Oil/gas Industry Risk Management Methods

Introduction

Oil/gas industry is among the major sectors which are associated with high risks, especially due to the fact that the products that are offered are flammable. For this reason, the management of such an industry has to lay a lot of emphasis to the risks identification, risk mitigation and risk prevention. Risk management helps an organization to be conscious of the hazards that may occur and plan in advance about how to deal with them in case of any.

4T`s method of risk management

The 4T`s risk management entail tolerate, treat, transfer and terminate. Tolerate encompasses a situation where the magnitude of the risk is low to such an extent that an organization can opt to accept its existence and live without any mitigation measure in place. An example of such a risk in an oil or gas industry is the perception that the employees can steal some oil for personal purposes. Treat tool is applied in a situation where the magnitude of the risk is above the organization`s risk appetite, and the organization seeks for avenues to mitigate it (Joey n.p). the firm puts in place measures of minimizing the frequency of loss or impact of loss. In an oil/gas industry, a good example of such a risk is loss of customers after employees overcharge them. The company can mitigate this measure by indicating the price per liter of the oil. Risk transfer occurs when an organization anticipates the occurrence of such a risk but due to huge loss that it is associated with, the organization prefer to transfer the financial burden of the loss to another party (Joey n.p). A good example of such a risk is when an oil or gas company insures it against fire. Lastly, risk termination entails a situation where an organization decides to stop an operation after anticipating that the project has a high magnitude of the identified risks. A good example is when an oil/gas company do away with the decision of supplying oil through pipeline, due to the fear of oil siphoning and leakages.

Conclusion

It is, therefore, evident that the 4T`s risk management method is fundamental strategy of identifying and mitigating risks in an oil or gas industry. The oil company can adequately classify the magnitude of a risks and embrace the most effective tool of mitigating them. By so doing, such a company remains safe or secure from being heavily affected by risks when they occur.

Work Cited

Joey Shumbamhini. 4Ts of Risk Management. Posted on 14^th July, 2017. Accessed from, https://www.linkedin.com/pulse/4ts-risk-management-joey-shumbamhini