Risk Management Failure - BP Oil Disaster - Essay Example

? Risk management Failure The “BP oil disaster” also called the “Gulf of Mexico oil spill” was an oil spill disaster that took place in 2010, at the Gulf of Mexico. The disaster took place at the Macondo BP-operated prospect (Anon, 2010). The disaster is arguably the largest marine oil spill – approximated at between 8 and 31 percent more impact – in terms of the area affected and the volume of coverage, compared to the earlier Ixtoc I spill (Robertson and Krauss 2010). The impacts of the explosion and the sinking of the oil rig included the loss of eleven lives and the flow of sea-floor oil gusher for 87 days, before it was controlled on the 15th of July 2010 (Robertson and Krauss 2010). The overall discharge of the spill was estimated at 4.9 million barrels, which covered an area of 780,000 cubic metres (Jervis and Levin 2010). The disaster was followed by major attempts to protect the estuaries and wetlands of the region, from the spreading oil. The impacts of the spill included the destruction of wildlife and marine habitats in the area; the stagnation of the tourism and the fishing industry of the region, as well as the human health issues that continued to be felt until year 2012 (Robertson and Krauss 2010). Following investigations, the causes of the disaster included the use of defective cement; the ineffectiveness of the operations of Halliburton and Transocean, as well as the lack of effective risk assessment by BP (NOAA 2011). This paper will explore the impact of BP’s failure to manage risks, which resulted in the BP disaster. The risk management failures of BP that led to the disaster Risk management failures were among the core factors that led to the 2010 BP disaster at the Gulf of Mexico (Zolkos and Bradford 2011). The joint report by the “US Coast Guard” and the “Bureau of Ocean Energy Management, Regulation and Enforcement” over the Macondo disaster, which triggered the deep-water blowout, was, primarily, caused by risk management failures of BP. Other companies that contributed to the incidence of the disaster include the Transocean Ltd, which did not carry out effective operational risk assessment and Halliburton Co., which failed in its specialty check of the cement used for the project (Zolkos and Bradford 2011). However, the contributory roles of the two secondary companies blamed for the disaster could have been mitigated through an effective investigation and the management of the risks facing the project. For example, the report from the investigation showed that the cement used during the construction was defective. Through effective risk assessment and management, BP would have discovered that the cement supplied was defective, therefore would outsource good cement for the project (Ingersoll, Richard and Reavis 2013). The Macondo blowout of 20th April 2010 was caused by a string of company decisions by BP, which increased the risk levels of the project. The company, also failed to assess different areas that would help it mitigate the risks of the project. These risk management failings include that BP did not carry out an official risk assessment of the critical operational choices made during the days prior to the disaster. For example, through administering an effective risk assessment process, the company would have discovered the risky operations planned during the execution of the project. Through the assessment, the BP Company would have exposed any organizational issues that were likely to affect the credibility of the decision-making process. Through exposing the different areas of risk – whether in the areas of planning or implementation – the company would have averted the incidence of the disaster. Therefore, the company’s failure to assess the risks that contributed to the disaster was a contributing factor. Through effective risk management prior to the disaster, the company would have detected the engineering weaknesses in the plant, therefore would have recommended some precautions to the issue (Zolkos and Bradford 2011). Some of the precautions it would recommend and employ would include requiring the removal of the oil products at the facility – especially flammable ones. Another would include requiring all the people at the plant to be evacuated, which would reduce the risk of deaths. Through employing these two risk management processes, the probability of the disaster would be reduced, and the deaths caused by the disaster would have been avoided (Zolkos and Bradford 2011). For example, through the removal of the oil products held at the facility, the probability of blowout would have been reduced to almost zero. The risk management action would have avoided the damage caused on the habitats in the area, the effects caused on the fishing and the tourism industries, as well as the human health problems caused by the disaster (DHSG 2011). The report by the USCG (US Coast Guard) and the BOEMRE (Bureau of Ocean Energy Management, Regulation and Enforcement, Regulation and Enforcement) cited that time and cost-saving decisions by BP, without taking account of mitigation and contingencies were another cause. These decisions should have been done in a careful manner, which would ensure that all the risks related with the deepwater operations presented the lowest risk levels possible. For example, due to the time and cost-saving decisions, the company did not take the time to assess the quality of the cement supplied by Halliburton Co.: incorporating risk management into the examination of the inputs used during the construction would reveal that the cement was defective (Zolkos and Bradford 2011). Through effective risk assessment prior to the start or during the progress of the project, the company would identify areas that required reinforcement, as well as those that required to be changed. For example, during the progress of the project, effective risk assessment would reveal the defective nature of the cement supplied by Halliburton Company (De Gouw et al. 2011). The failure to do an assessment of the risks of procuring sub-standard inputs during the construction of the facility led to the substandard development of the facility, which increased its risk levels. Following the usage of the sub-standard materials during the construction, the standards required from deepwater operations were not satisfied. It possible to argue that after the completion of the project, conducting a risk assessment of the facility would have shown its risky nature, which would lead to the implementation of mitigating measures, which would help avoid the incidence of the disaster. For example, the risk assessment of the facility during the days prior to the disaster, BP would discover areas of weakness, which would most likely require a halt of the facility’s operations. The failure to conduct the risk assessment of the facility – in general – was directly responsible for the incidence of the disaster. This implies that risk assessment and the implementation of risk mitigation would help the company avert the environmental, the socio-economic and the human impacts felt after the disaster (Zolkos and Bradford 2011). The BP Company failed to administer an effective risk assessment of the risks facing the particular project, considering that it was a deepwater project. For example, some of the findings from the risk assessment would include revealing all the security measures that were required before the operations at the deepwater project were started. Another example would include the assessment of the facilities to be used by the companies involved in the project, particularly the well-operator company, by checking the capacity of their equipment and the capacity to run the operations (Zolkos and Bradford 2011). The failure to assess the risks involved in the project, both at BP’s level and the contracted companies’ level, the company overlooked the protective standards that would help avoid the incidence of the disaster. Through an effective assessment of the risks involved, during the progress of the project, the BP Company would require the change of equipment, as well as the inputs used during the project. Such a risk management and mitigation outlook would help them avoid the risk, which would have averted all the impacts felt at the area of the disaster (Waring et al. 2009). Conclusion The BP oil disaster of 2010 took place at the Gulf of Mexico, leading to the destruction of the marine habitat, the halt of fishing and tourism as well as the incidence of innumerable health concerns. The disaster reveals a number of failures, including the failure of the management, the quality management team as well as the construction and the engineering specialists. Through effective risk assessment and the employment of mitigation and risk management procedures, the BP Company would have averted the incidence of the disaster, therefore would have avoided the impacts caused. The areas of failures include that of the management, which did not take the inputs collected for the project, prior to the start of developing the facility. Through effective risk assessment among the managerial team, the company would discover the flawed inputs and the oversight of the companies involved in the project. There were risk assessment failures among the engineering and the construction staff of the company, as the effective assessment of the progress of the construction would reveal the risky nature of the facility. Managerial failures in examining the risks that arose from time and cost-cutting were also to be blamed for the incidence of the disaster. Effective risk management would help the management explore the cost and time-cutting strategies that would not compromise the project. Prior to the disaster, the company’s operations team should have discovered avenues of reducing the incidence of disaster or the impacts caused. Reference List Anon., 2010. 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NMFS report, Dec. 2009. Zolkos, R. and Bradford, M., 2011. BP disaster caused by series of risk management failures, according to federal investigation of Gulf spill. [Online] Business Insurance. Available at http://www.businessinsurance.com/article/20110918/NEWS06/309189982 [Accessed April 18, 2013] Read More