Write a 3000 word report that critically analyses the risk management practices of an

international business of your choice. Your report should include a set of recommendation
aimed at facilitating continuous improvement.

1
 Table of Contents
1.0 Introduction................................................................................................................................3
1.1 Risk and Risk Management.......................................................................................................3
2.0 International Business and Risk Management...........................................................................4
2.1 British Petroleum (BP) at a Glance...........................................................................................5
2.1.1 British Petroleum and Risk Management...............................................................................5
2.1.2 BP Risk Assessment Changes................................................................................................6
2.2 Importance of risk assessment...................................................................................................7
3.0 Conclusion.................................................................................................................................7
4.0 Recommendation.......................................................................................................................7
References........................................................................................................................................9

2
 Executive Summary
Risk management is the identification, understanding and management of risks and opportunities
faced by an organization in other to achieve their objectives. This report evaluates risk
management practices of international business placing focus on British Petroleum (BP). The
report highlights the relationship between risk and risk management and also captions
international business and risk management. This report emphasis on British Petroleum (BP)
captions the history of the company at a glance and also shed more light on BP risk management
and assessment changes. Conclusively, there are more risks to carry in international business
especially in the energy sector. However, the potential gains in international business far
outweighs the risks involved. This report recommends proper assessment of risk management
with different international business as a great step to grow and add to the knowledge of the
environmental and economic impacts of using broadened risk management and assessment
strategies to address risk management practices of an international business.

3
1.0 Introduction

1.1 Risk and Risk Management

Risk is an effect of uncertainty on objectives. Risk can be illustrated as a situation

whereby an organization face a variety of factors and influences that make it uncertain whether
and when they will achieve their objectives. Risk in many ways can be applied to a situation
where there are several possible outcomes and, on the basis of past relevant experience,
probabilities which can be assigned to the various outcomes that could prevail. There has been a
shift in the societal and industrial interest of managing risk since 2008. Thus, leading to a
situation where the structured management and control of risks is now viewed as beneficial for
business and society and has led to a shift in the desire for a proactive rather than reactive
approach to risk situations.
Risk management is the identification, understanding and management of risks and
opportunities faced by an organization in other to achieve their objectives. Risk management is
based on the principles of assessment, identification and evaluation and control. The role of risk
management has over the years evolved in line with changing business needs, in order to deliver
recognized additional value to organizations. Risk management basically revolves around three
approaches. The traditional/defensive risk management focuses on insurance, contractual and
transaction risks. Integrated/advanced risk management function placed attention on the
management of insurable hazard losses through prevention and severity decline. This approach
concentrates on threats the organization faces. The enterprise risk management approach is an
approach under risk management which deals with risks from a much broader scope, depth and
response perspective, including strategic, operational and financial risks, among others, as an
interrelated portfolio. This approach focuses on how to make informed decisions about
uncertainties that affect the organization’s future. It is important to note that the risk management
process should form an integral part of any management duties (Institute of Internal Auditors
[IIA], 2012). Risk management should not be regarded as a separate business function, but
should rather be integrated into every facet of managerial responsibilities and decision making
(Mothopi, 2020). By default, this means it should also be embedded in a company’s business
culture and specifically tailored to the processes and needs of the company’s business. For an
effective utilization of risk management, it is imperative to establish external and internal context
basically due to the fact that this will allow in a company’s definition objectives within

4
applicable internal and external parameters. Establishing these context allows company to
determine the scope of the risk criteria that which will be useful for the rest of the process
(Mothopi, 2020). It is in the light of this that this report brings to the fore risk management
practices of an international business placing attention on British petroleum.
2.0 International Business and Risk Management

Subedi (2022) refers Stephen Herbert Hymer as the father of international business due to
his contribution to the theory of multinational companies and international business and also due
to his contributions related to foreign direct investment as well as his studies and academic
production on the field of theories of multinational enterprises.
International business can be considered as the exchange of goods and services between two or
more countries (Subedi, 2022). Quoting Czinkota according to Suibedi (2022), “International
business are forms of transactions devised and carried out across national borders in other to
satisfy the objectives of the individuals, companies and organizations. Roger Bennet define
International business as a form of business that involves commercial activities that cross
national frontiers. Subedi (2022) in his work also quoted John D. Daniels and Lee H. Radebaugh
definition of international business where it was stated that “International business is all business
transactions-private and governmental- that involve two or more countries. Private companies
undertake such transactions for profits, governments may or may not do the same in their
transactions.” International business transaction involves the exchange of goods and services in
form of transaction or production and distribution of resources for profits and transaction that
spans border, It is however no longer acceptable for organizations who are into international
business to find themselves in a form of position whereby unexpected events cause financial
loss, disruption to normal operations, damage to reputation and loss of market presence.
Stakeholders now expect that organizations will take full account of the risks that may cause
disruption within operations, late delivery of projects or failure to deliver strategy.
Relating risk management and international business has to do with the fact that for a
successful risk management in an international business, a major contributions is to ensure that
strategic decisions that appear to be high risk are actually taken with all of the information
available. Some reported cases of international business disputes among multinational companies
are reported in this caption. For example, the case of Aldi vs Marks and Spencers. Aldi was
accused by Marks and Spencers that their cuthbert catepillar cake was copying M and S's Colin

