Business Continuity Management - British Petroleum Company United Kingdom - Case Study Example

BUSINESS CONTINUITY MANAGEMENT The British Petroleum Company United Kingdom 1. Critical Analysis of Operating Environment/ Stakeholder Analysis British Petroleum or BP, a global energy group was once small local oil company in the United Kingdom. Today, BP has transformed into a major player in the industry and is now employing over 80,000 people in more than 100 countries around the world. BP’s primary business is oil and it has several production platforms, refineries, and ships. BP Petrol, a brand that started in the 1920s is now being recognised around the globe for its quality gasoline and other fuel source. British Petroleum is a large company identified with brands such as ARAL, ARCO, Castrol, Wild Bean Cafe, and more. However, most of these businesses are oil related thus it can be assume that its primary operation is focus on oil products (BP 2010a, p.1). BPs strategy is to invest on oil and gas production thus it is continually enhancing it operating processes. It is committed in exploring, developing and producing more fossil fuel resources to meet the growing needs of people today. The company is into manufacturing and processing oil products and therefore aiming to continually improving operating performance while reducing cost. British Petroleum’s approximate share in the global market 3% in oil and gas production while 4% in refining. In general, it has three business segments –exploration and production, refinery and marketing, and gas, power, and renewable. BPs oil exploration and production involves upstream activities in oil and natural gas and management of pipelines, export and processing terminals. Moreover, it also includes shipping and operating an international fleet of oil and liquefied natural gases tankers and carriers. Their refineries and marketing business include operations involving refining, transport, selling and trading crude and petroleum products. Marketing includes retailing of fuel and convenience store items through their over twenty five thousand gas stations all over the world. This means BP serving millions of customers and maintaining reputation that includes popular brands such as Arco, Castrol, Amoco, Aral, and BP itself. In Germany for instance, over two thousand seven hundred Aral outlets are serving the German population for their fuel and other travelling needs. In the US, Amoco and Arco are providing American consumers with high grade gasoline. The gas, power, and renewable business of BP is mostly focus on Liquefied Natural Gas that enables the company reach more customer in China, India, and South Korea (BP 2010a, p.1-36). In line with BPs local and global businesses, the most critical stakeholders are generally the customers, employees, suppliers and contractors, and government. Customers are critical in keeping business growth and financial stability. For instance, ARAL gas stations depend entire on the number of customers and any disruption in the operation a certain gas station means financial losses and damaged name. Similarly, absence of employees who are working in these gas stations can severely affect its operation and customer service. Suppliers, contractors, and regulating agencies of government can also affect operation such as delayed delivery of supplies, inefficient work by contractors, and suspension order from regulating government agency caused by violation of certain operational or safety practices (BP 2010b, p.1). 2. CRITICAL ACTIVITIES AND ASSESSMENT OF MAXIMUM TOLERABLE PERIOD OF DISRUPTION Although there a number of businesses under British Petroleum, the most direct and customer oriented is ARAL For this reason, this study select ARAL business activities for assessment. In gas station and convenience store operation, the most critical activities are vehicle re-filling, maintenance, and day-to-day selling and marketing. However, it is important to note that these activities are dependent on other BP’s business which is oil refining and transport. It is therefore necessary to consider these processes as inter-related to enable assessment of maximum tolerable period of disruption. Any delay in refining activities and transport means delay of supplies for each ARAL gas stations. For every gas station, the maximum tolerable period of disruption seen is a day. On the first day of disruption, customers may opt to go another competitor to get their fuel and other needs. However, they may be disappointed to see that nothing has been done in the following day and may not come back again and stayed with the competitor. More importantly, a day sale is more than enough financial loss considering the significant number of vehicles using the service. Disruption may also come from local stations such as fuel pump malfunction or accidents such as explosion and fire. These can also significantly affect the company’s reputation aside from big financial loss. Let us consider these scenarios in the overall recovery objective chart below as presented in the lecture reference (UcLan 2010, p.1-55). Fig. 2.1- Overall Recovery Objective The above overall recovery objective chart suggests that after the incident, the plan would be invoked and the BP Crisis Planning Team will execute an incident response procedure in the first few minutes of the incident. Business continuity procedures will be executed in the first hour and continue till normal operation resume in the following day. The maximum tolerable period of disruption therefore is only a day, start from the time the plan was invoked up to the resumption of business operation a day later. 3. TIME RECOVERY OBJECTIVES In line with the maximum tolerable period disruption presented earlier, time recovery objective should be set to clearly identify the estimated time of recovery. This is to prevent further damage due caused by extended disruption. Diagram as presented in UcLan (2010, p.1-55). The activity selected to present the time recovery objectives are the potential problems in refining and transporting oil products, and equipment failure in local stations. In a matter of 1 day, the objective is to reach at least of 80% recovery. The first phase, which will happen just a few minutes as mentioned in the previous section, requires crisis management team to contact and arrange all activities to get the back-up source of supply. In case of equipment failure however, the activity would be to contact maintenance and get it repaired. After an hour, the second phase requires the crisis management team to deploy the back-up source or equipment. The third phase in the following requires the crisis management team to restore operation. Recovery should be therefore within this time frame to avoid further complications and damage due to disruption of operation and services. 