Description
Chevron ppt on enivronmental risk management talks about environmental situation of chevron, exxon, mobil, internal, effective ways, policy 530, analytical EM, DEMA etc
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Risk is part of Daily Operations of Chevron. Risks of damaging Natural Environment, Human Health, Corporate Profitability, or all three. Trade-off between Risk and Financial Costs was main concern of Mark Keller, GM of HSE. Mark Keller had past experience in Environmental Decision making process called DEMA which resulted in Savings to Chevron. Tools like DEMA might be highly critical in Chevron’s success but Decision can’t be taken without taking current Risk management programs in context ??
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1899 : Pacific Coast Oil Company formed 1906 : Standard Oil Company merges with Pacific Coast. Standard Oil company grows aggressively and gains access to Saudi, Louisiana, Mexico and Hibernia Discovery in 1979. 1980 : Standard Company named to Chevron. 1984 : Acquires Gulf Corporation for 13.2 b $. 1988 : Sheds 6b $ assets that didn’t fit in long term plans 1997 : Earned 3b $ on revenues of 42b $. 1998 : operations I 90 countries and involved in Petroleum, NG and Production, refining and control.
Company CHEVRON EXXON MOBIL
Environmental Costs
% of Revenues
% of Total Costs
$ 893mn $1566mn $ 625mn
2.1% 1.1% 0.9%
9.0% 5.5% 8.4%
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Positioned as a company that was a responsible steward of natural environment Chevron’s Goal : To be the industry leader in safety and health performance and to be recognized worldwide for environmental excellence. This was in addition to its goal of exceeding the financial performance of its strongest competitors
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Advantages
Reduction in probability and magnitude of accidents leading to reduction in overall costs ? Enhance brand name and reputation of Chevron with customers, regulators and public ? Solid environmental reputation to help Chevron obtain access to domestic and foreign crude oil stocks controlled by government regulators
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?
?
Environmental Investments : Competing with other investments having higher payoffs Need for quantitative model to judge effectiveness
?
?
?
Historically, decisions made by senior executives characterized by judgment and not analysis. For e.g. replacement of tanks. The use of the internal risk management system has helped the company reduce costs substantially. The company used 2 methods to check internal environmental risk:
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Policy 530 Role of Incentives
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?
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Most important single instrument for environmental risk management, internally. To make Chevron a leader within the industry by emphasizing innovation and encouraging creative solutions to improve competitive position. 10 key elements were identified. Monitoring and Reporting Employee Benefits Corporate Wide Response Groups Relatively less use of other formal internal risk management tools.
?
? ?
‘Success Sharing’ plan, primary formal incentive system largely based on profit sharing; only minor part linked to attainment of safety or environmental objectives. Tie up Environmental performance to promotion process. The reasons for the same were 1. To set aggressive safety and environmental goals and not aim low to guarantee bonus. 2. Awareness of short term tension between financial and environmental and safety targets. 3. Inherent difference of measuring in monetary terms the Net Present Value of environmental benefits. 4. Overall goals could be pushed down to the organization.
?
?
?
General corporate strategy of self insurance up to certain level (around $200-300 Mn) above which external insurance needed The deductible varied in different areas of corporation and had a positive effect on incentive structure, reducing moral hazards Difficult to self insure catastrophic event like Exxon Valdez
Responsibility For Risk
? Decision relating to environmental risk mgmt. not centralized ? Only a few exceptions are there which includes the HSE Group
which has company wide responsibility on certain policies ? Many other decisions taken at operating unit level giving ground level managers to ensure safety and prevent adverse events
?
Policy 530 extended into management guidelines E&S Risk Management Process - incorporated the basic elements of pipeline company’s analytical model Broad set of approaches having 4 main phases:
Identify Events Assess Risk Identify Alternatives Decide
?
?
?
Risk value assigned for 4 categories of effect: Health and Safety, Environment, Public & Financial DEMA – a quantitative extension which provided a cost– benefit analysis of the projects
?
? ? ? ? ? ?
DEMA developed by CRTC after consultation with upstream and downstream operations A more applicable system for Chevron compared to the E&S risk management system Used by managers to determine cost benefit analysis Helps sets priorities for ERM on a analytical basis A spreadsheet with input sheets, valuation tables and 2 recap sheets DEMA Structure:
Data to be entered in input sheet: Project capital cost, Project life, Event description, Risk reduction proposal ? The input sheets compared scenarios ? Qualitative risk ranking matrices to be used
?
? ? ?
?
? ? ?
Event Likelihood - 1 to 4 rating Heath and Safety Impact – 1 to 4 rating Environmental Impact – 1 to 5 rating Financial Performance – 1 to 6 rating Public concern – 1 to 6 rating New dimensions to be added for different business divisions Standardize tables of weights or conversion rates devised
Implementation of DEMA
? Implemented in Richmond refinery and Chevron Overseas Petroleum
? ? ? ? ?
Inc (COPI) Hundreds of projects evaluated Provided significant benefits Helped in allocating risk management resources High level of savings obtained from Richmond Capable of replicating the success throughout
?
? ?
?
?
Should utilize a structural approach such as DEMA for environmental risk management in a phased manner CRTC should be engaged to refine the analytical risk management tools Level of customization of any such tools needs to be increased as the operations differ widely and so do the associated risks Environmental costs should be minimized by reducing the probabilities of incidents; more stress on training of ground level staff and specifically handlers Reduced probabilities would reduce insurance needs and associated costs
doc_710928508.pptx
Chevron ppt on enivronmental risk management talks about environmental situation of chevron, exxon, mobil, internal, effective ways, policy 530, analytical EM, DEMA etc
?
