Our risk management approach

Managing long-term risks associated with climate change is a key part of managing strategic risks.

Report Dec. 15, 2022

Our risk management approach

ExxonMobil’s enterprise risk framework considers climate-related risks

Our Outlook for Energy is a core element of our enterprise risk framework, which provides a structured, comprehensive approach to identify, prioritize and manage risks across the company. Our framework is designed to drive consistency across risk type and monitor key risks.

The framework includes five elements:

  1. A way to organize and aggregate risks
  2. Robust risk identification practices;
  3. A prioritization method;
  4. An inventory of systems and processes to manage risk; and
  5. Risk governance

For more details on the risks we consider and manage, refer to Item 1A. Risk Factors in the 10-K.

Our approach to risk governance is multilayered and includes clearly defined roles and responsibilities for managing each type of risk. It 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. Our Management Committee consists of our Chief Executive Officer, our Chief Financial Officer, and our two Senior Vice Presidents, who are responsible for the Upstream and Product Solutions businesses, as well as ExxonMobil Technology and Engineering, and Global Projects. The President of our Low Carbon Solutions business reports directly to the Chief Executive Officer.

Protection of assets, the community, and the environment

We have extensive experience operating in a wide range of challenging physical environments around the world.

Effective risk management requires the ongoing assessment and mitigation of potential physical impacts to our people, our assets, the community, and the environments in which we operate. Before pursuing a new development, we use data and advanced computer modeling to assess the full range of potential environmental, socioeconomic and health risks associated with potential construction and operations. We also consult with communities through public meetings and other outreach, and we work with regulators to share information and seek necessary approvals. This process gives us a comprehensive understanding of possible impacts, which we use to implement measures to avoid, reduce, or remedy environmental, socioeconomic, and health risks or impacts.

When considering physical environmental risks, we evaluate the type and location of facilities and investments. As an example, changes in patterns of waves, wind, or ice floes can affect offshore facilities. Onshore facilities could be vulnerable to sea level rise, changes in storm surge, flooding, changes in wind and seismic activity, or geo-technical considerations. We conduct environmental assessments before building and operating facilities to ensure that protective measures and procedures are in place.

Our scientists and engineers are industry experts across a variety of 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 our standards and procedures. We follow industry practices such as the American Society of Civil Engineers’ Climate Resilient Infrastructure: Adaptive Design and Risk Management manual of practice.1

Industry standards, including American Society of Civil Engineers (ASCE 7)2 Minimum Design Loads and Associated Criteria for Buildings and Other Structures, are also used along with professional experience to cover a range of uncertainties. After construction of a facility, we monitor and manage ongoing facility integrity through periodic checks of key aspects of the structures.

Once facilities are in operation, we maintain disaster preparedness, response, and business continuity plans. Detailed, well-practiced, and continuously improved emergency response plans are tailored to each facility to help us 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 an event. 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.

ExxonMobil enterprise risk framework considers climate-related risks

Hover over each card to see the risk type and examples of potential risks that could be impacted by climate change, energy transition or extreme weather

  • 1

    Strategic

    Supply/demand, disruptive technology, geopolitical, government changes and capital allocation
  • 2

    Reputational

    Industry reputation, corporate reputation
  • 3

    Financial

    Price volatility, foreign exchange fluctuations, customers’ credit risk, insurance
  • 4

    Operational

    Geological risk, project risk, product quality and brand, talent, supplier, operations disruption
  • 5

    Safety, Security, Health & Environment

    Process safety, well control events, environmental incidents
  • 6

    Compliance & Litigation

    Litigation risks, regulatory compliance

FOOTNOTES

1 American Society of Civil Engineers` Climate- Resilient Infrastructure: Adaptive Design and Risk Management, https://doi.org/10.1061/9780784415191.

2 American Society of Civil Engineers (ASCE 7) Minimum Design Loads and Associated Criteria for Buildings and Other Structures, https://doi.org/10.1061/9780784415788.