Report Jan. 5, 2021
ExxonMobil utilizes a risk management framework based on decades of experience to identify, manage and address risks associated with its business.
Report Jan. 5, 2021
ExxonMobil's approach to risk management
ExxonMobil’s corporate risk framework provides a structured, comprehensive approach to identify, prioritize and manage risks across the Company. It is designed to drive consistency across risk type, and monitor key risks, including risks related to climate change. The framework includes five elements: (1) a way to organize and aggregate risks (see illustration); (2) robust risk identification practices; (3) a prioritization method; (4) an inventory of systems and processes to manage risk; and (5) risk governance.
ExxonMobil’s approach to risk governance includes clearly defined roles and responsibilities for managing each type of risk, utilizing a multilayered approach. This approach includes a definition of the responsibilities of risk owners, functional experts and independent verifiers. Each risk type is managed and supported by functional organizations that are responsible for specifying corporate requirements and processes. Each of these processes includes the critical elements of leadership, people, risk identification and management, and continuous improvement. Oversight responsibilities by the Management Committee and the Board and its committees are a key part of risk governance.
Managing long-term risks associated with climate change is an integral part of managing strategic risks at ExxonMobil. A core element of the Company's management of strategic risks is the work underpinning the Outlook for Energy. The Outlook reflects a long-term, data-driven approach to promote a deeper understanding of global trends and projections related to population and economic growth, energy demand and supply options, as well as assessments of key uncertainties and potential impacts of alternative assumptions. Uncertainties include changes in economic growth, the evolution of energy demand and supply, emerging and disruptive technologies, and policy goals and actions. The Outlook informs business strategies, assumptions and processes for evaluating investment opportunities. Managing risk associated with climate change is an integral part of that work, helping to ground choices related to long-term strategies and individual investments.
Resilliency: Protection of assets, the community and the environment
ExxonMobil has extensive experience operating in a wide range of challenging physical environments around the world. The Company's long history of managing diverse operational designs, construction and operating conditions provides it with a solid foundation to address risks associated with unique physical environments. The Company assesses risks posed by weather and other natural elements, and designs its facilities and operations in consideration of these risks.
ExxonMobil‘s diverse portfolio requires it to work in remote and challenging environments, including flood-prone areas. Using a rigorous and comprehensive scientific assessment process and the highest quality data from measurements and advanced computer modeling, the full range of potential environmental, socioeconomic and health risks associated with potential operations are considered before pursuing a new development. Public consultation is also undertaken through community meetings and other outreach mechanisms, and the Company works with regulators to share information and maintain alignment. In doing so, a comprehensive understanding of potential impacts is developed and the information is used to implement measures to avoid environmental, socioeconomic and health risks, reduce them to acceptable levels, or remedy the impacts.
When considering physical environmental risks, including risks for production, refining and petrochemical facilities, the type and location of current and planned facilities are evaluated. As an example, offshore facilities could be impacted by changes in wave and wind intensity as well as by changes in ice floe patterns, while onshore facilities could be vulnerable to sea level rise, changes in storm surge, flooding, changes in wind and seismic activity, or geo-technical considerations. Environmental assessments are conducted in advance to ensure that protective measures and procedures are in place prior to building and start-up of the facilities.
ExxonMobil's scientists and engineers are considered industry experts across a variety of relevant disciplines. Through their active participation and leadership in industry groups, they advise and gather insights to inform and improve industry standards which in turn are adopted to enhance ExxonMobil‘s standards and procedures and industry practices such as the American Society of Civil Engineers‘ Climate-Resilient Infrastructure Adaptive Design and Risk Management Manual of Practice.
Industry standards such as ASCE 7,1 Minimum Design Loads and Associated Criteria for Buildings and Other Structures, are used along with historical experience and additional factors to cover a range of uncertainties. After construction of a facility, the Company monitors and manages ongoing facility integrity, through periodic checks of key aspects of the structures.
For example, the Gulf Coast Growth Venture (GCGV), a new petrochemical manufacturing facility near Corpus Christi, Texas, is compliant with both San Patricio County and national standards (ASCE 7). Storm water handling, which is a risk factor associated with GCGV, includes basins that have been designed to retain excess storm water to supplement the capacity of the municipal water system. The design, construction and operations of petrochemical facilities are highly regulated by the Texas Commission on Environmental Quality. Company representatives have held hundreds of outreach meetings with local organizations, chambers, government agencies, civic groups and neighborhoods and have addressed all comments and concerns raised during the permitting process. Additional information on the TCEQ permitting process can be found on its website.2
ExxonMobil’s comprehensive approach and established systems enable management of a wide variety of possible outcomes, including risks associated with climate change.
Local Emergency Planning Committee
Once facilities are in operation, the Company maintains disaster preparedness, response and business continuity plans. Detailed, well-practiced and continuously improved emergency response plans are tailored to each facility to help ExxonMobil prepare for unplanned events, including extreme weather. Periodic emergency drills are conducted with appropriate government agencies and community coalitions to help heighten readiness and minimize the impacts of such events. Strategic emergency support groups are established around the world to develop and practice emergency response strategies and assist field responders. Regardless of the size or complexity of any potential incident, each ExxonMobil facility and business unit has access to readily available trained responders, including regional response teams, to provide rapid tactical support.
Under the U.S. Emergency Planning and Community Right-to-Know Act of 1986, local emergency planning committees must develop an emergency response plan, review it annually, and provide information to citizens about chemicals in the community. These plans are developed by the committees with stakeholder participation.
Each of the Company's U.S. manufacturing facilities is involved with local emergency planning committees in the communities where they are located. Site personnel attend regular meetings and events alongside local emergency services providers, elected officials, public health officials, community groups, and industry representatives. Each committee posts information on a public website for accessibility.
The following are recent examples that demonstrate the power of this engagement:
- Baton Rouge, LA: ExxonMobil worked with the city of Baton Rouge, through relationships built in the area planning committees, to enable fuel truck deliveries during events requiring safety curfews, and ensure a steady supply of fuel to support critical infrastructure.
- Baytown, TX: ExxonMobil's Baytown Complex sponsored a shelter-in-place awareness campaign, intended to enhance communications, equip residents, and engage local residents and officials on the importance of having a shelter-in-place community plan in the event of an emergency.
- Beaumont, TX: Officials at ExxonMobil's integrated petrochemical complex developed shelter-in-place guidance to help strengthen the connection between industry and community emergency responders.
1 ASCE 7 is an American Society of Civil Engineers standard for Minimum Design Loads and Associated Criteria for Buildings and Other Structures that "describes the means for determining dead, live, soil, flood, tsunami, snow, rain, atmospheric ice, earthquake, and wind loads, and their combinations for general structure design."