?
?
?
?
Risk is part of Daily Operations of Chevron. Risks of damaging Natural Environment, Human Health, Corporate Profitability, or all three. Trade-off between Risk and Financial Costs was main concern of Mark Keller, GM of HSE. Mark Keller had past experience in Environmental Decision making process called DEMA which resulted in Savings to Chevron. Tools like DEMA might be highly critical in Chevron’s success but Decision can’t be taken without taking current Risk management programs in context ??
? ? ?
?
? ?
?
?
1899 : Pacific Coast Oil Company formed 1906 : Standard Oil Company merges with Pacific Coast. Standard Oil company grows aggressively and gains access to Saudi, Louisiana, Mexico and Hibernia Discovery in 1979. 1980 : Standard Company named to Chevron. 1984 : Acquires Gulf Corporation for 13.2 b $. 1988 : Sheds 6b $ assets that didn’t fit in long term plans 1997 : Earned 3b $ on revenues of 42b $. 1998 : operations I 90 countries and involved in Petroleum, NG and Production, refining and control.
Company CHEVRON EXXON MOBIL
Environmental Costs
% of Revenues
% of Total Costs
$ 893mn $1566mn $ 625mn
2.1% 1.1% 0.9%
9.0% 5.5% 8.4%
?
?
?
Positioned as a company that was a responsible steward of natural environment Chevron’s Goal : To be the industry leader in safety and health performance and to be recognized worldwide for environmental excellence. This was in addition to its goal of exceeding the financial performance of its strongest competitors
?
Advantages
Reduction in probability and magnitude of accidents leading to reduction in overall costs ? Enhance brand name and reputation of Chevron with customers, regulators and public ? Solid environmental reputation to help Chevron obtain access to domestic and foreign crude oil stocks controlled by government regulators
?
?
?
Environmental Investments : Competing with other investments having higher payoffs Need for quantitative model to judge effectiveness
?
?
?
Historically, decisions made by senior executives characterized by judgment and not analysis. For e.g. replacement of tanks. The use of the internal risk management system has helped the company reduce costs substantially. The company used 2 methods to check internal environmental risk:
? ?
Policy 530 Role of Incentives
? ?
? ? ?
?
?
Most important single instrument for environmental risk management, internally. To make Chevron a leader within the industry by emphasizing innovation and encouraging creative solutions to improve competitive position. 10 key elements were identified. Monitoring and Reporting Employee Benefits Corporate Wide Response Groups Relatively less use of other formal internal risk management tools.
?
? ?
‘Success Sharing’ plan, primary formal incentive system largely based on profit sharing; only minor part linked to attainment of safety or environmental objectives. Tie up Environmental performance to promotion process. The reasons for the same were 1. To set aggressive safety and environmental goals and not aim low to guarantee bonus. 2. Awareness of short term tension between financial and environmental and safety targets. 3. Inherent difference of measuring in monetary terms the Net Present Value of environmental benefits. 4. Overall goals could be pushed down to the organization.
?
?
?
General corporate strategy of self insurance up to certain level (around $200-300 Mn) above which external insurance needed The deductible varied in different areas of corporation and had a positive effect on incentive structure, reducing moral hazards Difficult to self insure catastrophic event like Exxon Valdez
Responsibility For Risk
? Decision relating to environmental risk mgmt. not centralized ? Only a few exceptions are there which includes the HSE Group
which has company wide responsibility on certain policies ? Many other decisions taken at operating unit level giving ground level managers to ensure safety and prevent adverse events
?
Policy 530 extended into management guidelines E&S Risk Management Process - incorporated the basic elements of pipeline company’s analytical model Broad set of approaches having 4 main phases:
Identify Events Assess Risk Identify Alternatives Decide
?
?
?
Risk value assigned for 4 categories of effect: Health and Safety, Environment, Public & Financial DEMA – a quantitative extension which provided a cost– benefit analysis of the projects
?
? ? ? ? ? ?
DEMA developed by CRTC after consultation with upstream and downstream operations A more applicable system for Chevron compared to the E&S risk management system Used by managers to determine cost benefit analysis Helps sets priorities for ERM on a analytical basis A spreadsheet with input sheets, valuation tables and 2 recap sheets DEMA Structure:
Data to be entered in input sheet: Project capital cost, Project life, Event description, Risk reduction proposal ? The input sheets compared scenarios ? Qualitative risk ranking matrices to be used
?
? ? ?
?
? ? ?
Event Likelihood - 1 to 4 rating Heath and Safety Impact – 1 to 4 rating Environmental Impact – 1 to 5 rating Financial Performance – 1 to 6 rating Public concern – 1 to 6 rating New dimensions to be added for different business divisions Standardize tables of weights or conversion rates devised
Implementation of DEMA
? Implemented in Richmond refinery and Chevron Overseas Petroleum
? ? ? ? ?
Inc (COPI) Hundreds of projects evaluated Provided significant benefits Helped in allocating risk management resources High level of savings obtained from Richmond Capable of replicating the success throughout
?
? ?
?
?
Should utilize a structural approach such as DEMA for environmental risk management in a phased manner CRTC should be engaged to refine the analytical risk management tools Level of customization of any such tools needs to be increased as the operations differ widely and so do the associated risks Environmental costs should be minimized by reducing the probabilities of incidents; more stress on training of ground level staff and specifically handlers Reduced probabilities would reduce insurance needs and associated costs
doc_710928508.pptx