Bp - the Case for Corporate Governance

ndon South Bank University

MSc Corporate Governance

Corporate Governance – Principles & Practice

-------------------------------------------------

Corporate Governance Case Study: British Petroleum

Submitted by:

Alex Alderson (Student Number: 3128229)

Vanés Cassells (Student Number: 3125227)

Robin Smith (Student Number: 3131145)

Introduction

In the words of Ramo (2009), “We are now at the start of what may become the most dramatic change in global order in several centuries... What we are facing isn’t one single shift... as much as an avalanche of ceaseless change... creating unprecedented disruption and dislocation.” Given that a crisis normally occurs without prior warning, it is therefore imperative that certain measures and procedures are put in place that can expedite a cure and thereby reduce the impact so that normality can be restored. For there to be effective crisis management, a robust risk management structure must be instituted within the organisation and must form an integral part of the ongoing corporate governance monitoring framework. A company should learn from previous incidents and incorporate preventative as well as curative measures into any risk assessment.

The risk oversight function of the board has gained immense importance in the last few years, mainly due to the collapse of the financial sector in 2008. Today, risk management has become even more critical and challenging. Companies are now confronted with risks that are more complex, interconnected and potentially devastating than ever before. BP’s ostensible lack of consideration for the risks involved in exploration drilling contributed to large-scale disasters which, in turn, highlighted a catalogue of corporate governance failures. The repercussions have been multifold as liabilities in the form of cleanup costs and reimbursements for lost livelihoods continue to mount. Alongside this, shareholder confidence has waned considerably – BP share price suffered its...