ERIC EJ1088190: Enterprise Risk Management in the Oil and Gas Industry: An Analysis of Selected Fortune 500 Oil and Gas Companies' Reaction in 2009 and 2010

2016·1 MB·English

by  ERIC

American Journa of Business Educoton = Fst Quarter 2016. Folume 9, Number £

Enterprise Risk Management In The Oil
And Gas Industry: An Analysis Of Selected
Fortune 500 Oil And Gas Companies’
Reaction In 2009 2 And 2 2010

eywords: Accousting: Risk: Oil and Gas Accounting: Chit Risk tise: Entyprise Risk Manggeusar

INTRODUCTION
Enterprise Risk Management

Je

sled wih comrades a en peril even chins affect Ue aly ad wae es
bors i appetite. In o@toa, Eetorpiso Rak Mecagercut ee prose that provicce easontlesesttense

lad st Asian usaf Dine Cain 66, Due dela me i act as

by authon): CCBY 23 The Clare Dosctare
Amerleon Journal of Business Eéucalon Fst Quarter 2016. Folume 9, Number £

reining the acbieweret of the eri objectives Caran siden, se, eu ul rumor the
loutcomes oft eopocaton's ending risk ctor wih an Entree Rusk Management sou ESS

‘This etiss wees the tren tom the “Report on ths Curso State of Eatepine Risk Gverigh”publiahed by
the AICPA Tine bang, §© Covariates nd the liye ik Manoel Nor
(Caroline Stare Unversity to anly2s reporting Yous 2009 and 2010 for selected Fortune $000 abd gas compen.
‘fer gathering ol ecaivn rvstonfore 2009 se 3050 aon ert, ER. lings al roy aleve
the atile cxamlaes how the slceted companics ae inplemestiag sequins ideatted 1a the previously
teentonmd pstons oni SO) alae waves else ye alate ane boxe, Chere
‘ConocoPbilipe, Bakes Hughes, Valve Eastay an Fromusr OU Corporation,

The Companies

Essonte

122009, Eoioahoil omit ths Fore 50 list a hs ligst company ia Aanerse with tse sles teaching ae
Ing $2558 bill wale aun S879 ll 200, slays eras $841 38 fli
8 gros ncome soe to $90.92 ballon. Moreors, Emcoahdcil ise well-eaublabsd cvporaton wih the oll aad
fs fal. IssonBobi's exeuuives expla on the spon lngestaling Fak momar et ser
EcsoaVobi’s ask eenagcment sytem encourages a isk-aezssplosophy fo gover the corporation's business
skeen: iol, He nk yew iaigy sours eecives fe abigail
‘nanageazen sect of Exxoabobi's annie satazea Sensis th sein avas of tak and the acu taka Ey
the rps tae theses

Yai ios the gern set the 2090 a! ae alive fof the mon isk
sociated with inercesing te cogporeion'sprodvction capaci. For astanee hess production Geant Lcrcasse
reson us ater of ike iain prjeclsarep liing, aielies, ene pnrre,
rod ol and anrel ex piss, outer overs. snd regulatory changes. In esivon, Fexoa\obi's value of cash
Mow seperie grey crule snd ried ae cen, 1 min the ul egprl 9 veer
ExsoaQobl dstals the manacr in which they mitigate he sks Usted aor. As addrcesod la EssoxNobis 2009
feporation epporn ips niaigane the over! potttea! a tectea! refs ofthe Comoran
fers cena a cach aban Ue he eo aly fal ok
[Smiugaced by the corporetion’s nancial szcngth. dee capac, and well dvssitiespostllo. As the cesporetion
nines loge poised nt laine she Esso sens ar tasiring sheholier sl Mor
ratonang the tctorsesscinted with Escorts rk magcuscar sistem. it appropsat 1 conclude the
muation fe smn wala ter of gating rks steve, tytn ato ak
{sue philosophy” Despitthe wll thought-out rk menagemout str, Fexoasobl's 2008 emma! Repo file
Ii vention the asin of Choa Rik fic. The asec bevonMobl's apis Kish Nosed
stem leads fo the coacisoa tha he ese-adverss approach has been quite seecesf. however, devcopiag the
fh of lhe Kish Offoe wont hove te osnsges ea teva spe TL ble Ui ais
(Chst Risk Oficer are hanelsd by sascons and thi feashovecd witha ths vppr sbslon Gt manepsusat Absa
smote rteence lo sick er ne le, held repeal