4. CRITICAL DEPENDENCIES The British Petroleum company is not different to other large business and required to indentify its critical dependencies. Knowledge of these critical dependencies can help business continuity planners to plan accurately. In businesses where several groups of stakeholders involved, critical dependencies are unavoidable and for these reason critical dependencies should be identified, discuss, and documented (Poulin 2005, p.96). According to Pearce (2001, p.43), critical dependencies should be managed to ensure survival of the organisation and therefore required in BP. As indicated in the table below, there are two critical activities identified and each has its own set of critical dependencies. Critical Activities Critical Dependencies Gas Stations Customers Supplier Employees Contractor Technology Refinery and Transport Suppliers Employees Customers Contractors Technology 4.1 People One of the obvious critical dependencies seen in BP’s operation is the people involved in providing the required services. For instance, gas stations cannot operate without direct management while the business would not progress if no customers are using the service. Analyzing the nature of gas stations and the activities involved in refining and transporting oil into these stations, one can readily identify that customers, suppliers, employees, contractors, and technology plays a vital role. People in particular are critical in terms of patronage of the service, work required to provide the service, refining the oil products, and bringing the supplies to the gas station. Disruption may result to a number of negative outcomes such as disappoint and inconvenience to customers, bad reputation, financial losses, and closure of the company in worst cases. For instance, when supplies are not reaching the gas stations because of some transport or refinery labour strike, customers will be sent away to fill their tanks with a business competitor. Moreover, employees are idle thus time and money is wasted. In case of equipment failure, supplier of spare parts and maintenance support may not be around thus the period of disruption is extended. For this reason, identifying and monitoring critical dependencies is very important to the survival of any business relying on people. 4.2 Building and other infrastructure In BP, there are several ways in which a building or infrastructure can affect smooth business operation during a sudden disruption. For instance, in case of small fire in one part of the refinery, the operation for that particular area of business will stop momentarily. The crisis management team now has to provide continuity for this disruption and ensure that production continues in the earliest possible. The most likely solution is to have spare parts on stock to replace the fire-damaged parts. In some cases, it may possible to re-direct the operation in some area of the plant where the same process can continue. If the fire happened in offices, the most likely solution is to move to another building and continue office works. However, this may not possible if files and equipment in the office were burned. For this reason, a continuity plan for buildings and other infrastructure should take into account back-up and restoration procedures of important files. This would enable quick restoration of work in temporary offices. 4.3 Vehicles As mentioned earlier, transport of supplies from the refinery to respective gas stations is part of the operation and therefore must be taken into account whenever planning for business continuity. For instance, a fuel truck that suddenly met an accident or broke down the road may delay the supplies intended for a specific gas station. One possible solution to this disruption is to have a spare fuel carrier to replace the truck and deliver the fuel instead. Another solution particularly during a mechanical problem is to have a maintenance team on alert and repair the truck. However, all these mitigating measures will take some time depending on the severity of the problem thus a business continuity plan identify the most rapid response and solution to the problem. One of the most likely logical solutions is to strictly monitor the operation and maintenance of these fuel carriers and create a special group that can immediately respond. Identify parts that are more likely to breakdown such as tires, brakes, etc., and have it always available in stock. 4.4 Technology Nowadays, technology is everywhere and one can find them in almost type of business. British Petroleum is no doubt reliant on technologies such as communication, computer processing, and devices being use in production and marketing. For instance, operations in the refineries are likely being run by computers while gas stations pumps are electronically controlled. In offices, more often than not, employees are using computers and other electronic devices to process documents and accounts. More importantly, they tend to be reliant on mobile communication devices to facilitate quick delivery of information. A disruption involving a certain technology can severely affect office and field operation. For instance, breakdown of office computers can lead to hours of disruption and loss of productive time. A business continuity plan should be able to identify these possibilities and present a detailed mitigating procedure to lessen the impact of such disruption. For instance, the crisis management team may consider placing another set of computers outside the premises as back-up. In case of fire and provided they are updated and well-maintained, these computers help restoration of services quickly. 