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BP Oil Spill Transcript

Interview with Geary Sikich on the BP Oil Spill from an Enterprise Risk Management perspective

Iris: Geary, just coming from your background in enterprise/risk management, what are your thoughts about how BP handled the incident?

Geary: Basic thoughts are that they didn't handle it very well. They fell prey to typical mistakes and errors that companies make when they run their crisis situation. They panicked. They didn't get all the information they needed to get. There was a lot of confusion about what was going on. And, eventually they got to the point where they developed sort of a seige mentality, which is kind of an us against the rest of the world, if you will.

What's happened with the whole oil rig thing is that it seems that they some way, shape, or form, they've kind of forgotten about safety, which is kind of an enterprise/risk management issue that they need to really begin to consider. Because when you begin to look at risk it's just starting to go, "OK, what do we need to do, and how do we need to manage the risk?" It didn't seem like they're managing risk very well.

Iris: Now in one of your articles you mentioned that BP has been an easy target for the media. You say, "It's far from clear that the way they handled the incident has been as bad as portrayed." Tell us more about that.

Geary: The handling of the incident in terms of response, much like or the Exxon Valdez, where Exxon actually had a very good response, but very poor communications, you know, the media and their public relations. I'd say BP in the same instance had probably a very good response effort-wise, and very poor public relations communications as far as the way they were being portrayed and the messages they were sending.

The other thing I'd say there is the BP Deep Water event really begins to start to look at where are we at and the limits of technology. And what we've done is apply technology that worked well in lesser depths of water, into greater depths of water without really understanding some of the ramifications.

Iris: In what ways do you think that oil company executives and board members should see this as a wake up call for the industry. I know you spoke a little bit about oil rig safety.

Geary: In a couple ways, on the side of the senior executives and board members I think one of the things they have to be cognizant of for one is there are going to be new regulations as a result of this event.

Two, that they have a liability that they incur by not insuring that their operations are in fact running the way they should in accordance with existing regulations. The fact is though the regulations that are going to be promulgated as a result are going to be extremely reactive and will not necessarily resolve potential problems, primarily because potential problems will not have been seen by the people who are writing the regulations.

Iris: And, what do you think companies can learn just from considering the sheer amount of press that BP has received as a result of this event?

Geary: With regards to the press coverage would be that I'd highly recommend for companies, regardless of whether they're in the oil industry or not, to have a very aggressive crisis communications program whereby they deal with crisis media communications and actually train people to be able to speak to the media and understand what the media focuses on and what the media is after.

Iris: So in the aftermath of BP's crisis what do you think executives should now be asking themselves about their own enterprise risk management program?

Geary: I think that the thing I see there is that there has traditionally been- well, a lot of people will refer to them as silos within organizations, and what other people call cylinders of excellence, which is kind of being facetious about the silos. But, the real aspect is you do have these silos within organizations, and the traditional risk management function has been focused on insurability and looking at risks from a financial standpoint. So, "Here's our risk can we insure it? And what's our financial exposure?"

That is not well communicated throughout the organization so that people that are doing emergency planning, or business continuity planning, or disaster recovery planning, or developing contingency plans don't really have that tool in their toolkit with regards to the risk management area, because the risk management people keep that sort of close hold and it's been traditionally pushed off as, "That's not an area you need to look into. This is all of our turf," if you will.

Iris: One last question for you, Geary, just thinking about siloed organizations and the fragmentation that exists in traditional risk management, what kinds of weaknesses do you see in BP's structure, and ultimately what kind of effect do you think this had on their communication?

Geary: Where the weakness is maybe is the interfaces between the BP Transocean, which is the owner of the rig, BP leased Deep Water from them. And, miscommunication, you know, trying to get something done because budgetary concerns were coming up. The fact was that they were a bit behind and they were spending a lot of money. And it was like, "We need to get this thing done now." It was like, "Well, yeah, we need to get it done right." "Well, no. Just get it done."

[laughter]

That was what's kind of coming out on some of these interviews. I think 60 Minutes and some other ones had that there was a literal kind of a breakdown in communications between the people who were operating the rig and the BP people who were overseeing the project.

Now when BP said, "No, we want it done this way," and these guys were saying, "No, it needs to be done this way," and BP just kind of overrode that. So, it was failure on the part of BP to recognize the risk warning signs. They got misfocused. They focused themselves on cost of project versus risk of failure, and risk of failure won out in the end.

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