Webinar: Why has the recent change in the global oil prices caught so many organisations out

Phil Griffiths

Why has the recent change in the global oil price caught so many organisations out?

The webinar will start shortly

Webinar Leader

Phil Griffiths

CEO

Business Risk Management Ltd

[email protected]

Agenda

• Welcome• Housekeeping notes• Session starts• Q&A• End of webinar

House Keeping• Slides will be available on our SlideShare page, link will be

emailed to you

• Recording of the webinar will be available to download, link will be emailed

• Take the time to complete post-webinar survey that will pop up at the end

• You can type your questions throughout the session

• Time will be allocated in the end for the speaker to address your questions

Predicting Major Events

• The ability to predict significant events impacting a business and having strategies to deal with them is a business differentiator

• It is also a key element of the Enterprise Risk Management (ERM) process

Predicting major events

• Why then has the recent large fall in global oil prices seemingly left businesses unprepared?

• Buying oil forward at $95 per barrel when the current price is $140 seems like a good deal – but not when the price falls to $45!

What has gone wrong?

• The last 10 years has shown us that the world can expect business volatility

• The depth of the recession in 2008 was not predicted

• We have had more frequent and more devastating natural disasters

• Now the oil price fall?

What else could be missed?• What other events could be lurking

out there?• Whose job is it to look for them?• What should the role of the

Assurance providers such as Risk Management, Internal Audit and Compliance be in this regard?

Characteristics of a mature ERM process AON 2014 survey

• An ERM culture that encourages full engagement and accountability at all levels of the organization

• Engagement of stakeholders in risk management strategy development and policy setting

Characteristics of an Advanced ERM process

• Identification of new and emerging risks using internal data as well as information from external providers

Characteristics of an Advanced ERM process

• A move from focusing on risk avoidance and mitigation to leveraging risk and risk management options that extract value

Every business needs to ‘ring fence’ exposure• The Medici

principle • No single part of

the business should be able to critically impact the whole organisation

What about ERM?

• Having a comprehensive ERM should identify emerging risks?

• However, my experience is that emerging risks particularly the ‘black swans’ are often not recognised until it is too late

• A black swan is a rare but very high impact event

The Reason that black swans are not often recognised

RISK ASSESSMENT MATRIX

5 10 15 20 25

4 8 12 16 20

3 6 9 12 15

2 4 6 8 10

1 2 3 4 5IMPACT

LIK

ELIH

OO

D O

F O

CC

U

The recommended approach

RISK ASSESSMENT MATRIX

11 16 20 23 25

7 12 17 21 24

4 8 13 18 22

2 5 9 14 19

1 3 6 10 15

IMPACT

LIKEL

IHOOD O

F OCCURREN

CE

Managing emerging risks

Emerging risks

• Emergent Risks are those that have not yet occurred or are at an early stage of becoming known

• They are expected to grow greatly in significance.

• They do not have the ‘track record’ of other risks and usually arise in the longer term.

Emerging risk examples • Nuclear energy• Climate change• Flooding and

famine• San Francisco

earthquake• Social media• Shale Oil

What should be done?

• How can lessons be learnt?• What actions should be put in place?• Who has to be involved?• What else can be done?

Course Dates- 2015

ERM May 3-7 & Nov 15-19

Advanced ERM Apr 12-16 & Sep 13-17

Risk Based Audit Mar 15-19 & Oct 25-29