British Petroleum’s Organizational Readiness and Risk Management

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Any company strives to enjoy the trust of its investors and customers. Companies may face circumstances that will put their reputation in decline due to several factors, called reputational risks. Knowing these, some steps can be taken to prevent potential harm to the company. The purpose of this article is to apply the project risk management theory to a case study using the example of the reputational decline of British Petroleum.

The efficiency of a company is determined not only by the set strategic objectives. Business success is impossible without the trust of clients and partners, and it is not so easy to maintain an impeccable reputation. Reputational risks of the organization are potential losses due to the negative attitude of clients, partners, and investors to the company (Franklin, 2019). There are many possible reasons to reduce the reputation of the company, but in general, all potential reputational threats can be divided into three categories: technical, human, and economic risks.

Furthermore, the effectiveness of the decisions made directly depends on the developed system of critical success factors. For clarity’s sake, it’s best to start by noting what is being invested in identifying the essential factors of success. These are the strategic objectives and performance results that a company should strive to achieve to increase its competitiveness and achieve success in the marketplace (Netland, 2016). According to the classical approach, CFIs are selected from a company’s strategic objectives as critical factors in its success, and this happens after the company’s mission is defined. CSFs can be about introducing new technologies, strengthening brand and reputation, improving product quality, and so on. When developing critical success factors, it is necessary to observe the rule of necessity and sufficiency, according to which each significant success factor included in the list is necessary to achieve the company’s mission, and altogether the elements should be sufficient to make it.

As a result of a careless mistake, the activities of the world’s leading refiner, British Petroleum, resulted in the deaths of 15 employees. This has caused the company substantial reputational damage, and it has lost the trust of investors and customers. The company had to solve a significant problem in regaining the previous reputation of trust among investors (Franklin, 2019). The current issue with the lack of security measures at a potentially hazardous facility should be addressed through the prism of critical success factors. However, it should be noted that the presence of essential elements does not provide a 100% guarantee of project performance. Still, their absence significantly reduces the possibility of obtaining the desired result. The case study mentions several critical success factors at once, and they include improving the safe technological infrastructure, ensuring compliance with international quality standards, and changing the current leadership.

The company coped with the last task in 2007 when CEO Brown announced his departure, two years after the tragic situation. A well-respected UK CEO, John Brown, while still a CEO, thought about the concept of transition from an oil to an energy refinery (Bryant & Hunter, 2019). Moreover, taking some significant steps to address safety issues would help to ensure compliance with global quality standards and would correlate with the CSFs’ employee stewardship program (Netland, 2016). In addition, the firm made significant efforts in those years to demonstrate itself as an environmentally-friendly enterprise.

As we know, risk management culture is a vital aspect of any project management. All the efforts of the project team will be in vain in case of implementation of risks for which the unit is not ready (Kliem & Ludin, 2016). The situation showed the opposite ideology with the company British Petroleum. Within the framework of another critical success factor, independent experts from Telos Group consulting firm were invited to the company’s plants. According to a report by an independent company, Telos Group, plant safety was severely compromised, and there were frequent failures in the warning system (Bryant & Hunter, 2019). The refinery director, Parus, asks why people continue to come to interviews for new jobs if the plant has faced problems such as fires, explosions, and sudden deaths almost every week. However, the situation did not change after the inspection and led to a series of additional explosions due to safety concerns.

The advantages of the risk management project include attempts to invite independent third-party experts to assess the situation and to move in the direction of change in profile. The organizational readiness of the company is not supported by any real changes in the management policy. To quickly return to the category of world leaders trusted by investors, the company needs to take some modernization measures (Franklin, 2019). Except for the transformation of management and invitation of experts, no additional steps to restore the reputation have been taken.

It makes sense to develop some recommendations to minimize risks within the framework of the case study. Based on the already established problem of ensuring the safety of people’s health and the environmental situation of the company, it is proposed to organize an additional department in charge of security issues. The practice has shown that such a department is not sufficient or that employees have not performed their work in a proper manner (Bryant & Hunter, 2019). Such a department will have a positive impact on the company’s reputation and will show investors the directors’ interest in safe production.

To address potential risks in the future, it is recommended that British Petroleum’s senior management reorganize the entire business based on the safety report received from Telos Group. In order to raise the reputation of the company, it is recommended to create an enlightenment department to ensure that British Petroleum has a positive global reputation. The firm announced itself as a leader in alternative energy in 2006, and this should be a new direction for the company (Bryant & Hunter, 2019). The advertising and enlightenment departments will inform investors and interested citizens about the security measures taken, provide descriptive statistics, and conduct frequent discussions on environmental topics. One of the last recommended steps may be to engage an external audit company to assess the changes made as part of the modernization process. The independent firm’s report will help eliminate possible conflicts of interest. Identification of existing risks is intended to help in organizing their elimination (Kliem & Ludin, 2016). According to the case study, the company has several initial risk categories. These include external risks (force majeure and political changes in management), management risks (in particular, reputational decline), and technical risks (site security breaches).

For companies, there are many risks that can lead to reputational damage. To prevent this, companies usually organize design work on risk management. This work was based on a case study of the decline in the reputation of British Petroleum. It assessed the critical success factors, the available advantages of the project on risk management, and some recommendations were given to address possible threats to the investment and customer attractiveness of British Petroleum.

References

Bryant, M. J., and Hunter, T. (2019). British Petroleum (PLC) and John Browne: A culture of risk beyond petroleum (A). BUS 519: Project Risk Management, 13-26.

Franklin, A. (2019). Reputational risks: A practical perspective. Web.

Kliem, R. L., & Ludin, I. S. (2019). Reducing project risk. Oxfordshire, England: Routledge.

Netland, T. H. (2016). Critical success factors for implementing lean production: The effect of contingencies. International Journal of Production Research, 54(8), 2433-2448.

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British Petroleum’s Organizational Readiness and Risk Management

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