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Reputability LLP are thought leaders in the field of reputational risk and its root causes, behavioural risk and organisational risk. Our book 'Rethinking Reputational Risk' received excellent reviews: see www.rethinkingreputationalrisk.com We help business leaders to find these widespread but hidden risks that regularly cause reputational disasters. We also teach leaders and risk teams about these risks. Here are our thoughts, and the thoughts of our guest bloggers, on some recent stories which have captured our attention. We are always interested to know what you think too.

Tuesday, 17 November 2015

The Rise and Fall of BP

The tale of BP is a story of a sleepy British corporate, transformed by Lord Browne into one of the world's largest and apparently most successful oil companies, only to be cut down to size by a series of tragedies.

When it emerged that BP's apparent success was built on foundations of charisma, a flawed safety culture, cost-cutting and lost internal expertise, its reputation and its market value, were destroyed.  It became a pariah, publicly berated by a US President, downgraded to BBB by Fitch and discussed as a take-over target.  It was probably saved from takeover by its toxic litigation legacy, only recently resolved at a cost estimated at more than $50 billion.

Journalists have feasted on stories from the Texas City explosion and the Deepwater Horizon disaster.  We deconstructed the root causes from reports internal and external, to extract more lessons from these stories than from almost any other company in crisis.

But to our delight, Professor Andrew Hopkins has done better.  He taught the US Chemical Safety and Hazard Investigation Board, charged with investigating the Texas City refinery explosion, about culture, safety cultures and learning cultures.  His insider knowledge of the investigation and track record of thinking and teaching about oil industry disasters put him in a good position to write about both disasters.  But he also identified, which we had not, a treasure trove of material: depositions and internal BP documents on a US website devoted to the Texas City disaster by Eva Rowe in memory of two of its victims, her parents James and Linda Rowe. 

The result is two exceptional books.  The first, 'Failure to Learn' takes apart the story of Texas City with a confidence that comes from direct contact with the evidence of witnesses and other primary sources.  Based on these sources he devotes a chapter to the failure of BP's top leadership

'Disastrous decisions' the second of this pair of books, deconstructs the Deepwater Horizon disaster.  It is worth quoting its opening words, which we endorse:
The blowout in the Gulf of Mexico on the evening of 20 April 2010 caught everyone by surprise although it shouldn't have."
Before the Deepwater Horizon disaster, BP was sufficiently riddled with systemic behavioural and organisational risks and reputational risks that a bad accident was to be expected even it was not possible to predict timing or the precise accident.  This is not an uncommon situation: systemic risks typically lie latent for years, sometimes decades, before causing what can be catastrophic damage.  In the meantime, the absence of a catastrophe leads insiders, particularly leaders, to be complacent, believing that "it won't happen to us" because it hasn't - yet. Outsiders, and frequently lower level staff, know otherwise.  But no-one listens to them until luck takes a day off.

Whereas the special focus of 'Failure to learn' is leadership, Hopkins uses 'Disastrous decisions' to explain and illustrate the power of error management and root cause analysis to find out why accidents happen so that their root causes can be dealt with before they cause harm. He also focuses on decision-making by middle-mangers, using the community of engineers to illustrate his points.

Both books make striking contributions to the literature.  Their additional sources have reinforced our analysis with new and strong evidence. Both should be compulsory reading for business leaders, board members and everyone with risk responsibilities.

And unlike most required reading, they tell a captivating story too.

Anthony Fitzsimmons
Reputability LLP
London
www.reputability.co.uk