The term “risk management” refers to identifying, assessing, reacting to, and keeping tabs on any threats to a company’s market standing and bottom line. When firms know their processes’ and systems’ weak spots, they may better allocate resources for immediate and future gains. As a result, evaluating them is crucial for all businesses since they help organizations make well-informed, quick-turnaround investment decisions and prepare them for risk management and devise a risk management plan.
Risk analysis and establishing strategies to remove challenges put a firm in a good position for strategic planning and helps keep unexpected expenses under control.
Risks that the Oil and Gas Industries Face
Major risks that industries face are mentioned below:
1. The ESG Risks:
Environmental, social, and governance risks (commonly abbreviated as “ESG risks”) are possible dangers to a corporation. Climate change impacts and mitigation, environmental risk management practices, working and safety conditions for employees, anti-bribery and corruption measures, and general compliance with industry-specific norms and regulations are all ESG elements.
Remembering that every obstacle may contain a hidden opportunity is essential when risk analysis is done in this industry. Last year, the International Monetary Fund highlighted that eco-friendly efforts were increasing in Asia as a risk management plan adapted by their industries.
2. Supply Chain Issues
There is still widespread fallout from COVID’s interruption of the worldwide supply chain. The reasons industries are still experiencing bottlenecks were discussed in a recent episode of Marketplace. Those conducting risk analysis must consider the repercussions of such supply problems.
It’s important to know if your company’s most valuable resources rely on something external and if so, to make contingency plans in case something goes wrong. Supply chain dangers aren’t going away anytime soon, unfortunately.
3. Scam Issues
Scammers have exploited the weaknesses in the supply chain. Since the emergence of COVID, there has been dishonesty surrounding PPE equipment, and this trend will likely persist until at least 2022. Since fake KN95 masks are so standard, the New York Times recently reported where people might get authentic ones.
A rise in loans and loan forgiveness occurred directly from the first government response to the COVID outbreak in the United States. Warning signals to look out for if your company has received unsolicited contact, including those that pretend to be government entities providing help, may be found on the FTC’s website.
Assessments of the possibility of fraud, both internal and external, should be performed by businesses.
Risks Involved In the Oil and Gas Sector
The oil and gas industry is no doubt one of the most flourishing industries in the world. However, this industry is vulnerable to the maximum level. Thousands of risks are involved in the sustainability of these industries. Although the list is way too long still, some of the risks are explained here as follows:
1. Risks related To Environment:
The air contamination caused by burning fossil fuels is called the “invisible killer.” It has been linked to a variety of disorders, including those of the respiratory and cardiovascular systems. The extraction of fossil fuels can also result in the release of toxic substances into the surrounding Environment, which can lead to cancer, birth defects, and damage to the liver.
It is essential to cut back on the development of fossil fuels, particularly on public lands, that should contribute to our health and well-being rather than pose a risk to it. The risks to our health posed by oil and gas production are genuine.
· Toxic Emissions From Fuel combustion Leading To Climate Change
The current era is witnessing a shift in the climate. 2020 was one of the hottest on record, the wildfire season in the West was longer, and storms were more deadly than they had been in the past. These severe weather occurrences may be traced back to burning fossil fuels, which emit gases that trap heat in the atmosphere.
The United States is one of the world’s leading emitters of greenhouse gases, and the extraction of fossil fuels from public lands causes over one-quarter of those emissions. Public lands, with improved management, have the potential to become part of the solution rather than the issue.
On these lands, we might conduct less extraction of fossil fuels and more responsible generation of renewable energy.
· Destruction Of Wildlands
The infrastructure created for extracting oil and gas can leave behind significant effects on the surrounding wildlands. Heavy machinery is required for the building of roads, infrastructure, and drilling sites, all of which have the potential to devastate large tracts of untouched wilderness.
In many cases, the harm cannot be undone. Typically, these projects include the removal of significant portions of rangelands and flora utilized by both people and wildlife. Even if oil and gas corporations give up on these sites, in the long run, it may be generations before they return to their natural state.
Workers in the oil and gas industries face the risk of fire and explosion due to the ignition of explosive vapors and gases. Several things, including wells, vehicles, production equipment, or surface equipment like tanks and shale shakers, might ignite flammable gases.
Hydrogen sulfide, methane, and other vapors and gases are some examples. Examples of possible ignition sources include static electricity, electrical energy sources, open flames, lightning, cigarettes, cutting and welding devices, hot surfaces, and heat created by friction.