(othe pba ha divans vss inl The Lane an Fanti 912 Carga Citoanchin Rr bh
[5 poblishod branoully aad includes climetechengcs. cxvronscualchllongss, mith and sisace projects,
Fe tang publi fr samo sana The at ise he ea nla pats sh
Notional Ou Compeay of Colombie, ax arsle ob Cabadian sals abd anarle om Angela Block JS. The Angola
$e splays tee Angolan A sua af rhs isn sels oa ligation tiatcoil eect nese
Dsssard ets obd ofthis ets tral mapa,

Copyright by author); CC-BY ™ The Clare Dosctare
Amerleon Journal of Business Eéucalon Fst Quarter 2016. Folume 9, Number £

2002, Ces rae mg the Fron 00 compara, il revenue ning thigh a 8265 blo
Jearing muy of tow comet ia Tair wks, Chvvea has proven to bee vsecel eompration with he oll
med gt rity. Wile dorsting ihe meakel Chet ow fepleerled ome of the mos fepecsive st
compeshensive Earopiss Rik Management (ERD) systoms evidenced by thee contnning iMesiieator
sowed request thts hvni ulfizy te sel sleet fo fur eames sa plea
Sbarcholdrs ofthe possible sks lavolvod an the of and ges undesuy. Tn penisulr, Chevson Meni peal
Fir taroiing the wliily of ae cil prices, su Fase evans of ftom shoring scones coe
Serving fguletvion and plier witha tletedcounuiss and some inccess ia cvala costs which cxcced hs
tulsa far se Tp reese vaso om hevne's ily ho provides resp Io thane sky
CChoveen coutnuelly cvalvate ie sak oppontnitie, and cosy moniter devlopmsits. ARE srwwiag
(Chessman fo ane a hat Chron Veni i Megat sou the
‘nowt developed and coups veers ot of th ix ol and gs soarpenies vised

Although Chevron hes an advensed risk managsmest system, chy did uot meston the postion of Chist Risk
(Often the eversve fit of ssh Talons lathe thom to eonchate thal Cheon showy rekon
Addiiooaly. ths company's lavestncat cadeavors ee uniucaced by Chcvion's tsk forme Issel After
Fevening Chan's 010 Pony Stunt, he slo egang the wes rs eens afresh
‘rine seseamert and maaagotasa, Spee the 2020 Prony Statemevn specie that ovesikt responsibly
Fale or te ul Compliant le hn murorng Chev’ Pak apse ie ln veh
guidelines apd plicis to goveun processes fr managing vsks. Ths Coussincedscusse Chevzes police Wit.
Fespect 19 rsh ssevsel inl rah tanperenl As sich, Chevron fie 4 salle aoped al dacten
‘Eneypuss Risk Manggenicnr e950,

Conoco

ne $06 comes

12 2009, ConosoPhiligs moved abead of Gensel Motors to clas Sound spot amoag the Fo
‘tn re he canon earn S124. 18 fllgn fugit ceal $897 fll he cv ty 300, tne
figursinecescd wo 5199-1 bllon ard 511.36 bili, spect. ConccePhllips” sucess aot lites tthe
(rtioal eo ay. hei 200 fn Rapa mons the ony ess posses igh exper chk
fsossmeut: this is domonsuatod in their csloration satcay into the House bauns. ConocePhilips sccks fo
frie the ae 0 Fis bats By seciring tive pins Ul bance sk ae es nee the
Gonsiereton that CoascePailips hes sskncuuel qppsete within thar dey-to-dey prosofurcs and rise

Vethout Ue msl repent, Comes us he hey som fe nl cin omens, the es wns
<hat ConpecPhilis alnays uses e disciplined eppossh whoa eanéucungbusinsss. The following statcet toa:
the 2800 boo eget nas tan la sara len cnet the sry rk qe “WA rbd
apres opparunsics oa baad. se exe ot pursuing ac acces that ease be comgetedtaveabp.” Tn cgraiag
‘sch rat opponents ConncaPhelis i pony o he lene

