1. Overview of Operational Risk / Liability
U.S. Maritime and Offshore Oil & Gas Industries

2. RISK = PROBABILITY x CONSEQUENCE
What is risk?
Set of All Possible Hazards – what can go wrong?
Likelihood of Occurrence of Hazards – how possible is it?
Consequence of each Hazard – how bad can it get?
RISK = PROBABILITY x CONSEQUENCE
Provide definition of risk. Talk briefly about how risk is managed by reducing probability of occurrence and reducing a hazard’s consequence. Next slide shifts focus to the Audience’s services.

3. Hazards of Business Operational: Legal / Financial: Scope of Work
Indefinite
Beyond capabilities
Project management
Resources
Planning and logistics
Execution
Delays, productivity, competing projects
Reliance on third parties
Deliverables
Time
Quality
Changing expectations
Accidents
Property or equipment
People
Acts of God and Nature
Legal / Financial:
Pricing risks
Payment risks
Delay costs
Claims for defective deliverables
Termination risks
Discuss various ways the Audience faces risks in its business activities – use examples from audience or on presenter’s own. Relate back to Probability x Consequence, then proceed to next slide for specifics.

4. Offshore Oil & Gas Activities
Exploration
Seismology
Seafloor surveying / Mapping
Drilling
Transporting supplies, equipment or personnel
Development
Construction
Wells
Structures / facilities
Pipelines
Pipe-laying
Transporting supplies, equipment, or personnel
Production
Operating structures / facilities
On-site processing
Transporting oil, gas, & gas condensates

5. Maritime & Shipping Activities
Logistics
Managing inventory on-shore
Loading
Transporting, navigation, & pilotage
Off-loading
Customs
Vessels / Assets
Newbuilding/commissioning
Operation and Maintenance
Salvage
Cargo
Bulk
Container
Human transport (Cruise ships)
Special purpose (FPSO, LNG, Tenders, Tugs, etc.)
Port
Navigation
Stevedoring
Cranes
Drydocking

6. Probabilities & Consequences
For Example:
Late arrival at designated location:
Probability: medium to high
Consequence: - no material delay to others: no impact
- delays overall project: $$ impact
Employee Error:
Probability: low to medium
Consequence: - not material error: no impact
- material error: $$ impact
- critical error: impact to life, property, or project viability
Collision at Sea – Our negligence:
Probability: low
Consequence: - injury to customer personnel & property
- injury to third parties or 3rd party property
Start talking in $ terms: (1) Late arrival = delay in project - lost revenues from delayed start; or extra costs for expediting to maintain schedule after our late delivery Etc.

7. U.S. General Common Law concepts
Intentional Acts
Assault, Battery, Trespass, False Imprisonment, Defamation
Fraud, Wrongful Interference with Contract or Business Relationship
Intentional Infliction of Emotional Distress
Negligence
Acts that a person exercising ordinary care would not do under similar circumstances; or
Fails to do what a person exercising ordinary care would do under similar circumstances.
Negligence per se
Violation of a statute or ordinance that provides criminal penalty and that violation causes injury to another
Strict Liability in Tort
Abnormally Dangerous Activities
Product Liability

8. More Specific Law concepts
Unseaworthiness
Ship owner’s duty to maintain its vessel in a seaworthy manner
Vessel’s equipment, masters, and members of the crew can render a vessel unseaworthy
Jones Act
Vessel owners’ liability for injuries to seamen
Oil Pollution Act
Responsible party liability for response costs to oil spills
U.S. Admiralty Law
Affect ship owners, cargo owners, marine insurers, and crew
Pertain to salvage claims, marine pollution, and collisions at sea
Anti-Indemnity Statutes of TX, LA, NM, & WY

9. Risk Management - Key principles
Risk Quantification
Likelihood
Consequence
Risk Mitigation Measures
Risk acceptance criteria
Barrier identification and monitoring
What can go wrong?
How big?
How often?
Is that OK?
What can be done?
Is it being done?
This is not a lesson in Risk Management, but it may help people see why effectively managing EACH contract is so very important to enterprises of substantial size. Smaller companies can get away with no focusing to the same extent, because their daily viability relies more on growing the opportunities than managing the existing opportunities. Smaller companies that do not grow (capture enough contracts) early on will simply fail – an acceptable risk. Once a company is large enough, it is no longer acceptable to allow one contract to be the end of the enterprise. Hence, the introduction of Risk Mitigation Measures to control Risk.

10. Mechanisms for Controlling Risk
Shift Risk to someone else
Buy Insurance
Seek Contractual Protections
Employ operational excellence
Employ the best people
Maintain state of the art operations
Provide best on-going training, and
Keep highly motivated