Sydney Harbour Oil Spill- Risk Management

Essay by leungmaggiA-, May 2005

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Executive Summary

Risk, to a large extent, is an inevitable consequence of present ever-evolving business environment that forces organizations to recognize the importance of risk and incorporate this aspect as part of their business management systems when formulating strategy. In order to manage risk in an optimal manner, the perception of risk from the public should not be neglected as the public voice sometimes is so powerful that causes an organization's reputation to be damaged.

Within the chemical and petroleum industry, the risk of environmental damage has been the principle concern of organizations. However, a new risk: risk of reputation damage has emerged which forces these organizations no longer facing a single risk management issue. In light of these two risks, the case of Sydney Harbour oil spill is chosen as an example as to analyze how a potential environmental hazardous corporation, Shell, preserved the risk of environmental and reputation damage during the oil spill crisis.

To Shell, they certainly understood such an environmental disaster would definitely ruin its well-built active social commitment that was highly perceived by the public. Even though a prompt implementation of pre-planned crisis management plan had enabled Shell to receive wide spread praises including wining of an award in 2000 for its efficiency and tremendous efforts in containing and resolving the crisis, the delay in recognizing the crisis i.e. oil spill and alerting relevant authorities by Shell staff was to be blamed by various authorities for hindering a prompt stoppage of oil spilled into the Harbour. Indeed, the crisis could have been able to be avoided if both the staff of Shell and the tanker Laura D' Amato were competent in the sense that they strictly followed the company's operation instructions. Alerted from this incident, Shell learnt that staff competency as well as extension of...