5. STRATEGIES FOR MAINTAINING CRITICAL ACTIVITIES/DEPENDENCIES A large organisation like the British Petroleum company with various critical activities and dependencies should have a reliable strategy that would ensure business continuity. For instance, the company should consider the effect of different stakeholders particularly suppliers, employees, technology, equipment and vehicles, regulating agencies, and customers. They should plan and write down each process to ensure immediate recovery during a sudden crisis. The following strategy may be useful for BP: a. In case of employee strike, the company may opt to enter into contract with a contractor that would provide the temporary manpower during the disruption. b. In case of sickness, sudden resignation, accident, or death of a particular employee, the company may opt to require applicants to have at least two useful skills that can fill other positions when such disruption occurs. c. They may also require employees to follow a certain policy when retiring or resigning to give company more time to hire replacement. d. As an important part of their overall policy, the company should encourage back-up procedures. This may be in the form of support computers, vehicles, equipment, and so on that are intended to immediately cushion the impact foreseeable disruption. e. In case of fire, the company may identify possible temporary offices or certain alternative area. This may also encourage employees to temporarily work from home during the disruption. f. During a transport disruption, the company can enter to a contract with a transport company that can provide temporary fuel carriers during the disruption. However, a large company as BP with businesses that rely mostly on transport vehicles, the most logical option probably is to purchase support fuel carriers. g. In general, BP should have enough knowledge of their critical activities, dependencies, and stakeholders to ensure business continuity during a disruption. 6. CRITICAL DEPENDENCY MONITORING ARRANGEMENTS The British Petroleum company at the least should be knowledgeable of critical dependencies such as the manner in which a particular stakeholder can impact the operation and the business overall. These critical dependencies may be viewed as a process that must be studied, reviewed, assess, and documented continually to ensure effectiveness. Below is a diagram showing how critical dependencies can be monitored. 7. PLAN INVOCATION ARRANGEMENTS After identification, assessment, and documentation of critical activities and dependencies, the company may arrange a plan on how to invoke procedures required to a particular activity disruption. The arrangement for plan invocation must be understood by all involves particularly those that will make critical decision whether to invoke the plan or not. Plan invocation arrangement may be done in the following manner as shown by the diagram. 8. GENERIC RESPONSE ARRANGEMENTS FOR MANAGING DISRUPTION A general response in managing disruption may be necessary to ensure continuity. In BP, supplies and services delivery is critical and therefore deserve some form of practical response to at least minimize the impact of disruption. For instance, accidents on the road are expected and therefore require certain preparation and response. A generic response arrangement for managing disruption is not necessarily a complete solution but it can ensure that no further damage can be done. Below is a diagram showing the basic arrangements needed by BP in managing sudden disruption. 9. A MEDIA STRATEGY FOR INTERNAL AND EXTERNAL STAKEHOLDERS Media plays an important role in information spreading and clarifying issues to the public. During a disruption, particularly those that was caused by accidents that involves a certain number of employees and other individual, the public tendency is to get the details of the accident and the well-being of individual involve from the media. However, getting information from different media may result in different interpretation and confusion thus an appropriate media strategy is required. In an incident response, the organization involved often chooses a media officer to represent the incident team. This media officer is well-briefed and possesses the ability to manage information wisely. In coordination with staff and those directly responding to the event, the media officer is well-informed. During a media conference, the media officer often knows his boundaries and only releases information appropriate at that time. In this manner, the organization managing the disruption can accurately present the information and avoiding confusion created by multiple source of information. The media strategy may be done in the following manner as shown in the diagram below. 10. PLAN DEVELOPMENT, REVIEW, AND TRAINING ARRANGEMENTS Typically, an organisation will favour a well-understood plan derived and presented to the same people that will be involve during the crisis. Following the appropriate business continuity planning step can help the organisation and specifically the crisis management team to achieve its objective. For instance, the plan should contain important and specific details about the roles of each individual that will perform during the crisis. These include specifically those people that will make the initial decision to invoke the plan. Other important details required and must be incorporated in a written plan are the roles of employees and the training required to achieve the efficiency expected. For instance, employee training regarding installation of back-up devices during an emergency or training on emergency notification and other critical activities. In general, the plan must develop and reviewed regularly to ensure its relevance to the current situation. 11. ARRANGEMENTS FOR EMBEDDING THE PLAN INTO THE DAY TO DAY MANAGEMENT SYSTEMS AND ORGANISATION CULTURE Implementation of Business Continuity Plan depends on the commitment and firmness of the organization. For instance, the success in restoring gas station operation depends on BPs commitment to create a special team to perform an immediate repair or willingness to purchase additional fuel carriers for back-up purposes. This is the reason why it is important that a BCP is documented and enjoying the support of higher management and everybody in the organization. One way to ensure that practices leading to successful BCP are well understood and accepted is to incorporate the issue in every discussion, meeting, memo, and make it a part of employee’s daily life. Issue a manual, post notes and reminders, and make it a point that management regularly discusses possibilities of such interruption to enable alertness among employees. 12. REFERENCE LIST BP, 2010a, Annual Review: Operating at the Energy Frontiers, British Petroleum, UK BP, 2010b, About BP, available at http://www.bp.com/marketingsection.do?categoryId=2&contentId=7013628 Investment & Income, 2010, British Petroleum Plc, available at http://www.investmentsandincome.com/investments/multinational-corporation/british-petroleum.html Pearce J. 2001, Organization and Management in the Embrace of Government, Routledge, US Poulin L. 2005, Reducing risk with software process improvement, CRC Press, US UcLan, 2009, Business Continuity Management, University of Lancashire, UK Read More