Is enterprise risk management (ERM) an effective form of risk Dissertation

Is enterprise risk management (ERM) an effective form of risk management and value creation in the oil and gas industry and to w - Dissertation Example In effect, the major strengths and weaknesses that have been associated with BP Oil’s risk management policies shall be outlined and compared to risk management practices at Tullow Oil Ghana. This comparison will be done so that in later chapters, particularly the discussion chapter, the researcher will draw inferences on how Tullow Oil Ghana can learn from the strengths and weaknesses of risk management policies from BP Oil perspective. In relation to the general aim of the study, particular attention shall be paid to how BP Oil have both benefited and failed to benefit from the use of Enterprise Risk Management practices at different times of risk situations that the company faced. In order to follow the qualitative philosophies of the research, the researcher is going to dwell on the analysis of secondary data instead of the use of primary data. This will be done because of the impact that secondary data has on qualitative data, making it more subjective, but backed by empi rical evidence from related literature (PSA, 2007). 4.1 Analysis of Secondary Data on Risk Management Practices at BP 4.11 Risk Management Options at BP As far as risk management practices are concerned, there are a number of options that can be found throughout of existing data for oil and gas companies, of which BP Oil is one. Generally, BP Oil has been identified to have used three major risk management practices at different times of its operations. These options have been avoidance, knowledge and research, and controlling. Avoidance has been used in very high risk situations to ensure that there exist alternative approaches that do not bear any risks at all (Vinnem et al, 2007). The effectiveness of avoidance has however been found to be vested in a risk management environment where risk managers can be proactive enough to identify alternative options (Bly, 2011). Knowledge and research has been pointed out in some existing research data as not being an independent risk managem ent option but an effective tool for equipping the functionality of other risk management options. At BP Oil therefore, knowledge and research is not used in dealing with initial risks but is used as mop up risk management option to consolidate the efficacy of other options on practice. Commonly, research and knowledge is used in relation to the final risk management option at BP, which is controlling. Controlling has been found to be the commonest risk management option at BP for day to day risk situations (PSA, 2007). It has been found to involve the creations of a risk reduction plan made up of parallel development programmes (Vinnem et al, 2007). From the graph above, it can be observed that BP Oil chooses different risk management options depending on the level of risk that the company is presented with at any point in time. Where there is high risk, the company employs the use of avoidance; where there is medium risk, the company employs the use of controlling; and where there is low risk, the company employs the use of knowledge and research (K & R). 4.12 Risk management failures in the Gulf of Mexico Oil Spill In several sectors of risk management application, BP Oil was sharply criticised in the academic and professional cycles for some levels of inefficiencies that accompanied the handling of the Gulf of Mexic