Managing Risk Appetite to Prevent NonCompliance

Experience has taught us all a great deal about risk. Wildcatters have to weigh the risk of a dry hole every time they drill a well. For professionals in the oil and gas industry, this is a risk worth taking when the potential reward is so lucrative.  Most wildcatters have a high risk appetite when it comes to oil exploration. They’re in it to win and, as the saying goes, “you can’t win if you don’t play”.

When it comes to regulatory compliance, most oil and gas professionals have a much lower risk appetite. We saw the most dramatic example of noncompliance when the blowout preventer on the Deepwater Horizon failed in April of 2010. Of course, there are many less extreme outcomes when regulations aren’t followed correctly. Many of these outcomes can still result in serious financial loss for oil and gas companies, among other consequences.

There are five main consequences of noncompliance that I can think of:

• Financial Penalties (Government Fines)
• Negative Reputation
• Lack of Safety (sometimes resulting in injury or loss of life)
• Criminal Charges
• Degradation of Corporate Ethics

So what is a healthy risk appetite for regulatory compliance in the oil and gas industry? The correct answer for most companies would probably be very low. With laws and regulations changing frequently in the oil and gas industry, noncompliance is actually quite common. The most common consequence that companies suffer when they are non-compliant is financial. Government fines and revenue loss when operations are ceased can be staggering.

One of the easiest and most cost-effective ways for companies to prevent this is by using Regulatory Change Management Software like cloud-based predict360. The predict360 suite of products lets users stay up to date with their policies and procedures so that noncompliance is a non-issue in a constantly changing landscape of rules and regulations.

Predict360 is a fully configurable and automated Enterprise Risk and Compliance management platform that has over 40+ modules for the Financial sector, Power sector, Oil & Gas, Information Security, Insurance, EHS and other major sectors. Some of the popular ones like audit management software are successful enough to have enabled 360factors to be awarded with 2014 GRC TECHNOLOGY INNOVATION AWARD.

Remain up-to-date on industry news / updates through our  Twitter & Linkedin profiles.

*All images are property of their respective owners.