GEMI Survey EHS Risk Management

1
GEMI SurveyEHS Risk Management

• October 2001

Carl Wirdak Occidental Petroleum Corporation
2
Outline

• Survey Recap
• Risk policy and program features
• Risk assessment process
• what is covered
• how is risk assessed
• Information and communication
• Risk management process responsibilities
• Risk management outcomes

3
Survey Overview

• Survey covers the management of environment,
  health or safety (EHS) related risk as it applies
  to a companys business activities (i.e.,
  manufacturing, transportation/distribution,
  product formulation and use, etc.).
• Survey response rate 69
• 27 companies responded to the survey
• Not all companies completed all questions
• Broad industry coverage
• Chemicals, semiconductor, oil/gas, consumer
  products, pharmaceuticals, food/beverage, forest
  products, energy, transportation, etc.

4
Risk Policy

• gt95 of respondents have an internal policy or
  guidance document that directs efforts to
  identify / manage EHS risks
• Most risk management programs are formal
• Acceptable risks are established on a
  case-by-case basis, rather than by setting
  bright-line or unequivocal limits

5
Risk Policy
Majority require that all risks be identified and
managed
6
Risk Assessment - Scope

• All respondents do EHS compliance audits
• 80 of respondents covered by a legally mandated
  risk management requirement (OSHA PSM / EPA RMP)
• 88 of respondents conduct EHS risk assessments
  and all of these address risk issues that go
  beyond regulatory compliance

7
Risk Assessment - Focus
Physical risks appear to be the primary focus
8
Risk Assessment - Process

• 67 have written procedure that provides a method
  for categorizing EHS risks
• 50 say the methodology for categorizing PSM /
  RMP related risks is different than for all other
  types of risk

• 43 force rank different types of EHS risks on a
  common scale

9
Risk Assessment - Process
10
Information / Communication

• 84 of respondents address inherent EHS risks of
  operations
• 92 report on risks that go beyond those areas
  covered by PSM / RMP
• Nature of risk discussion

• 83 include mitigation opportunities
• 59 document risks left unmitigated

11
Information / Communication

• Facility, Corp EHS and Legal know the risks
• Risk information communicated to Division/BU
  management
• Corporate management does not receive risk
  information

12
Information / Communication

• Legal Department involvement
• 80 of companies have legal input
• Risk assessment team member or report reviewer
  (sometimes directs the team)
• Twice as likely (40) to have outside counsel
  involved in risk assessments versus EHS audits

• Apply audit privilege

13
Responsibilities

• Identification and management of EHS risks rests
  with line management and facility, division, or
  corporate EHS staff

14
Responsibilities

• EHS and (to a lesser degree) other facility staff
  are primarily responsible for conducting and
  validating the risk analysis
• Where corporate EHS is not involved in risk
  analysis, more than 25 of respondents do not
  validate the output

15
Headcount
16
Outcomes

• 80 of companies require identification and
  prioritization of risks
• Only 45 require elimination of risk
• Line management is responsible for choosing
  accepting risks
• Popular 3rd party insurance
• Operational
• Business Interruption
• E, S, H

17
Outcomes

• Benefits of EHS risk management
• Lower risks
• Reduced potential liabilities
• Improved EHS performance
• Enhanced EHS legal compliance
• Lower EHS costs and lower insurance costs
• Enhanced management awareness
• Safer products
• Smoother ISO 14000 registration
• Satisfy stakeholder expectations
• Created new customer service opportunities

18
Outcomes

• Emerging areas of risk management
• Sustainability
• Social Responsibility
• Company and brand reputation
• Community relations
• Persistent chemicals
• Biosafety
• New issue management

19
Questions / Comments

• We assess existing risks to find ways to avoid
  conditions and designs that create significant
  future risk.
• We use our life cycle management process, EHS
  management system plus RMP/PSM and EHS audits to
  control risk.
• Has any company outsourced the risk analysis
  function?
• Are companies considering a transparent, full
  disclosure policy or participation (by NGOs,
  etc.) on company risk assessments?
• How well do companies utilize their risk
  evaluations related to intangible assets for
  financial analysts?