HC2121 Comparative Business Ethics and Social Responsibility

e ethical risk management and the reduction in the accident rate, risk mitigation and meeting the energy supply demand, and the risk management through the ethical leadership approach, would be analysed to gain the understand regarding the risk management and the sustainable approach of the industry.

Section-2

The relation between the reduction in accident and the oil and gas industry specific ethical risk management

There are lot of risk that are associated with the drilling and the transportation process of the oil and natural gas. The pollutions and the emission related hazard that the industry is facing are separate aspect from the disaster related hazards. Some of the hazards are like gas release and the explosion of the released gas, massive fire caused by the ignition of the hydrocarbon that accidentally released, and the potential harmful effect of the release of oil on the sea and sensitive costal area (Aven et al., 2007). The impact of this kind of disaster is high for the business as well as for the environment and the society. The accident impacts the health and safety of the staffs of the organisation and some time that result in loss of life. From the case it can be seen that BP accidents killed 15 and 11 staffs of the organisation in the two accidents. The financial impacts that BP had to to incur in the 2010’s accident are $36.5 bn for the cleanup and $18.7 bn for the environmental damage (Gill et al., 2012).  Similarly Exxon had to spend greater than $2.2 bn for the reimbursement and cleanup activity. The disasters also impacted the environment of the area with huge amount of livelihood loss for the local population. Several special of animal died in large number because of the oil spill on the sea and accumulation over sea ground level.

There are risk factors that cause this kind of accident. Management of those risks if is done ethically reduces the change of the accident. The result would the avoidance of the huge financial loss and loss of organisations’ image. The management of the risk stars with the assessment and identification of the risk factor in the daily operation of the industry (Hoffman, 2002). Then the organisation would develop objectives of reducing that risk through control and operational process development. From the given case of BP and Exxon it is quite visible that the risks are not managed ethically in both cases to avoid the risk. Even after the accident took place the contingency plan and response method was grossly inappropriate (Aven et al., 2007). The result is the huge damage to the company as well as to the local environment.  

An analysis of the mismanagement of the risk unethical would provide clear picture. In the case of Exxon an unlicensed third mate was on the steering of the tanker. The actual captain of the ship was in sleep.  At the time of disaster the captain tried to manage the situation but he was heavily under the influence of alcohol. The ‘Trans Alaska pipeline’ and the APSC were not prepared for such situation (Ritchie et al., 2011). There was a communication problem, breakdown of skimmer boat happened and the inappropriate approach of not calling the private boat. These entire things aggravated the situation. Exxon tried to save money by not building the second hull in the body of tanker and that is serious fault in the prevention process. On the other hand in the case of BP there were serious problem in the maintenance of the rig. The contingency system designed for half a million tone oil spill per day, did not worked properly and was unable to contain the situation. The cementing of the still pipe and the gas detection pipe test was inappropriately done (Ritchie et al., 2011). There was no system for the remote shut off facility in the rig. The blowout preventer in the rig was faulty.  All of this mismanagement caused the situation or aggravated the situation of the disasters. Had there been an ethical approach taken by the organisations and proper maintenance and procedure followed, the situation would not happened or would have got under control easily.

The energy supply demand and the risk faced by the Exxon, BP or the Fracking industry

The demand of the energy which is dependent on the fossil fuel is high. The estimation is that the energy demand would be 41% higher than today by the year 2025 (Barnato, 2015). Majority of the demand are coming from the emerging economy. On the other hand the reserve of these natural resources are depleting fast around the world. The new opportunities that are coming up are much expensive to drill and produce. The crude oil price has also fallen in the recent time. That means that the companies are wary of investing in the exploration activity. Under these circumstances the risk factor for these companies are increasing. The companies would try to meet the growing demand but the space for that is shrinking for them. Under those circumstances they may reduce the emphasis on the ethical risk management in the operation. There the risk factor may increase.  In the recent time the shale gas exploration has gained interest. Exxon has gone for $35 bn purchase process to built expertise in the Fracking industry (O'Keefe, 2012). This industry is in the starting phase and the rules and regulations are not well formulated. There the companies may get involved in the profit making drive without considering the ethical approach of the risk management. There is a great chance of seismic activity because of the exploration through this process. Unless a big disaster happened which would be linked to this process the practices in the industry may not get changed. In that context the companies would take lot of risk to meet the market demand of energy. The exploration of shale gas is seen as the energy security and independence of US (Stevens, 2012).  There are some concerned about the chemical use for this exploration process. The exploration process is in fast pace and the actual impact are not quite clear. There the cumulative impact of the process may trigger a disastrous situation for the community and the environment. The organisation has to address the shareholders concern of high return through meeting the high market demand; they also have to look after the preventive measures for the potential disaster and also have to spend on the environmental cleanup process (Jacobs, 2014). Now under this tight situation they would be able to spend less amount of money for the preventive measure. Under that situation the risk would escalate is some places and the disaster may happen.

The management of risk and the role of the ethical leadership in the sector

In the ethical leadership approach dignity, rights, ethical value and the belief system get priority. The idea of just and the fairness is part of the trait of this type of leader. Honesty and the trust factor are high in the leader. The decisions are made considering the total value approach. The leaders lead by example. The morality factor is visible in the personal character as well as in the management process of this style of leadership (Walumbwa & Schaubroeck, 2009). The impact of this type of leadership can be explained through two types of theory. One theory is the social exchange theory and another one is the social learning theory. The theories explains that this type of leaders try to reciprocate the best thing that they got from the society.  The theory also says that there is less chance of engaging in the unethical or the destructive mode of behaviour. The effectiveness of the top management team are some time attributed to this type of leadership (De Hoogh and Den Hartog, 2008). The reward system also used to promote the ethical, value driven and moral behaviour among the followers by the moral managers through ethical leadership style.

The risk factor in the gas and oil industry is high. An effective measure can prevent the future disaster. The ethical approach helps the management of the organisations to follow the proper procedure in the operation ethically. The top leadership of the organisation would influence the managers to follow the preventive approach properly (Sama and Shoaf, 2008). Taking huge amount of risk is part of the corporate culture. The case of the Exxon mobile shows that the leadership tried to cut $22m by not investing in the second hull. The ethical leadership would have considered the consequence of the process. The greater value would have been considered in the decision making process. The new industry like the Fracking would also need this type of leadership. Most of the industries of shale gas are among the populated communities. There consequence of any such disaster would be large among the communities. There the ethical leaders would considers the risk factor minutely and take decisions. The reciprocating approach of this leadership style would make them much more responsible  (Sama and Shoaf, 2008). The approaches to the risks need to be holistic and greater participation of the management and employee is needed. The ethical leadership approach influence this aspect of effective management team and would result in greater participation in the risk management process.

Section-3

Conclusion

Risk is part of the oil and gas industry. There is always a possibility of big disaster in the operation of the industry. New industry like the hydraulic fracturing would also have some risk factor which are not so pronounced in the present time and may image in future. That is why a constant check in this regard would make the industry as a whole to avoid such disastrous situation. The accident not only impact the organisation financially but also the corporate image of the organisation. There a constant vigilant would help the organisation to reduce the risk factor. The culture of the organisation depends on the leadership of the organisation. There an ethical approach to the leadership is essential in the management of the risk. The current situation of the industry is tight as the demand in the market is high, the price level of the crude is low and new sources are harder to find and explore. There the risk taking ability of the organisational leadership increases and there the preventive measure and the disaster contingency plan may get low priority. Under such condition the chance of accident increases. There the leadership becomes the important factor in the management of the risk.

References

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