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 impact on the business and measures that can be implemented to mitigate the identified risks so that Seplat can continue to operate safely and effectively. At the same time, the Company continually maps out its response and plans should events go wrong and learnings from past incidence reviews. 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.
Roles and responsibilities
The Board of Directors is responsible for setting the overall risk management strategy of the Company and the determination of what level of risk is acceptable for Seplat to bear. The HSSE and Risk Committee assists the Board of Directors and has oversight of the Company’s risk management framework, profile and the risk/reward strategy as determined by the Board. The Risk Management and HSSE Committee includes two Independent Non-Executive Directors and the Chairman of the Committee, with the CEO and CFO in attendance. The head of the Company’s internal audit unit may attend the meetings of the Committee. Specialists with appropriate technical expertise may also be invited to attend meetings of the Committee when necessary. The Committee meets at least four times each year when it analyses and evaluates Seplat’s total risk exposure and ways to streamline processes throughout the business to promote a unified and standardised approach to risk management.
Reports on the Company’s risk exposure and reviews of its risk management are compiled and presented to the Company’s senior management and Board of Directors. The main risk factors identified in this risk review and reporting process then become the main focus of the Committee over the coming year. For internal control purposes the Company has policies and procedures in place that aim to improve internal business processes and strengthen control systems across the Company. The Company has an internal audit unit that undertakes periodic audits of the various business units including the Company’s corporate governance systems and risk management processes.
Cross functional dependencies exist with the Finance Committee, which also monitors the controls and activities to mitigate identified financial risks. The Board also focuses on risk management in discharging its role over strategic matters and oversight over key business activities. These include approving the Company’s annual budget and five-year business plan and potential risk to the achievement of the plan and defining key operational and non-operational targets in monitoring business performance and growth.
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.
Main initiatives in 2016
In 2016, we analysed and evaluated the various key risk exposures for the Company. In doing so, we reviewed the Corporate Risk Register 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 Niger Delta stability, low oil price environment, export line breaches and alternative crude oil evacuation options, funding challenges with the majority joint venture partner, liquidity and market risks, and contractual related risks and attendant litigation. The status and effectiveness of mitigation actions were reviewed and any residual gaps or follow-up actions were identified. Key performance indicators and 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 across the organisation.
The Committee received regular updates on Seplat’s performance in regards to 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.
The committee followed through to ensure that operational risk matters identified during the Committee’s physical inspection of the Company’s field infrastructure were adequately addressed.
As part of assessing fraud mitigation efforts, the Committee reviewed the operations of the whistleblowing system to obtain assurance about its effectiveness in the organisation.
Find out more about how we manage risk in our online Annual Report.