An Assessment of BP's Risk Management Issues and Poor Response to the Oil Spill

Executive summary Business risk management is a broad and important tool for companies to integrate into their work and its importance can not be ignored. BP's 2010 oil spill in the Gulf of Mexico lacked a company's response to the lack of negligence and emergency response plans and the risks it produced. In this analysis, the BP approach to event processing has a great financial impact, leading to negative recognition from the public and corporate reputation and value.

In addition, the history of BP oil spill accidents indicates that operational risk management was insufficient over the past few years. Past tragic events included the explosion of US refineries in 2005 and 2005 and the oil spill of Prudhoe Bay (Fineberg, 2007). A further serious incident occurred in the Gulf of Mexico as the company continued to ignore security issues and risk management after these incidents. After the incident, the BP was asked to reduce the planned capital expenditure and increase the disposal of assets to provide additional liquidity (BP p.l.c, 2010). In addition, the total pre-tax expense recognized in 2010 was $ 40.9 billion (BP p.l.c, 2010). However, BP is not certain about the total amount that will be finally paid. The company is currently prosecuting a series of lawsuits that may result in significant costs (BP p.l.c, 2010).

In 2010, due to the lack of operational risk monitoring and management, the company suffered a significant loss due to oil spills in the deep sea zone of the Gulf of Mexico (McDonald's BP's highlighting the risk management failure, BP's picture of oil disaster Period record, 2010). The incident caused a catastrophic biological environment with 13 deaths and 17 injuries (McDonald's, BP oil breakdown record, risk management failure, 2010). Immediately after the incident, the company investigated risk management practices. As a result of this review, the CEO Tony Hayward eventually dismissed (McDonald's, breakdown of BP oil petroleum disasters, failure of investment risk management, 2010).

Prior to the incident, BP executives ignored the need for operational risk management. This makes the company vulnerable to operational risk. Even after two oil spills occurred between 2005 and 2007, BP has not taken effective measures to improve risk management practices. Fortunately, this problem was finally recognized by Dudley. Dudley has launched a constructive plan to implement operational risk management across all parts of the company.