Category Archives: Safety

Building a Successful ERM Program

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Iman H. Al-Gharabally is responsible for the enterprise risk management program at Kuwait Petroleum Corporation (KPC) and its subsidiaries since 2004. She is the team iman-h-al-gharabally-picleader, coordinator and project manager for the ERM program and its strategic implementation across the Kuwait oil sector. Al-Gharabally, a speaker at RIMS’ Middle East Risk Forum 2016, taking place Dec. 13 and 14 in Dubai, United Arab Emirates, discusses the implementation strategies and successes of KPC’s ERM program.

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RIMS: How did you begin the process of building KPC’s ERM program?

Al-Gharabally: In 2002 the KPC managing directors at the time recognized there was a serious need to look into and have in place a consolidated view of potential risks and a consolidated risk management format of those risks facing the organization. Hence the ERM initiative was introduced as a way to instill this unified format of consolidated risk management mainly through the insurance section. In 2004 the ERM initiative was introduced and in 2006 the ISO 31000 was launched.

RIMS: How did you develop your ERM structure?

Al-Gharabally: Initially I had no prior knowledge of what ERM stood for. I was recruited in April 2004 from Kuwait Oil Company (a subsidiary to KPC) to project manage and lead this new ERM initiative. I studied the topic extensively and slowly had to lay down the foundation for a dynamic ERM program for KPC and its subsidiaries. We started at the very top, first in the corporate office looking at the strategy of the corporation and what the corporate objectives aimed to achieve in the coming five years from 2004 to 2009. We then looked at the potential risks that would prevent the corporation from achieving those objectives and started the communication lines across the subsidiaries to initiate awareness on these potential risks and put forth mitigation options to ensure the corporation was well prepared and to increase our abilities to deliver on our strategic objectives.

It was imperative at the very beginning to ensure that we worked hand-in-hand with the various planning, HSE and marketing units across the entire value chain. The idea was to start the conversations early and brainstorm unilaterally for solutions to be placed to counteract any potential risks emerging that would hinder our 2020 strategic business goals.

Over the first few months in 2004, we managed to convince CEOs across the group to create and assign a focal point to be internally responsible for ERM and coordinate and liaise with us at the corporate head office on all ERM related matters. It took 10-12 months before having each subsidiary assign a dedicated ERM focal point. Once there were dedicated individuals to communicate with and be internally responsible for monitoring and reporting on all risk-related matters, the next phase of setting up an ERM framework and governance structure was initiated. In 2007 the ISO 31000 framework was launched across the group for implementation.

KPC’s ERM structure is that of a hybrid matrix in which central ERM policies, procedures and key performance measures are set, while subsidiaries and ERM units across the group are free to implement according to their individual company’s needs and business model.

RIMS: How did you make ERM a success?

Al-Gharabally: It was not an easy task, to be honest. KPC is the corporate head office to eight other companies from upstream to downstream. The nature of their business is quite complex and diversified. So to lead ERM initiatives and have them fully incorporated and periodically monitor and report on the progress is a challenging full time task. The key is to be well integrated.

From the very start of our initiative in 2004 we made certain that the corporate head office ERM unit was well integrated with each and every single subsidiary ERM unit. We put in place a platform establishing a community of ERM best practice and there are means to discuss, troubleshoot and share various topics to ensure the benefit is widely absorbed across the entire oil sector. We conduct periodic risk culture surveys and benchmark ourselves not only internally across the group, but also against international financial and oil corporations with advanced risk management programs.

RIMS: What is unique about KPC’s approach to ERM?

Al-Gharabally: Having an ERM program in place in an oil corporation is in itself unique. To take that further and have a single unified ERM strategy and shared initiatives across multi discipline functions and across eight subsidiaries elevates the uniqueness. Having delivered a successful fully functioning ERM program over the past 13 years in close collaboration with the corporation’s strategic planning, financial and marketing departments sets KPC’s ERM program apart.

RIMS: What tools/resources have been the most helpful on this journey?

Al-Gharabally: From a risk culture perspective, establishing a community of best practices for ERM individuals to have a platform to share and collaborate various ideas, trouble-shoot implementation issues or integrate objectives on unilateral ERM implementation plans is critical to the success of our program. Having a risk operating committee chaired by the CFO and reporting to the corporation’s risk and audit committee was also a critical success factor to KPC’s ERM initiative. Subsidiaries learned early on that having a dedicated ERM unit reporting directly to the CEO, with no conflicts of interest of shared ownership of risks in the reporting line, was a critical success factor to KPC’s ERM structure. From a technical perspective, establishing a clear ERM framework, policy and procedure as well as systematic reporting of risks in a unified ERM information system, and linking the reporting to the corporations was a critical success factor.

Rims: How can ERM best inform strategy?

Al-Gharabally: KPC’s decision to maximize transparency and work closely with strategy marketing and finance was a key aspect in making our ERM program successful. To be able to look at leading risk indicators and have in place the appropriate mitigation options for improving the corporation’s performance in meeting its strategic objectives is an invaluable resource.

RIMS: What advice can you give those embarking on building a world-class ERM program?

Al-Gharabally: Communication, communication, communication! Had we not lobbied, or brainstormed across various business functions early in our journey in 2004, or not ensured that we had the full support of planning and finance on board for our ERM initiatives, our program most likely would have flopped!

Earthquake Spike in Oklahoma Linked to Fracking

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A magnitude 5.0 earthquake that rocked Cushing, Oklahoma, on Nov. 6 damaged part of the city’s downtown district, but left no major damage to bridges or highways.