5
the Catepillar cake. Following a legal dispute, a settlement was made confidentially, however
Aldi capitalized on this risk for favorable PR with the issue of humorous tweets which went
down well on social media and resulted in favorable advertising for the supermarket. Most
organizations that engages in international transaction most times tried to generate positive or
negative impacts of this risks to the organizations strategic goals in other to prepare for the risks
identified in other to reduce to the likelihood and severity of these risks (Hopkin, 2018) just like
the case of Aldi vs Marks and Spencers.
2.1 British Petroleum (BP) at a Glance

British Petroleum, (BP) is one of the world’s leading international oil and gas companies with an
operating market of products in more than 80 countries, providing customers with fuel for
transportation, energy for heat and light, retail services and petrochemicals products for everyday
items with a market capitalization $77.4 billion in 2020 (Carpenter, 2021; BPFOI; 2010; 2021).
As a multinational company, they are the sixth largest energy company by production, and the
fifth largest company in the world by revenues (Oil&GasIQ, 2014).
Being a global group, BP major activities are held or operated through subsidiaries, jointly
controlled entities or associates established in – and subject to the laws and regulations of –
many different jurisdictions. The company name becomes The British BP enters Petroleum
Company Limited in 1954 spreading its tentacle to New Zealand, parts of Africa, and more
countries in Europe.
2.1.1 British Petroleum and Risk Management

Risk management failures has been regarded as a factor leading to BP offshore oil well disaster
in the Gulf of Mexico. British Petroleum estimated more than 200 million gallons of crude oil
pumped into the Gulf of Mexico for a total of 87 days, with $397.7 million dollars’ worth of oil
spilled, 16,000 coastline affected, more than 8,000 animals reported dead in just 6 month after
the spill and $105 billion lost by BP in 87days. Macondo disaster as a result of wellhead blowout
also revealed that investigative panel conducted on this disaster later attest to the fact that “no
evidence were found that BP performed a formal risk assessment of critical operational decisions
made in the days leading up to the blowout. BP's failure to fully assess the risks associated with a
number of operational decisions leading up to the blowout was a contributing cause of Macondo
blowout.

6
 Hopkin (2018) made it known that the purpose of any risk assessment remains the same
and it is also to identify what is believed to be the current level of the risk and identify the key
controls that are in place to ensure that the current level is actually achieved. Hopkin (2018)
posited that risk in assessment – are analyzed, considering likelihood and impact, as a basis for
determining how they should be managed. The above-mentioned statement credited to Hopkin
(2018) would have saved BP from the disaster they experienced. The aforementioned disaster at
the offshore rig killed 11, injured numerous others and led to nearly 5 million barrels of oil
pouring into the Gulf of Mexico before the well was capped on July 15, 2010. All these occurred
as a result of not carrying out risk assessment by the company. The sloppy preparation of BP for
risks and its inappropriate communications strategy cannot also be ruled out as no evidence was
shown on the company’s side that they had sufficient emergency plan for the worst-case deep-
water oil spill. All these showed their deficiency in risk management. The risk management in
question that should have solved this disaster has been put also been placed on understanding the
hazards drill crews faced, as well as the checks and balances meant to prevent such accidents.
2.1.2 BP Risk Assessment Changes

According to Hopkin (2018), the combination of risk recognition and risk rating form the risk
assessment component of the risk management process. Risk assessment involves the recognition
of risks and the rating of them to determine the significant risks facing the organization, project
or strategy. Hopkin (2018) also opined that group-wide risk assessment requires business units to
formally review business risks each quarter as this will help them in the identification, analysis
and assessment of risks and thus, will help to ensure responsibility so that they are managed,
controlled and monitored. This could broad spectrum of risks could range from strategy,
operational performance, finance, product engineering and technology, business reputation,
human resources, health and safety and the environment. The causes and the consequences of
each risk are considered and, where appropriate, linked to strategic and operational objectives.
Hopkin (2018) in his study stated that risk approaches can be undertaken making several
approaches. One of the key decisions will be who to involve in the risk assessment exercise.
Sometimes risk assessments are undertaken by the board of directors as a top-down exercise
Complying to Hopkin (2018), BP in other prevent future disasters in the assessment of
risk changes decided to enhance safety and risk management by implementing safety and
operational risk organization (S&OR) team and also implement a report named the “Bly” report