Vine 2800 aa 2000 doa! Reports dr wo mets the pte af Chief Wik eer ow ster Senior Le
Manager, Hower, ia the reading, i cbviovs that ConscoDilipe besa sepectals and thorough goes fr
Temagng Heke Mlrrevensng Comccobiie’ 7010 Fray Sine nga rok veh, res
tesigned to ConccePlips Nanagemsot, In aéitoa. the Boas of Dacor es oversight repeat for Ris
Singers in the rl the Noonl nines renews sa ecg plement sk
rmanagsateat process, esurng Ihc} xe functioning. as tended. Delgaion occurs 10 indviéeal Board
Gris, sich ts Ue Av ant tance Conve. Ail the Mina Ve Comrie ronal
fscuess the cosporsio’s risk assesusca and risk manggsucat pois to Yu that he progeass as opting
ihey were gna. slarsura,the Chao 9 Ue Aiton Vane Coneessnbace ial meee
‘whore the Chaus of cach Boa:d comme eather ro disenss the tuncuonality ofthe eureat nse mansesmeat
Fromme Moraiver, within the cue uf the yey the Din of Diesare reeves rear ile othe
‘Rupocive Boe comatose satya didval eres of concen. All ud the syeeneappoar compas.

Copyright by author); CC-BY 28 The Clare Dsetare
Amerleon Journal of Business Eéucalon Fst Quarter 2016. Folume 9, Number £

20, Valen ny kel er om the Fart 904 falling Unless with S660 lion

venue anda nega $273.00 auilion ia ast steome, Ia 20U0, Velo Haatsiel postoa changed data.
frowicing even of $822 lis an nari he cospany< el sare psene S28 eli, le
[Sa highly compettivs oll end ces company witua ths ladusuy. Supdsnely, Valcio's 2009 aimuat Report
Cima elec the fren of kk mmsgeren panes Tirouh the 79 tual Rag
Valo sucssed tie importance of taking aggressive spe to cobbat tre chaleages, while towing Hote
covet nthe

sing 200, Ver ook aatage ofthe apr to ves aertiee event Spill, Vern ete
ths eanolbusinse is 2009 by aosusig seven chanel plans lathe Miswest. Ths aequlstion alongwith the
frase of ee skisonal eta pare disin 2009, ped lo be poe evel the corr, ene
ths capciy by LJ billion gllos per year. The causes Valao tobe sas ofthe lnget produces ot sano] ths
imi. Vales align necomnive Ue opps tates allele ene wo piss the
operons fra sucess: this aso staccato the companys level of tlsebls se Is th 2009 tm
Tye Valea sara ting sy ies every a tbs ro na eect fad
ro ie achtovemer of te company’s ston. This sews as vidas ofthe ue of risk manggemcat process 0 Base
the somorasin's decir. llowater ee Uhdagh Vala hl » erly avon yrnces i rae sk,
cridsne of Chist Risk Ose ee nasi

‘Varo dropped tom the tout 1 dhs tecay-seh spot inthe 2010 Ferre 50D st. Tho 2019 Proxy Statement
onkane sect regiing rah munagered sat the lion's ssgonly Ingen sk mumagenen These
‘sponsibiiis isiode resting ‘ports from embers of senor management oa afas of mato isk. Those
epi ae ev arable the Noid lp wdestad ul ore Valeo ek sets Sein, uae tl
‘igctionsvatogis. Attrwar, the cairporson of ach Comune scperts on the meters othe Boa. Ths Board
a eleven sk tegen legal pf Vale's rule pinning proces” Vale's Chie
‘Aud Oatiees enna peoperce a competative il aescemeat report, ie sevwed by the i coca.
atheros, ep ili Wl nl shied eral cls Ul ene kee gs
those rks.

Boer Hughes,

2009, Baker Hughes Ine was number 227 on the Forune £00 ls. with evenne of $9.6 billion and ast incom:
‘030-4 ilo he ZOD hen hes sv lin 2 the Frio 300 Fal soo S142) fli
tnd ast oats increas to 0.81 biden, In coast fo the atsesmentionos couipaaie, Baker Hughes suet

‘Sih deol all servic cl sive Sil. The 99 nnoo! Report chal langly ax david
ctcy to outing the corporation's meta sks. This sceuon also details the effet of th sk on Bakr
Tages ne esis a sep ne eit les cra theses er Ughes ali ike ce

‘olutiy oF ol aad natu ge piss. store acting demand foro a ature gas. scesonl end adver Weather
itor hihlysurpattios rank geopolisel rab ul lerinsn rcs Towne, ker bes ieee
Fisk mvnageaiit proces faded to Metta Sceioe Level Managse devstes wo eecag thi proces. Fusomooe,
Ter eas do sat on ofthe sagan as rene Rn ss sk

