In an environmentally risky business such as oil drilling, there can be little margin for error. And if there is a catastrophic failure, there had better be a very good–and tested–contingency plan in place. Yet with the BP oil spill, it appears that risk management and contingency planning were non-existent.
In fact, I'd bet these companies spend way more on lobbying against government intervention than on their risk management and loss control programs. And speaking of the government, where was the oversight?
I checked out the website of MPA–the Marine Preservation Association, formed as a result of the Oil Pollution Act of 1990 for the sole purpose of addressing problems caused by oil spills on water. Among its members are BP, Chevron, ExxonMobil, Citgo, ConocoPhillips and Shell.
According to the site, www.mpaz.org, "anyone involved in the transportation, distribution or receipt of petroleum products on water must establish an approved plan that–should they cause a significant oil spill–responds to the 'maximum extent practicable.' Such a response must be immediate, comprehensive and safe."
The site continues that the "key word here is 'immediate.' Because during an oil spill response, time is of the essence. That is precisely why MPA created–and entirely funds–the Marine Spill Response Corp."
MSRC, the site said, is "the most comprehensive, dedicated standby oil spill response program in the U.S."
That all sounds great, but rings hollow today. In fact, when I clicked on the "In the News" tab at the site, there were only two 2006 links to articles about how MSRC had come through to help oil companies after the Gulf Coast hurricanes.
When I tried to do a search for "risk management" on the site, I got the "couldn't be found" message. This is a sad commentary, especially in light of executives testifying before a Senate panel in Washington recently. Lamar McKay, chair of BP America; Steven Newman, president of Transocean Ltd. (which owned the Deepwater Horizon rig leased by BP); and Tom Probert, president of Halliburton (which did work on the rig), each pointed fingers at the other's operations, defending their own.
Why am I questioning the value of risk management to these companies? Because "black swan" events have been happening regularly of late, and few seem to be prepared for the worst-case scenario. Indeed, risk management seems to be an afterthought.
Risk management cannot be practiced in name only, when it is most critically needed. It cannot be implemented when it's convenient to organizations, and it has to be given prime consideration.
Enterprise risk management is an obvious solution to assessing and preventing such disasters, but it appears this discipline has a very long way to go in terms of adoption and implementation.
According to media reports, solutions to the sort of disaster that's unraveling off the Louisiana coast were never even tried. Nobody knew if the giant box lowered to stop up the well would work at all–they were surprised when ice crystals formed, preventing its success. The same goes for subsequent–and unsuccessful–efforts to cap the well.
Unfortunately, I believe risk managers may have a bigger battle ahead of them than anyone might have imagined.
A political cartoon by Matt Davies said it all. Labeled "Offshore Drilling Technologies," two side-by-side drawings depicted a detailed oil rig on the left with the caption "extraction." On the right, with the caption "cleanup," was a simple roll of paper towels.
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