7
which addresses shareholder input, continual improvement and continuity, and adds experts who
are apt to deal with complex situations making use of the approach of boards of directors stated
by Hopkin (2018). Through the aforementioned risk assessment changes, the company was able
to assign experts to continuously improve standards as problems arise and change as it this help
to continuously provide technical expertise for all of the operations leaders (Looney, 2012). The
team also utilize its knowledge base to design and update standards (Looney, 2012). Overall, the
main goals of the S&OR team to provide technical expertise in order to enable production to
proceed in a safe, reliable, and compliant manner was achieved (Looney, 2012).
2.2 Importance of risk assessment

Risk assessment is vitally important and useful if the conclusions of the assessment are used to
inform decisions and/or to identify the appropriate risk responses for the type of risk under
consideration (Hopkin, 2018). For an effective risk assessment, consideration must be put for it
as the starting point of the risk management process and it is certainly not an end in itself.
Hopkin (2018) also pointed out that identifying risk that is going to be evaluated at the inherent
level or at the current (or residual) level is a major and important feature of undertaking a risk
assessment. An approach recommended by internal auditors. An internal auditor will point out
that two risks at the same current or net value may have significantly different inherent or gross
values. It is however important to be able to detect know when this is the case. The benefit of
undertaking assessment of inherent risk is that the difference between the current level and the
inherent level can be identified as knowing this will give an indication of the importance of the
existing control measures and the information will be used by internal auditors to help identify
critical controls and set audit priorities. Although this may be a useful approach, there can be
considerable difficulties in identifying the value of the inherent level of risk.
3.0 Conclusion

Risk management identify, managed and nullify risks in all business activities in an effort to
increase the production or value of the company facing organizational problems. This report has
evaluated risk management practices of an international business placing its focus on British
Petroleum (BP). Having evaluated a considerable number of papers in this area, it can be
concluded that there are more risks to carry in international business. However, there are
potential gains in international business that far outweighs the risks involved.

8
4.0 Recommendation

Assessing risk management with different international business will be a great step as this will
help to grow and add to the knowledge of the environmental and economic impacts of using
broadened risk management and assessment strategies to address risk management practices of
an international business. In addition, better hedging polices must be put in place to offset losses
in investments by taking opposite position in a related asset.

9
 References

Aven, T. (2016). Risk assessment and risk management: Review of recent advances on their
foundation. European Journal of Operational Research, 253(1), 1–13.
https://doi.org/10.1016/j.ejor.2015.12.023.
Avent, T. (2015). Implications of black swans to the foundations and practice of risk assessment
and management. Reliability Engineering and System Safety 134 (2015) 83–91
BP Financial and Operating Information (2010). Corporate report/pdfs 2006 – 2010
Bp-Annual-Report-And-Form-20f-2020. (2021). Retrieved 1 September 2021, from
https://www.bp.com/content/dam/bp/businesssites/en/global/corporate/pdfs/investors/bp-
annualreport-and-form-20f-2020.pdf
British Petroleum. (2010, September). Deepwater Horizon containment and response:
Harnessing capabilities and lessons learned. Retrieved from
http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/
incident_response/STAGING/local_assets/downloads_pdfs/
Deepwater_Horizon_Containment_Response.pdf
British Petroleum. (2011). Response timeline. Retrieved from http://www.bp.com/iframe.do?
categoryId=9035136&contentId=7065156
Carpenter, J. (2021). The Top 5 British Petroleum (BP) Shareholders. Retrieved 1 September
2021, from https://www.investopedia.com/articles/insights/062 016/top-5-british-
petroleum-shareholders-bp.asp
Hopkin, P. (2018). Fundamentals of Risk Management (4th ed.) Abingdon, UK. Routledge
IIA (2012). Executive Report | Risk Management and Internal Audit: Forging a Collaborative
Alliance.
International Standard ISO/IEC 31010 (2009). Risk Management: Risk Assessment Techniques,
www.iso.org
Looney, B. (2012). Managing Risk and Building Value in the Next Decade. Retrieved September
17, 2014, from http://www.bp.com/en/global/corporate/press/speeches/managing-risk-
andbuilding-value-in-the-next-decade.html
Mothopi, L. (2020). Linkedin Post > sums it all up in one page. Iso31000 risk management
process explained (linkedin.com).
Oil&GasIQ. (2014). Top 10 Oil and Gas Companies. From
http://www.oilandgasiq.com/strategy-management-and-information/articles/top10-oil-
gas-companies-number-6-bp/
Subedi, K. (2022). A conceptual study of international business. Journal of management and
sustainability. 1:12-11:1.

10
11
 Bibliography
Aven T. (2011). Quantitative risk assessment. The scientific platform. Cambridge: Cambridge
University Press.
Buckley, P. J. and Casson, M. (2003). The future of the multinational enterprise in retrospect and
in prospect. Journal of International Business Studies, 34(2), 219–222.
Sealy, I., Wehrmeyer, W., France, C., and Leach, M. (2010). Sustainable development
management systems inglobal business organizations. Management Research Review,
33(11), 1083-1096. Mauro, G.(2012). Global Turning Points, Cambridge and Emilio
Ontiveros, University Press.

12