Here’ mae ic sure by dhe campy empl desvon-making yeas win the ark
‘Tae Cargoction sts tek posaion athe bight compote macs by ecetig valve tor thei casos hough
leveling nee eal sebtle protean ensoes, shar les dale Ip ike on ete level fos nba
Scorching fo potcanal growth eas witha the opsraung scpmest tis plan was implored fo esist he
Snort acai nom tive al snrpetve rate he coqonys floss bl wh bi sve
big ceva in cs cass, sevard serene the company’s eb 10 sessn competative an & highly eggsssve
fe ska Tage vs moar ens ca ait the earanys ental posi, ise i sl
tmaturs Eatepise Risk Manageuscut stu: Ua place Bekor Hughss is able to uadorakee grceter evs ot rise
CSripunel ton conspmnies who ty have rly cesta the ike. sonchasmy ssypear that Tiber
Hughes" dccisous are besed ob @ asksccking appt The 2010 Proxy Semen does act sxplo® the risk

Copyright by author); CC-BY 26 The Clare Desetare
Amerleon Journal of Business Eéucalon Fst Quarter 2016. Folume 9, Number £

nama syste however, 210 Anno! Repo dss oversight risk as el rik marsgeret yin,
‘Tac spoosbliyof reviewing the guides aad polis on Earcpise Risk Manegcuscar ls upon the Av and
Minos Cormac sk scent and ok tagcat ell! tothe conmang's eur Cancel Hk
cspomies end tho step anagsaient fae tesa to moar ead maiges awh exposures |The Chet Comiglancs
(Otfecr provides rp the cone slang le sng Ue ii of the compan corpo
‘with is senéads, pliis,prosdurc, and processes Baker Hughes masts en Earopise Risk Ma

froses which mien the bashese's rit fveurh, inline wr astern exer shy erly sd
Eppuopiete maigtoa astviss, An aubvel Estsreee Rusk Management span is pressed tthe Auda ene Ede

(Corie sd pens ae the etre Bonk in aha, the load of Basins
Hck nanegenioatocesses i lec fy Baker Hvgbes ar apropeet

ve a the

Frenne Ox Corpora

1g 2009, Fromicr OU Cosprstioa ranked aumbse 335 on ths Forme $66 lst. with $6.80 billon in eevenue and
80.20 wlon nel fos, In 2050, ae Ol Carnation ded oe 1 spun he here sa
suns IEE, th $1.25 ilioa in revsnueabé a agatve 883-20 mulioa et insoase. Frotir resides witha the
Feta reine ibe, hush the cangany essay ruler Ha tye coats ld thi
fey. Hoatar dosieted ths Hust accion of the 2008 sual Raper euryung sated nse, Tao lato
fatal teil ik cons chal Tht coal il ves oe ely he ara, dard
HMucratias, compotion with corftiningcoupanic,coitehtsks. ad tvcets The fact that Froaic basa
clon nthe sal rap cect spectclly tn sce sing ison sll sale ery
the fat sp to prodeing« wolcoveloped Entel Rak Managstact sytem ito eat thecompenys mao
Feb aren

rughoul the 709 noua Herort the sharcholden ne inforoed wha sks ane preser e how thee sk
dicey ior From, although 29 plaa is meatoned to combat hese spite ks. The 2010 Proxy Stazoent
fll to idelly a Chi seuss Offices however tie sian il contain + seston dating the
‘soponsibiais ofthe Board sogardag ik miaageiea, ‘The Boerd and comme averse Foais'spnery
Fhks= Grane, operating Siguiente a esl ned aly se well the ites rete of Il

conaany. Spsctcaly. the Asie Conuaince monsters the work gttoated by uatral ely ia sch exces at
Fete insertoy pss soa ree Ue vk pica illmned fn poche eral il nl sar fed slack
AA such, Fromsr Ol Corporations sul in sk aenagementogenizaven es eters uncloded us ths ives

SUMMARY

Teble | suramerizescompan-idetiteé and ecpetd risks extracted tom annval soports, 10's, 6's and Proxy
Stasoens Aiton, tlle rats wim na i eflgv nee rescore by the rept
fod, ig sums cease ths authors. Miugetion mctode, ielvslag “Large end Diverse Pontos” and “Finacial
Shera ware wel epelisels by eompaen ll saya compara ware Grullyams ths ili
High iting on mignon ctenccacss.ddiuonaly. ell wore large and diverse in hs perso. Whea fing
ln ange sd Dhanee Hos von ly, tit ws tat very ches cade oe
shore and otFshoce. ll opt. dapouts of both oi and ges, queliy of serves owaed,gsogtepiea locaton, ead
platen so Boner bose ed errs wars thee hes iver ay efare ooling ellos
E58 scearch and development ot such AU companis Were svong in application of thir sion Thus thy wd
thie one snl seuss the shan of “OH nl Cie nan at Poche tr i
8 Gas Eeploction an Prosweton ia some ces, replaceé with “Eacrgy

