priorities and commit to ensuring the safety of its employees over mere profit maximization.

References

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