Risk management is an integral part of all business activities of Seplat.
Managing risk in protecting our business
Risk management is an integral part of all business activities of Seplat. The Company’s risk management policy is focused on the early identification of risks and future risks that are central to achieving its strategy, corporate objectives and annual business plans; their possible impacts on the business; and measures that can be implemented to mitigate the identified risks so that Seplat can continue to operate safely and effectively.
Seplat recognises that risk management is a continuous journey of improvement and not a
destination, and will continue to develop its risk management processes to ensure the Company is fully equipped to deal with the constantly evolving operating and business environment of the oil and gas industry.
Risk management system
The Company’s risk management system is based on guidelines provided in ISO 31000, the international standards for risk management. The system is built on a top-down and bottom-up approach with the Board of Directors (the ‘Board’) determining the right risk appetite necessary to achieve the Company’s corporate objectives while the business units identify and mitigate risks at the unit and asset levels.
The Risk Management and HSSE Committee assists the Board in overseeing the Company’s risk management framework and the risk/reward strategy as determined by the Board. The Committee ensures that the Company has adequate risk management systems in place to manage the diverse and changing risks and opportunities faced by the Company as it creates value for shareholders. It meets at least three times in a year to analyse and evaluate the Company’s key risk profiles, proposed mitigation strategies, mitigation actions taken by management and any residual risk exposures. The meetings are attended by Executive Directors who have accountability for ensuring that risk identification is comprehensive and proposing mitigating measures that are effective in achieving the desired objectives. Reports on the Company’s corporate risk register, key risk exposures and reviews of its risk management systems are compiled and presented to the Board of Directors.
While key risks and associated risk appetites are determined at the top, the business units and functional managers are accountable for the respective risks within their areas. The Company’s ERM system, coordinated by the Head, Internal Controls & Risk (‘ERM Coordinator’) and overseen by the Risk Management and HSSE Committee, supports risk management across the business and functions. The Company’s ERM includes a robust risk identification, assessment, reporting and monitoring mechanisms and approaches that include maintenance of both corporate and operational levels risk registers, risk dashboard, mitigation actions tracking and monitoring and risk reporting.
In a bid to continually embed risk management across the business and functions, the Company utilises specially appointed and well trained Risk Champions to ensure common methodology, language and approach in the way risks are managed across the business.
The Internal Audit unit undertakes periodic audits of the various business units including the Company’s corporate governance systems and risk management processes.
Key principles that underpin the Company’s risk management framework and system:
- Strong focus on safety throughout the organisation.
- Close oversight by senior management in day-to-day business operations.
- “Risk owners” throughout the business.
- Accountability of staff and/or key personnel.
- Regular and timely reporting.
- Clear line of sight on the system of internal controls.
- Monitoring and independent reviews.
Activities in 2019
In In 2019, the Committee analysed and evaluated the various key risk exposures for the Company. In doing so, the Corporate Risk Register was reviewed, and the risk reports presented by management. These reports detail the key risks, the potential impact of the risks and the likelihood of occurrence. Mitigating strategies were comprehensively considered, including but not limited to those related to the stability in the Niger Delta, oil price volatility, export line breaches and alternative crude oil evacuation options. Other risks considered are funding challenges with the majority joint venture partner, liquidity, market, contractual and litigation risks. The status and effectiveness of mitigation actions were reviewed and any residual gaps or follow-up actions were identified. Key performance indicators as well as other risk indicators and trends were monitored. Key risks requiring risk tolerance considerations and strategic actions were presented to and debated by the Board.
The Committee reviewed the risk management systems including the risk dashboard and assessment tables. The Committee gave further consideration to the achievements made by the Risk Champions appointed with a view to unify risk management approaches and embed risk culture across the organisation.
The first quarter of the year was marred by huge uncertainties on outcomes following the conduct of the 2019 Federal and State elections. The Committee worked with management to ensure that mitigation actions were put in place to curb any severe exposures arising from the elections. The strategic mitigation action plan was designed such that an adequate business continuity plan was put in place to ensure availability of essential duty personnel to keep the business going if election violence resulted in the declaration of state of emergency or movement restrictions. Overall, the elections were conducted peacefully with no remarkable impact on the business.
The Committee received regular updates on Seplat’s performance regarding environmental, health, safety and community relations matters; reviewing any strategies and action plans developed by management in response to issues identified and HSSE performance on industry benchmark scorecards.
As part of assessing fraud mitigation efforts, the Committee reviewed the operations of the whistleblowing system to obtain assurance of its effectiveness in the organisation.