Organizational Risk and Ethical Issues in British Petroleum - Case Study Example

Name: University: Course: Tutor: Date: 13, December 2010. Organizational Risk and Ethical Issues in British Petroleum Introduction British petroleum is a global oil and gas company with is head quartered in London United Kingdom and it is the world third largest energy company and third in term of revenue and is also on the oil and gas super majors. Its largest division is based in Houston, Texas in United States and it’s the country’s biggest gas and oil producer. BP company core values states their commitment to the safety and development of its people and communities and societies in which they operate its further states the company aims at ensuring that no accidents occur and no harm is vested to its people and the environment. These values are driven by continuous improvement and safe reliable company operations. The company is guided by its values in all of its operations and therefore expects people to meet its high ethical standard and to act in accordance with the company’s set code of conduct. The company in its history has been associated with a number of environmental and political controversies threats includes the 1965 Sea Gem incident, 2005 Texas City refinery explosion and the 2010 deep water Horizon oil spill (Management & Excellence, 24). In 2005, a sustainability report noted that BP Company actions were aligned to providing high standards of cooperate citizenship and its aspirations were to providing a better quality life through its services and products. Summary of the major risks that you consider they may face British petroleum is a company that deals with operations ranging from The Occupational Safety and Health Administration has warned that cleanup workers face hazards caused by oil byproducts, chemical dispersants, drowning, heat, and snake encounters, among others. Benzene is a natural part of crude oil that can cause dizziness, irregular heartbeats, unconsciousness, and even death, according to the Centers for Disease Control and Prevention. There were 800 claims for sprains and strains, cuts, or contusions and 250 for bronchitis-type respiratory problems. Recent media reports say some Gulf of Mexico cleanup workers have complained about nausea, headaches and coughs they believe are caused by oil fumes and chemical dispersants. Level of hazards faced by BP The British Petroleum company is considered as one of the hazardous companies as its operations deal with handling and transportation of inflammable products like oil and gas. Some of the physical hazards the company faces include: risk of fire outbreaks in places of work, destruction or loss of property due to accidents, natural catastrophes and theft. Workers especially those involved in the clean up of oil spills face dangerous exposure to toxic oil fumes like the benzene which causes lung complications, dizziness and headaches. Also they face the risk of drowning, snake encounters and exposure to chemical dispersants. Some of the moral hazards the company can face are: various court charges and effect in its organizational reputation, occupational hazards on its workers e.g. heat strokes, rush issues, impact from huge cloud fumes of toxic properties, chemical leaks into the environment, effect of its operation on the communities and societies, hazardous damping and effects of its products us eon the climate change. Recommended Insurance Policies for BP The company needs to buy various types of insurance to enable smooth operations as well as maintaining a good public image in the competitive industry. Operations like deepwater drilling is an inherently dangerous undertaking and can result in many risks that become liability to the company hence the need development of a comprehensive insurance policy. Some the liabilities that BP may face as an international commercial industry include those emanating from long term impacts on environment a result of disturbance of the ecosystem, property and general liabilities, demand for workers’ compensations, exposure of clean up workers to work place occupational hazards, liabilities incurred from the US long shore & harbor, restrictions to fishing as a result of poisoning from pollution, Directors & Officers, negligence and criminal wrongdoing and most of all the environmental liability exposure that greatly impacts life both in sea, land and air. I recommend that the company buys ‘The company Director and Officer ("D&O") liability insurance’ as such type of insurance will help the company protect itself from law suits filed against them as a result of litigation from errors made by directors and officers for which are held liable. This insurance policy is very applicable when there occurrences of accidents like the recent deepwater horizon oil spill in the Gulf of Mexico that led to organization blame came. In such a case the company with the help of the D& O policy may be forced by cooperation to sue its directors for failed to deliver their fiduciary duties owed to the cooperation. BP therefore needs the insurance especially in this times when oil exploration is an expensive and dangerous venture given the fact that there are declining oil resources in the world leading to deep water horizon oil exploration and officers are force to make personal decisions that in impact on the