Enterprise-wide risk management (EWRM) provides: 1) Comprehensive identification of risks across the entire organization. 2) A systematic analysis of all organizational risks. 3) Quantification of risks and identification of the organization's risk retention capacity. 4) The ability to combine similar risks for evaluation and promote better strategic decision making to optimize the overall risk profile.

1. Enterprise-wide risk
management
“ It is the process whereby an
organisation optimizes the
manner in which it takes
risks’

2. Enterprise-wide risk management
• Provides Comprehensive Identification of
Organisation-wide risk
• Develops a systematic analysis of the
Organisation’s risks
• Quantifies them
• Identifies the risk-retention capacity of the
Organisation
• Provides ability to combine like-risks for
evaluation
• Promotes better strategic decision making
• Optimize overall risk-profile.

3. Business
Risks
Public
Perception
Management
Systems
Personnel
Risks
Environmental
Risks
Community
Risks
Facility
Risks
EWRM- Involves

4. END
Risk Management Process
Determination of the limits of machinery
Hazard Identification
Risk Estimation
Risk Evaluation
Is the machinery safe?
Risk Reduction
NO
YES
Risk
Assessment
Risk analysis

5. Engineered Systems
Operating System
Risk Management Model
Incident
Investigation
Failure Mode
Identification
Operational Assessments
( Reliability-centered Maintenance)
Lessons Learned
Fixes

6. Personnel “Systems"
Personnel System
Risk Management Model
Accident
Investigation
Job safety
Analysis
Operational Assessments
(Area inspections,safety Committees)
Lessons Learned
Fixes

8. Risks an Oil Company faces?
• Market risks
– Crude oil
– Natural gas
– Refining margins
– Currency
– Interest rates
• Operational risks
– Catastrophe
– Production loss
– Reservoir risk

9. Why EWRM?
• Add to shreholder value by
– optimizing risk profile through hedging
– Allocating capital (risk/reward) that ensures
sufficient cash flows for profitable investments

10. Risk committee
• Establish risk committee at each group level
• Accountable for strategic market risk policies
• To be headed by CFO
• Members could be
– Corporate risk manager
– Head of corporate control
– Head of project site
– Head of crude oil trading
– Controllers in exploration

11. Risk Committee Main Issues
• Who should have price risk
responsibility
• How to report the effects
• How to avoid sub optimization
• How to deal with tax issues
• What are the most effective guidelines
for hedging transactions

12. Debt strategy
• Achieves flexible access to short and long-term
capital markets to ensure sufficient liquidity
• Optimizes portfolio based on the expected
corporate cash flows using a dedicated multi
currency liability management model
• Concerned about-
– Finding sources
– Maturity profile
– Currency mix
– Interest rate risk management instruments
– Liquidity reserve

13. MLM-Risk Management
Strategies
• Generating realistic scenarios for future exchange
rates, interest rates, commodity prices based on
historic correlation
• Simulating the behavior revenue/expenses/cash
flows,debt and financial asset instruments
• Aggregating cash flows to arrive at expected
profitability
• Analyzing source of risk and identifying potential
hedging instruments
• Optimization analysis to determine best ways of
managing exposure

14. MLM
• Identifies the ‘efficient
frontier’ showing the trade-
off between the risk and
return.

15. Efficiency Measures of Risk
Management Practices
• Use of Sharpe Ratio
– Measures risk-adjusted reward
– Measures return in the context of the risk
taken
– Helps in comparing different group’s
performance against the backdrop of
risks taken individually

16. Internal controls: how safe?
• Belief systems
– Are core values of the Co. communicated
effectively?
• Boundary Systems
– Do managers know the specific actions &
behaviours that are off-limits?
• Diagnostic control systems
– Are control systems adequate to monitor critical
performance variables?
• Interactive Control Systems
• Does control systems facilitate learning?