Tag Archives: Gulf oil spill

NY State Pension Sues BP for Stock Price Drop Following Spill

Here is an interesting excerpt from a Reuters piece published yesterday:

New York state’s pension fund plans to sue BP Plc to recover losses from the drop in the company’s stock price following the worst oil spill in U.S. history, state Comptroller Thomas DiNapoli said on Wednesday.

DiNapoli said the fund owned more than 19 million shares when the Deepwater Horizon rig exploded in the Gulf of Mexico in April.

“BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we’re going to hold it accountable,” said the Democratic comptroller, who will stand for election in November in the race for New York comptroller.

The Pension’s action – and it stated basis for the lawsuit – is dramatic evidence of the risk companies can face from shareholder activism in light of EHS matters.  It further supports what BusinessWeek reported last week about the likely increased in shareholder demands related to EHS management and disclosure.

Oil Spill Floats on Water But Sinks BP

Reuters published rather pointed points today related to the Gulf oil spill:

Analysts … cited rising takeover speculation [of BP], although they said reputational damage and the unknown financial cost of the spill would deter suitors for the moment.

BP could now be easy prey having lost over a third of its market value or 46 billion pounds ($67 billion) in six weeks.

“Given the collapse in the share price and the potential for it to fall further we expect that it (BP) could become a takeover target – particularly if its operating position in the U.S. becomes untenable,” said Dougie Youngson, analyst at Arbuthnot Securities….

The cost of protecting the company’s debt against default rose sharply, with five-year BP credit default swap widening by 71 basis points to 173 basis points.

The linkage of environmental risk management and financial impacts doesn’t get much clearer – or bigger – than that.

Elm and Sentiment360 Featured in Leading Insurance/Risk Management Publication

Business Insurance, one of the insurance/risk management industry’s top publications, today published an article highlighting The Elm Consulting Group International, LLC and Sentiment360.

The article, BP spill response tars reputation, features Scott Marticke, COO of Sentiment360 and Lawrence Heim, Director of Elm’s Atlanta, office discussing BP’s environmental and reputational risk assessment in the shadow of the Deepwater Horizon spill in the Gulf of Mexico.

Elm and Sentiment360 announced earlier this year the formation of a cooperative relationship to identify, track and assess reputational risk related to environmental, health, safety and sustainability matters.

Insurance Executive’s View on Gulf Oil Spill and Risk Assessment

The Risk Management Monitor recently posted a piece on a conversation with Bill Berkley, chairman and CEO of W.R. Berkley Corporation.  W.R. Berkley Corporation was founded in 1967 and is now the 18th largest property and casualty insurer in the U.S.  When the conversation turned to his thoughts on the Deepwater Horizon spill, he responded:

I don’t think it’s an enormous lack of risk management in the offshore drilling industry, no. I think it was more a lack of understanding of all the alternative things that could go wrong.

Generally, risk identification/assessment go hand-in-hand with risk management, so perhaps it isn’t critical to differentiate.  But it is difficult to argue with someone as knowledgeable and successful as Mr. Berkley.  Either way, it is critical that companies understand and evaluate a much wider range of risks/failures than perhaps was done in the past.

Oil Spill Preparedness on Mars

Okay, maybe not Mars.  But the New York Times reported that governmental officials in New Jersey are putting together a plan to respond to oil migrating from the Deepwater Horizon spill site in the Gulf of Mexico to the Jersey shores, over 1,000 miles away.

Some may think this is ridiculous.  Others will view this as smart low-cost risk management and emergency preparedness.

BP’s Oil Spill and The Black Swan

This past week saw two unfortunately intertwined events unfold: the BP Deepwater Horizon well blowout/oil spill and the 2010 Annual Conference of the Risk and Insurance Management Society (RIMS).  For those unfamiliar with RIMS, it is a global association with a membership of approximately 10,000 of risk management professionals.

Among the myriad of presentations, Nassim Nicholas Taleb was the luncheon keynote speaker one day of the week-long conference.  Taleb is the author of the book The Black Swan: The Impact of the Highly Improbable.    In Taleb’s context, a Black Swan is an event that is (a) so low in probablility that it is unforeseeable and (b) so catastrophic in impact that it changes history.  In covering RIMS 2010, Risk Management Monitor blogged on Taleb and his presentation.

Which brings us to the Deepwater Horizon well blowout.  An article in USA Today stated that in assessing the environmental risk of the well, BP assumed:

an accident leading to a giant crude oil spill and serious damage to beaches, fish and mammals was unlikely, or virtually impossible.

The sort of occurrence that we’ve seen on the Deepwater Horizon is clearly unprecedented,” BP spokesman David Nicholas told the Associated Press on Friday. “It’s something that we have not experienced before … a blowout at this depth.”

The [plan] conceded a spill would impact beaches, wildlife refuges and wilderness areas, but argued that “due to the distance to shore (48 miles) and the response capabilities that would be implemented, no significant adverse impacts are expected.”

Robert Wiygul, an Ocean Springs, Mississippi-based environmental lawyer and board member for the Gulf Restoration Network, said he doesn’t see anything in the document suggesting BP addressed the kind of technology needed to control a spill at that depth of water.

Even if a massive spill had been assessed, the question remains whether the risk assessment/spill response plan would assume that weather conditions would possibly hinder spill response effectiveness, and how quickly/effectively the underwater well would be sealed.

It appears that BP has found their Black Swan.  And Black Pelicans, Black Seagulls, etc.