reputation of the company. I recommend that it’s mandatory that company buys the casualty insurance policy to insure its staff members and workers against accidents that are likely to occur while they are carrying out the company’s duties. Such accidents may include accidents, body injuries or even death. This policy is very essential for BP especially when considering the fact that that the company is considered to be one of the high risky business enterprises. Since BP operate in more than 80 courtiers including those known to be high risky zones to work( due to political conflicts) it is recommended it buys the Kidnap and Ransom insurance to cover itself and its staff working in conflict prone countries from possible kidnap, wrongful detention, hijacking and from cases of extortion. Another mandatory insurance policy that the company should buy is the workers compensations insurance policy which will serve to replace either all or part of the worker’s wages lost and even cover the medical expenses incurred as result of the injuries related to company’s job. Third mandatory insurance that the company must buy is the life insurance policy is also recommended for the company as it will be of great importance if its worker or staffs are involved in a fat al accident by providing a monetary benefit to the victim’s descendants and assist family members of the insured person in burial, funeral and other final expenses. This insurance policy often consists of a package of various types of insurance that are related to health. Property insurance policy is also essential for BP as its operation involve acquisition of high value properties hence the policy will serve to provide protection against risks to property, such as damage from fire out break, theft, burglary, or effects that result from natural calamities like floods and earthquake. Since BP is also involved deepwater oil exploration and transport of cargo as part of its operations there is a need for the purchase of Marine insurance and marine cargo insurance cover to cover the loss or damage of transport vessels both in inland waterways or sea and to cover the cargo on transit. Finally I recommend the company to purchase the all-risk insurance which will cover a wide range of issues and incidences that might occur in the company. This will cover various perils including those not indicated in other peril-specific insurance policies. In personal opinion I think insurance can be described to be partially ethical. Insurance is ethical from the fact that individuals chose to buy premiums or not so its based on an individual’s free will and not compulsion; so if one sees he deem fit that he need to buy an insurance policy then so be it, after all were free should individual and live in a in era where individual interests and freedoms are put into consideration (Simbajon, par, 4). On the hand insurance appears like gambling as it puts its emphasis on the probability of an event occurring to its clients so if it happens then the odds are against the system but in many cases they don’t happen and they gain on the ‘bet’. Also when a client buys a peril-specific premium lets say to cover fire and that insured item gets destroyed by something else other than the one stated in the premium (gets stolen) then the policy does not apply and that is not ethically correct to me. It appears the insurance system is making profit from misfortunes of his clients. Finally I agree that without strict laws to control the operations of insurance system it its policies makes organizations to behave unethically especially when it denies selling insurance policies to those of lower income level (costly premiums) despite the fact they are the ones exposed to more risks and thus require the policy more as compared to the affluent who lead better lives. Lower income earners have diverse problems that insurance policies claim should be charged higher premiums and to me that is not a fair act or behavior. Finally, to make those with low income get insured just as their affluent counterparts; the government should pass legislations that regulate the premium rates such that they are determined based on individuals income and not the risky level. In doing this the rich pays more while the poor pays less and this swill enable the insurance givers to operate sustainably. Microfinance scheme help people excluded from the formal scheme of social protection and members are free to pay part or any necessary contributions to facilitate them being given cover benefits. Microfinance offers schemes on life, property, crop, health and disability micro insurance which can help the insurance company in catering for the need of those who earn low income. Works Cited Corbin Dan. (2006, September, 25,). Establishing ethics for insurance professionals. Retrieved from http://www.insurancejournal.com/magazines/midwest/2006/09/25/features/73123.htm [Accessed 13/12/2010]. Management & Excellence. (2007, February 21). World’s Most Sustainable and Ethical Oil Companies 2007. Retrieved From: http://www.management-rating.com/archivo/Brochure%20Oil%20Study%202007l.pdf [Accessed 13/12/2010]. Simbajon, Gabriel, Carlo. (2010, June 19). Corporate Ethics and the BP Oil Spill. Retrieved on 13, December 2010 from: http://all247news.com/corporate-ethics-and-the-bp-oil-spill/509/ [Accessed 13/12/2010]. Read More