risk management (“rm”) program january2009. 1 risk management objectives goal of the...
TRANSCRIPT
Risk Management (“RM”) ProgramJanuary2009
Risk Management (“RM”) ProgramJanuary2009
2
Risk Management ObjectivesRisk Management Objectives
Goal of the Halliburton RM Program is to achieve:
- Higher returns on capital
- Reduced cash-flow volatility
- Reduced risk of unsuccessful projects or poor execution
- NYSE compliance and strong corporate governance
Goal of the Halliburton RM Program is to achieve:
- Higher returns on capital
- Reduced cash-flow volatility
- Reduced risk of unsuccessful projects or poor execution
- NYSE compliance and strong corporate governance
3
Risk Management StrategyRisk Management Strategy
The strategy designed to achieve the objectives has three basic elements:
- Senior management leadership• Board of Directors / Senior leadership oversight
• Advisory committees comprised of executive management
- Cultural permeation• Exposure to all levels of the organization
• Risk awareness ingrained in behaviors
- Sustainability• Continuous assessments
• Documentation and training
• Recognition program
The strategy designed to achieve the objectives has three basic elements:
- Senior management leadership• Board of Directors / Senior leadership oversight
• Advisory committees comprised of executive management
- Cultural permeation• Exposure to all levels of the organization
• Risk awareness ingrained in behaviors
- Sustainability• Continuous assessments
• Documentation and training
• Recognition program
4
Risk Management ProcessRisk Management Process
Identify Risk- Risk assessments led by RM committee
• Guidance provided by Executive Advisory committees • Over 200 individual interviews with senior management and key personnel• Survey of an additional 60 Operations personnel in 25 countries
• Completed eight functional assessments (Legal, Ops, M&A, IT, HR, BD, F&A, Supply Chain)• Focus groups to identify emerging risks
Control Risk- Avoidance or transfer of unacceptable levels of risk
• Strong corporate governance• Contracting policies and review process • Global insurance coverage• Financial and process controls• International Commercial Agent Policy and Agent Review Committee
Monitor Risk- Continuous reassessment of risks and controls
• Ensure linkage of Risk Management Process with Audit Plan and Program
• Cycle and risk-based audits• Gap analysis performed to both confirm that controls in place are appropriate and effective• Operational project reviews
Identify Risk- Risk assessments led by RM committee
• Guidance provided by Executive Advisory committees • Over 200 individual interviews with senior management and key personnel
• Survey of an additional 60 Operations personnel in 25 countries
• Completed eight functional assessments (Legal, Ops, M&A, IT, HR, BD, F&A, Supply Chain)• Focus groups to identify emerging risks
Control Risk- Avoidance or transfer of unacceptable levels of risk
• Strong corporate governance
• Contracting policies and review process • Global insurance coverage• Financial and process controls• International Commercial Agent Policy and Agent Review Committee
Monitor Risk- Continuous reassessment of risks and controls
• Ensure linkage of Risk Management Process with Audit Plan and Program• Cycle and risk-based audits• Gap analysis performed to both confirm that controls in place are appropriate and effective
• Operational project reviews
5
Risk Management LeadershipRisk Management Leadership
Board of Directors Halliburton Sr. Management
RM CommitteeChairman: Sr VP & Treasurer
Director Risk ManagementVP Internal Audit & Controls
Law Department Representative
Corporate Advisory CommitteeVP & Controller
Sr VP Commercial LawEVP Administration
VP LitigationVP Information Technology
Sr VP Supply Chain ManagementEVP Corporate Development
VP Tax
Working TeamRisk Management, Internal Controls
Treasury, Audit, Law Department
Operations Advisory CommitteePresident Completion & Production
President Western HemispherePresident Eastern Hemisphere
VP BD & MarketingDirector Global Operations Finance
President Drilling & Evaluation
Subject Matter Experts ("SME")
Determined as needed
6
Current Status Current Status
Completed preliminary assessment of all risks- 8 Functional Assessments completed
- 144 material Assessment Risks identified
- Prioritized by significance and likelihood
Categorized 144 Assessment Risks into 30 broad Risk Categories in Corporate Overview booklet
- Facilitates better understanding
- Easier to catalog and incorporate into user-friendly documents
Developed Risk Management Tool comprised of Corporate Overview booklet and 8 Functional Assessments
- Incorporated Corporate Policies into Assessment Risks when appropriate
- Normalized significance and likelihood across Assessment Risks using common terminology
- Developed instructions for using Risk Management Tool located in appendix
Completed preliminary assessment of all risks- 8 Functional Assessments completed
- 144 material Assessment Risks identified
- Prioritized by significance and likelihood
Categorized 144 Assessment Risks into 30 broad Risk Categories in Corporate Overview booklet
- Facilitates better understanding
- Easier to catalog and incorporate into user-friendly documents
Developed Risk Management Tool comprised of Corporate Overview booklet and 8 Functional Assessments
- Incorporated Corporate Policies into Assessment Risks when appropriate
- Normalized significance and likelihood across Assessment Risks using common terminology
- Developed instructions for using Risk Management Tool located in appendix
7
Current Status (Continued) Current Status (Continued)
Evaluated Assessment Risks in light of identified controls
- Implemented(ing) corrective measures when appropriate• Lease analysis
• Commodity price risk
Begin institutionalizing the Risk Management process
- Process should be usable and influence behaviors at all levels of organization
- Seamless integration into existing business policies and practices
- Results tailored to specific jobs for maximum effectiveness
- Employee communication
Evaluated Assessment Risks in light of identified controls
- Implemented(ing) corrective measures when appropriate• Lease analysis
• Commodity price risk
Begin institutionalizing the Risk Management process
- Process should be usable and influence behaviors at all levels of organization
- Seamless integration into existing business policies and practices
- Results tailored to specific jobs for maximum effectiveness
- Employee communication
8
Top Risks Top Risks
Lack of Demand for Hydrocarbon Based Fuels
$70 cost / barrell
Long term investment
Marginal wells / fields
Green energy
Failure to Comply with Laws and RegulationsInternational challenges
SEC compliance
Intellectual Property
Control of Hazardous Materials / Environmental damage
Harsh Chemicals
Radiation
Well site hazards
Lack of Demand for Hydrocarbon Based Fuels
$70 cost / barrell
Long term investment
Marginal wells / fields
Green energy
Failure to Comply with Laws and RegulationsInternational challenges
SEC compliance
Intellectual Property
Control of Hazardous Materials / Environmental damage
Harsh Chemicals
Radiation
Well site hazards