Early reports indicate the damage is not insignificant. A 16-block area in the hard-hit downtown has been sectioned off because of the danger posed by unstable structures and broken glass. No serious injuries or fatalities have been reported, however.

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Power in Cushing was out for less than an hour following the quake, and several gas leaks were taken care of.

The city, which has a population of 7,900, is noted as the world’s largest oil storage terminal and has experienced 19 earthquakes in just the past week, raising safety concerns. As of last week, the town’s tank farms held 58.5 million barrels of crude oil, according to the U.S. Energy Information Administration. The number of earthquakes in the area has also risen exponentially.

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During the first half of this year, 618 temblors of M2.8 or greater have shaken Oklahoma.

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Swiss Re noted in its September 2016 report The Link Between Hydrofracking, Wastewater Injection and Earthquakes: Key Issues for Re/insurers:

Since 2008 the number of magnitude 3.0 earthquakes per year has grown from roughly 2 per year to an average of nearly 3 per day. This now makes Oklahoma the most seismically active of the lower forty-eight states. It’s highly likely that this dramatic rise in earthquake occurrence is largely a consequence of human actions. Along with the increase in seismicity, Oklahoma has seen a growth in its oil and natural gas operations since 2008, specifically hydraulic fracturing (often referred to as “hydrofracking” or “fracking”) and the disposal of wastewater via deep well injection.

A number of states that have increased wastewater injection activity have seen increases in the number of induced earthquakes, the study said, but the reason for such a large increase in Oklahoma is still unclear. Because of the large amount of crude oil storage in the Cushing area, strong shaking is worrisome and has led some to proclaim that induced earthquakes are a national security threat.

According to AIR-Worldwide, it is not clear whether the occurrences of the small and intermediate size earthquakes being seen, and the stress changes from wastewater disposal could trigger larger and more damaging earthquakes. As a precaution, the Oklahoma Corporation Commission ordered four new Arbuckle disposal wells to be shut and 10 to reduce their volume by 25%. In Osage County, 32 wells will have reduced volume.

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Experts believe limiting injection volumes is helpful because of the link between high-volume injection and earthquakes, but Swiss Re’s report concluded that while, most companies participate in the suggested reductions following a detected earthquake, economic pressure to continue wastewater injection often prevails. “Changing regulations, and how the oil and gas industry respond, remain the biggest contributor to uncertainty of how the risk will change in the future,” Swiss Re said.

Asian Piracy and Crime Incidents Drop 65%

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The number of piracy and armed robbery incidents in Asia from January to September 2016 decreased by 65% compared to the same period in 2015. A total of 59 incidents were reported during the period, including three piracy and 56 armed robbery incidents, according to the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP).

ReCAAP emphasized that the decrease in the overall number of incidents was most evident in the Straits of Malacca and Singapore. Other improvements were reported at ports and anchorages in Bangladesh and Vietnam. In these regions, there were only two incidents from January to September 2016, compared to 96 incidents in the same period last year.

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About 73% of the incidents occurred on board ships while at ports and anchorages, and 27% on ships while underway.

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There was also a decrease in hijacking of ships for oil cargo theft during the nine-month period—only two such incidents occurred, compared to 12 incidents in 2015.
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Although the total number of incidents has decreased, there is no room for complacency, ReCAAP emphasized. Measures must be implemented to prevent recurrence of incidents involving the abduction of crew in the Sulu Sea and hijacking ships to steal oil cargo. Crews need to be vigilant while underway and maintain watch at ports and anchorages. In addition, authorities should implement port security measures and maintain regular surveillance.

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OSHA Releases Updated Workplace Safety and Health Voluntary Practices

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To help medium and smaller-size businesses initiate effective safety and health programs, the Occupational Safety and Health Administration today released Recommended Practices for Safety and Health Programs, an update of its 1989 guidelines, reflecting changes in the economy, workplaces, and evolving safety and health issues. The recommendations feature a new section on multi-employer workplaces and a greater emphasis on continuous improvement, OSHA said.

“Since OSHA’s original guidelines were published more than 25 years ago, employers and employees have gained a lot of experience in how to use safety and health programs to systematically prevent injuries and illnesses in the workplace,” Dr. David Michaels, assistant secretary of labor for occupational safety and health said in a statement. “We know that working together to implement these programs will help prevent injuries and illnesses, and also make businesses more sustainable.”
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The recommendations include seven core elements for a safety and health program:

• Management leadership
• Worker participation
• Hazard identification and assessment
• Hazard prevention and control
• Education and training
• Program evaluation and improvement
• Communication and coordination for host employers, contractors and staffing agencies

Implementing recommended practices brings benefits to businesses that include healthier employees, fewer injuries and, ultimately, lower workers compensation costs:

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  • Preventing workplace injuries and illnesses
  • Improving compliance with laws and regulations
  • Reducing costs, including reductions in workers compensation premiums
  • Engaging workers
  • Enhancing their social responsibility goals
  • Increasing productivity and enhancing overall business operations

Because management leadership is an important part of the equation, OSHA recommends that business owners, managers, and supervisors:

  • Make worker safety and health a core organizational value.
  • Be fully committed to eliminating hazards, protecting workers, and continuously improving workplace safety and health.
  • Provide sufficient resources to implement and maintain the safety and health program.
  • Visibly demonstrate and communicate their safety and health commitment to workers and others.
  • Set an example through their own actions.

To establish a program, OSHA said organizations need to create a written policy signed by top management that describes the organization’s commitment to safety and health. By creating specific goals and objectives, management sets expectations for the company’s managers, supervisors and workers. The goals and objectives should focus on specific actions that will improve workplace safety and health, OSHA said.