“People usually regard risk as being negative,” says Boyd Wright, HSEQ manager of Aberdeen-based Venture Production plc. “But there is an opportunity side to risk. I spend a lot of time saying, ‘Good risk management is not a barrier’.”
Six years ago, when Boyd Wright took over Enterprise Risk Management (ERM) as part of his HSEQ role at Venture Production, the company had 50 employees in Aberdeen. Everyone pretty much knew each other and processes were generally not written down. But the success of Venture, an independent company founded in 1997 which specialises in the acquisition, development and production of proven but under-exploited ‘stranded’ oil and gas fields, has changed that situation. Now the company has nearly 200 staff at its head office in Aberdeen, 70 staff in its offices outside Amsterdam and offshore in the Netherlands and is still on target to double production in the next two years – as it has done every two years in the last six. It is on the FTSE 250 Index (a capitalisation-weighted index of 250 UK companies on the London Stock Exchange) and has interests in over 50 North Sea proven oil and gas fields. That success has resulted in it having just been acquired by Centrica Resources, the owner of British Gas.
In the course of these years of rapid expansion, ERM has become a useful and necessary tool for Venture, tailored to fit its business. “As the company grows there’s always a threat of strangling yourself with processes,” says Boyd Wright. “So we don’t paralyse ourselves by over-engineering. Everything has to fit the company culture.”
Everybody involved
“The way we managed business risk in Venture from the start was different from most other companies, in that we involved every employee. We didn’t say to people, ‘You’re in the finance department, so look at the financial risks.’ We asked: ‘What do you think the risks are to the business?’”
“Everybody thinks they know what the risks are to a company until they go through the process. Then they find out they don’t actually know.”
This ‘bottom-up’ approach enables Venture to tap into the wealth of experience of its employees and is complemented by a ‘top-down’ completion when the same questions are asked of the senior management and board, who always add new perspectives.
An informal ERM process worked when the company was much smaller, but three years ago Mr Wright brought in DNV, knowing the process needed development due to the fast growing and increasingly more complex organisation.
“How can we make this better in a larger company, yet still retain that flavour of getting everyone involved?” they asked at the time.
Use of experts
Venture’s business model is based on having a relatively low number of highly experienced and very competent employees, many of whom are in effect ‘contract managers’. “Our business model is not to man up to do the work ourselves,” says Mr Wright. “We generally contract out the services we need. But the people running those contracts need to have enough knowledge, experience and understanding to know that what they’re buying is what they want. When it comes to ERM, I have a need to do it, and to do it properly. I have a pretty good idea of what I want, but I bring in somebody who I’d see as an expert to help me facilitate that, and to do what I don’t have time to do, like finding out what best practice is. I need someone to find out other ways of doing it, other models, and adapt them to fit Venture’s fairly unique way of doing business,” he says.
DNV developed the new business risk process and has facilitated it for the past two years. This has given Venture a total risk picture that now focuses on the key business issues with the confidence that it has made a broad search for threats and opportunities.
“Last year, as we went through the annual update, some managers only brought in their direct reports and some managers used the whole department. So it’s a mix. It’s another good example of process in Venture. We don’t say to people, ‘Right, you will come with your direct reports and do this’. We say to managers, ‘This is what we want to get out of it. Bring in whoever you think is necessary’.”
Risk appetite
Mr Wright emphasises the benefits of good risk management, and how determining a company’s risk appetite can bring in new opportunities.
Venture acquired one of its platforms in 2003, when it was producing just 3,000 barrels a day. The previous operator could have further developed the field, but chose not to. “Why didn’t they? They decided, I think, that it was a bit difficult. The reservoirs were not easy, there was risk associated with it, so they were quite happy to sell it to us. Today that platform is producing 30,000 barrels a day for Venture.”
“One of the things that Enterprise Risk Management really shows us is what our risk appetite is. How risky do you want to be?”
Obviously, Venture’s risk appetite has paid off.
Date: 2009-10-23