Copyright by author); CC-BY ” The Clare Dosctare
Amerleon Journal of Business Eéucaton —

First Quarter 2016.

able. Wik Susu Chis

Folume 9, Number £

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Copyright by author); CC-BY

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Moles
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The Clare Dosctare
Amerleon Journal of Business Eéucalon Fst Quarter 2016. Folume 9, Number £

Lobe 2 surmorzes cmpomy-reprtadsasnent of “Chief Kick Offer ana thor sme af Lael
Risk AppettsTlsraes", slong with “Foreune $00 Ranking”. While sovcel industries bave taken stps 10
Spleen the tle of Chie! Kish OMicey the sl and ga tonpunies snalyved te Mtgerent anand
tienes ofthe Avda commie ro hansle ssh ek

Indus tha ave asa tps to anpouaaro Chist Risk Otter include banking, wore, aud ote Hail
sevice indir, specifically franca lone when desing il the crete al yt een ns
by inte etesarte of sunorsts tte of rink tlstnse. Cire ele hea cae oa. abd wel ee
The posison of Chie” ish Offer gros tne hore asheses x the realli regi ch
smanageascatiercess. For istnse, R80 f0oatseguleions igcude the Sarbanes Oley Ae and the Sscuty
Tchge Cons eee in ld saat of ss th yy pony sere

Isble2, Samay of i App asking.

Chere NA NA Jed Ave ik Aves 3 5

Convcoilips Na NA | katate akbiedowe f é

Baker Hushes NA NA | Kk Modmice Rik Morale Be

FoulirOlCerpertion Na Na | Mkshooss Nok ts
CONCLUSION

At th ond of 2009, the TS. Souris and Esshaage Comision bsgen sequitag all “US, publiey-raés
‘Sma a tclute th seal pony slave foto abd the a invent ck veh
[ically the SEC's roping sequent wil ssuze the od a ge adr to ther Sevelop i Eateprns Rise
‘Management ejetens. Tn cogltsion, companies raking higher on the Fortine 309 list appeared to have moze
Tiel aygnnces nlc nse sh Mager se

Ini, ver nee av ahem ses peri he rule af Chiat Risk Ree few xaos nce
benkiag, ieuranes, and eer fiancial services uncurics, Di até gee coapanise pace such reponse
gues on the Auda coouieo ands ltrartuctus. Some induc have alopcd the postion of Chast Risk
Oe, inchatng hl car, rel sl ves at, The sition nf Chie Fs Ofc esse rine
‘osiesecs asthe sogulaions ceeding isk napageica inscess

1 conchae six somportions tellowod the Seeitis end Exchange Commussion sporting roybizcasat which
‘ware fupitmeied cone of 2009. Turharrane, sch eapany's 19 Pring Sttemen chalet asin
‘etling sstormation abou the Boaud's involvement nthe vk oversight process Moccover, saay of te 26
Frew Stamens bok dowa the Boerd’s sek oversight aponsblry auig ths soaatecs and epleinsd ths
froces of Menifee gang, amd epg the corpora hs

Violet €. Ropers isa Psssssor of Ascouarancy et Stephon F. Austin State University. Hee taching intrest
inhale Avlitng, Repution, sna Gilad Cine Acco, er maar hlerecs Pcbula lewhing ate oe

Envtcamental Accounting. Etes and Rik She has previous exgviass in public accountng aud 25 yeas o
stusitnal experince vier 2D i= fre the Univesity of Nord Tews tomas women fine

{Covrapoading enter

Jack R. Eehrige is « Profsssor of Accouutacy a Stephen F_ Austia Sete Uasvsriy. His tashing intrest
Include Andinne. Advanced Accousirg. and Theory. He rescech noose inci eching eres andreas
racing eli Ile fs nv yf eal expen. Ils hI) hn Uses of hans
Email jteidgosiss oft

Copyright by author); CC-BY » The Clare Dosctare
Amerleon Journal of Business Eéucalon Fst Quarter 2016. Folume 9, Number £

Aloe §. (205 Atay 12). eeu cifras

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