Risk management in British Petroleum (BP) Essay

Risk management in British Petroleum (BP) - Essay Example It is however, critical to understand that BP has been in the news in the past due to different disasters thus exposing its risk management practices in place. The deepwater drilling oil spill in the Gulf of Mexico is just one of the examples of how the operations of BP can actually create significant risks for the firm and damage its reputation in the global market place. (Maung, 2010). Company manages its overall risk management infrastructure in terms of the UK Corporate Governance Code and its own internal policies. The overall effectiveness of the risk management policies, procedures and internal control systems are evaluated by the Board of the firms and outlines broader policy guidelines in terms of managing the overall risk within the organization. BP has also put in place which monitors and identifies different risks and communicates their observations and recommendations to the Board of Directors which ultimately formulate and design strategies for overall risk management p rocess within the organization. Communication of potential risk issues should therefore be open enough to make them reach at appropriate level. ( Olson,& Wu,2010) Current Risk Management Process The overall policy for managing and overseeing the risk management process within BP is the ultimate responsibility of the Board of Directors of the firm1. ... The overall supervisory responsibility however, remains with the Board of Directors to ensure that proper risk management infrastructure is in place. This is in consistence with the principal that the BoD should have a supervisory role in risk management process.( Hillson, 2003), BoD performs the regular reviews of the risks and recognises the same in the annual plan of the British Petroleum as a Group. Board also has the mandate to review and analyse as to whether the Group Chief Executive has been effective in implementing the risks identified and explored by the Board and whether the overall risk management process at the organization wide level is managed effectively. It is also important to note that the Board has the direct responsibility of overseeing the geopolitical and reputational risks. These two risks are directly managed and identified by the Board and BoD through its own operational mechanism oversees this risk. Board however, achieve this objective by delegating the s ame to different Risk Committees which forward their recommendations and observations to the Board and it is then decided by the Board as to what risks to be further perused and evaluated and which risks should be left unattended. This should however, be based upon the assumption that the BoD has the right kind of representation of all the stakeholders so that risk management as a process is implemented from the perspective of all the stakeholders.( Hopkins, 2010). As discussed above that the overall responsibility by the Board is delegated to the Group Chief Executives who have further delegated the same to the individual business units. It is however, critical to note that Board has also created different committees which directly oversee the process of risk management within the