BP Company Leadership in Geopolitical Environment

The exploration of oil and gases is significant business that takes place in the world due to high demand of energy from these sources. BP is a leading company that explores gas and oil products in the world (BP.com, 2010). The company started in 1908 in Persia as Anglo-Persian Company (BP.com, 2010). However, the name changed to its present form after various mergers with other companies. BP has its headquarters in London and is one of the companies listed in Stock Exchange in Frankfurt, London and New York (BP.com, 2010).  BP handles products such as lubricants, petrochemicals, light energy, heat energy and transportation of these products. The company employs over 70,000 people and operates in about 70 across the words (BP.com, 2010). Currently, BP is able to produce approximately 3 million barrels every day and owns about 17 billion barrels of oil (BP.com, 2010). The company further carries refining of oil in its different sites. Some of the brand BP Company owns include Bop marine, Aral and Castro among others (BP.com, 2010). The company is vertically integrated and it starts its operations by exploration through refining and finally marketing its products in the market. Apart from exploration, BP Company generates power from wind and biofuels. 

BP Management is aware of the risks that face their company and thus develops different risk management measures. One of the risks involves commercial and strategic risk where the business has to face financial resilience, geopolitical systems and climate change (Macalister, 2011). The risks especially carbon pricing from different government can result to rising cost of operating there business. Actually, due to its operations in different countries, BP faces varying political scenario. However, the company monitors these regulations and environment thus enhancing its relation with government and related stakeholders. The management adopts risk mitigation strategies as it monitors events taking place in the world (BP plc, 2019). Financial risk originates from changing market dynamics and the company responds through diverse portfolio, strategic planning and effective financial framework (Hunter, 2017). Operational risk also faces the company where the management has to provide safe working environment, attractive employee welfare and good relationship with the locals where it operates. 

Paper Objective

Geopolitical risks pose a significant challenge to multinationals that operate in different countries. Some of the risks originate from natural calamities, civil wars, politics and government regulations among others (The World Bank, 2018). The risks have potential to affect the supply chain and core operations of a company thus reducing its profitability. There are different companies across the world that has faced geopolitical risks especially concerning September 11 terror attack (Behendrt & Khanna, 2015). Multinationals are working towards ensuring that they identify and mitigate risks before they suffer from losses from such events. 

Through this paper, analysis of leadership performance of BP Company concerning their response to Iraq geopolitical landscape is covered. World Bank report on ease of doing business places Iraq at position 153 out of 183 countries in the world (The World Bank, 2018). The position shows the risk that faces any company that operates in this country. 

Result and Discussions

Despite facing different risks from geopolitical landscape, BP has emerged successful due to effective mitigating plans. Iraq is a leader in oil market in the world and exports about 80% of its more than three million barrels it explores per day (Macalister, 2011). BP faces competition in Iraq from companies such as Oxy, Mobil and Exxon but retains the highest percentage of shares in the Iraq fields (Macalister, 2011). The management of the company has invested significant capital in this sector thus remains proactive in preventing any disturbance in the region. Some events that are posing geopolitical risks to BP in Iraq include threat of terrorism from groups such as ISIS (BP.com, 2010). However, BP responds to this threat through ensuring that it restricts its operations on the southern parts of Iraq, which has not registered any attack from the terror group. The management provides security and safety to its assets and employees. The company monitors security situation in the country and takes different steps such as regular board reviews. 

BP conducts annual plans that engage board of management to review different risks and the preparedness to respond to such threats. Through the review, the management assigns different assignments to various groups to ensure monitoring of all risks.  The risks are classified as either high or low priority and resources allocated on basis of this categories. Major risks include legal non-compliance, financial viability, terror and operational accidents (Hunter, 2017). There is establishment of dedicated committee that monitors possible impact of social political tensions on company’s operations in Iraq. Further, the company carries events contingency such as drills to prepare the employees to responds to different risks and especially terror. The plans are effective and they helped the company safe its employees from threat of spillover in Rumania in 2011 (Macalister, 2011). 

However, despite the reviews by management the company recognizes that constant monitoring is important in enhancing mitigation of risks. BP works with the locals to understand and mitigate geopolitical risks. There are different measures that the country puts such as travel warning when they recognize geopolitical risks in a given country (BP plc, 2019).  Indeed, during such events the staff only travels to countries that have low risks. The company also offers guarded transportation through use of security companies armed against mines or bullets (BP plc, 2019). Additionally, the company offices rely on armed security to protect them from possible external attacks. The company further operates joint ventures with different local partners to minimize risk. Southern Oil Company is in joint venture with BP in Iraq (BP plc, 2019).  Further, the company discourages employees from staying with families in Iraq and instead offers them accommodation in countries such as Dubai. The management also recognizes foreign exchange risks and thus makes contracts using local currencies. 

Conclusion

Geopolitical risks are a significant challenge for business operating across countries and there is need for management to identify such risks and mitigate them to avoid negative impact on their performance. Oil industry faces significant threat from geopolitical risks threat especially in countries such as Iraq under terror threat. BP Company, which has significant investment in oil industry in Iraq, has contingency plans to handle this risk. The company also has plans to foresee such crises and methods of responding to the threat. There is progressive review on geopolitical risks and management takes different steps to ensure that its assets and employees are safe. The efforts have significantly helped the company remain competitive in the oil industry in the world. 

References

Behendrt, S. & Khanna, P. (2015). Risky Business: Geopolitics and the Global Corporation. Retrieved January 19, 2019, from: https://www.strategy-business.com/article/03308?gko=00437

BP plc. (2019). Reviving One Of The World’s Super-Giant Oilfields. Retrieved January 19, 2019, from: https://www.bp.com/en/global/corporate/what-we-do/bp-worldwide/bp-in-iraq.html

BP.com. (2010). BP History at a Glance. Retrieved January 19, 2019, from: https://www.bp.com/content/dam/bp/pdf/investors/bp-foi-2006-2010-introduction-and-history.pdf

Hunter, M. (2017). Premiums for Geopolitical risk returning to tighter oil market. Financial Times. Retrieved January 19, 2019, from: https://www.ft.com/content/12c03914-b89d-11e7-8c12-5661783e5589

Macalister, T. (2011). BP ‘Has Gained Strangehold Over Iraq’ After Oilfield Deal Is Rewritten. The Guardian. Retrieved January 20, 2019, From: https://www.theguardian.com/business/2011/jul/31/bp-stranglehold-iraq-oilfield-contract

The World Bank. (2018). The World Bank in Iraq. Retrieved January 19, 2019, from: http://www.worldbank.org/en/country/iraq/overview