Presentation on theme: "Overview of Operational Risk / Liability"— Presentation transcript:
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 CONSEQUENCEProvide 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 IndefiniteBeyond capabilitiesProject managementResourcesPlanning and logisticsExecutionDelays, productivity, competing projectsReliance on third partiesDeliverablesTimeQualityChanging expectationsAccidentsProperty or equipmentPeopleActs of God and NatureLegal / Financial:Pricing risksPayment risksDelay costsClaims for defective deliverablesTermination risksDiscuss 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 ExplorationSeismologySeafloor surveying / MappingDrillingTransporting supplies, equipment or personnelDevelopmentConstructionWellsStructures / facilitiesPipelinesPipe-layingTransporting supplies, equipment, or personnelProductionOperating structures / facilitiesOn-site processingTransporting oil, gas, & gas condensates
6 Probabilities & Consequences For Example:Late arrival at designated location:Probability: medium to highConsequence: - no material delay to others: no impact- delays overall project: $$ impactEmployee Error:Probability: low to mediumConsequence: - not material error: no impact- material error: $$ impact- critical error: impact to life, property, or project viabilityCollision at Sea – Our negligence:Probability: lowConsequence: - injury to customer personnel & property- injury to third parties or 3rd party propertyStart 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 ActsAssault, Battery, Trespass, False Imprisonment, DefamationFraud, Wrongful Interference with Contract or Business RelationshipIntentional Infliction of Emotional DistressNegligenceActs that a person exercising ordinary care would not do under similar circumstances; orFails to do what a person exercising ordinary care would do under similar circumstances.Negligence per seViolation of a statute or ordinance that provides criminal penalty and that violation causes injury to anotherStrict Liability in TortAbnormally Dangerous ActivitiesProduct Liability
8 More Specific Law concepts UnseaworthinessShip owner’s duty to maintain its vessel in a seaworthy mannerVessel’s equipment, masters, and members of the crew can render a vessel unseaworthyJones ActVessel owners’ liability for injuries to seamenOil Pollution ActResponsible party liability for response costs to oil spillsU.S. Admiralty LawAffect ship owners, cargo owners, marine insurers, and crewPertain to salvage claims, marine pollution, and collisions at seaAnti-Indemnity Statutes of TX, LA, NM, & WY
9 Risk Management - Key principles Risk QuantificationLikelihoodConsequenceRisk Mitigation MeasuresRisk acceptance criteriaBarrier identification and monitoringWhat 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 elseBuy InsuranceSeek Contractual ProtectionsEmploy operational excellenceEmploy the best peopleMaintain state of the art operationsProvide best on-going training, andKeep highly motivated