3. Risks Related To Cyber Security
The product chain of an oil and gas firm typically consists of three parts: the upstream, the midstream, and the downstream. Upstream refers to the processes involved in oil exploration and production, while midstream describes the movement and storage of crude oil via pipelines, trains, ships, or trucks. Upstream and midstream are both considered to be parts of the oil industry.
And finally, the creation of final goods, known as the downstream. Cyber hazards are prevalent in all three categories; however, few occurrences have been publicly reported for the upstream and midstream categories.
Oil and gas firms should be on the lookout for several different dangers. The factors that have a direct and adverse effect on the companies’ ability to manufacture their final goods are the ones that pose the most risk to the sector.
In addition to this, such businesses are required to take measures to protect themselves from industrial espionage. Following is the summary explained regarding these risks.
Sabotage in the oil and gas business might take the form of modifying software’s behavior, erasing or erasing all material on all accessible machines, or erasing or wiping specific content to disrupt corporate activities.
Common knowledge has been spread about a few such sabotage campaigns, the most well-known being the Stuxnet incident. Stuxnet was an autonomous malware with a very particular and targeted payload.
Analysis of the worm’s code indicated that it was created to infect computers at the uranium enrichment facility of Iran’s Natanz Nuclear Plant.
Threat from within
An insider is typically a dissatisfied employee out for vengeance or seeing an opportunity to make quick cash by selling sensitive information to rival companies. This individual poses a sabotage risk.
They can steal intellectual property, leak confidential papers, and cause disruptions by tampering with, deleting, or destroying data from business servers or shared project files.
Because insiders typically have access to so much information, protecting against them is difficult and complex. Furthermore, an insider likely already knows the firm’s inner workings and does not require months to learn the internal network.
Information theft and espionage
Theft of data or espionage might be the first step in a more extensive and damaging attack. Attackers often require a certain amount of background knowledge to launch an attack.
Intruders can make money by stealing sensitive information, including well-drilling methods, data on probable oil and gas deposits, and secret recipes for high-end items.
Risk management By the Oil and Gas Sector
There are proper departments set up in the oil and gas industries that examine the risks caused by the drives to the Environment and devise a strategic plan to cope with or manage those risks.
In the case of environmental risks, a team comprising biologists and environmentalists is made whose work is to deeply research the effects of specific oil and gas industries on the Environment and the risk analysis. First, they ensure that the industry is located far away from the water bodies so that the aquatic ecosystem is not disturbed.
Secondly, in the case of climate change, industries are working to establish environmentally friendly types of machinery in the system. Those types of machinery are specifically designed to release waste gases by passing them through special filters so that the toxins in those gases do not disturb the natural atmospheric layer.
Thirdly, proper training is given to the workers and the staff working in the oil and gas industries to devise risk management plans because the Environment in which they work is scarce. One small mistake and everything could catch fire. Fire extinguishers and the rescue staff are also employed and stay alert to prevent some hazardous unfortunate events.
Lastly, for cyber security, the proper staff is recruited. Most of them are IT experts and Software Engineers. They know everything about the online management system and the protection of the design of their industry. They develop their security system and protect it from viruses and hackers. They try their best to save their company from all kinds of cyber threats because the online stored information may include crucial data details of the company.
Risks are part and parcel of life. Risks are involved in almost every system, whether on a higher level o smaller level. Similarly, the oil and gas industries also face many threats regarding their risk management.
Those threats have proven true if one takes examples from past incidents. Nowadays, every oil and gas industry is working to acknowledge and find every minute risk involved in their system and to devise a proper risk management plan. This article summarizes all the risk factors, risk analysis, and risk management plans acquired by the oil and gas sectors.
Q1: What dangers are associated with the use of oil?
- Pollution damages communities.
- Dangerous pollutants fuel climate change.
- The exploitation of wildlands for oil and gas can be disastrous.
- Visitors are discouraged from coming to areas where fossil fuels are extracted.
- Drilling harms animal habitats.
- Animals are particularly vulnerable when there is an oil spill.
Q2: In the oil and gas business, what exactly is risk assessment?
Identifying potential dangers and considering the outcomes that could result from their occurrence is known as a risk assessment. This method can be broken down into three stages: Identification of Risks: Identify internal and external risks, as well as risk factors that have the potential to result in harm.