Annual Report 2010 - SBM Offshore

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Risk Management Risk Management operates on three fronts through a standard process of risk identification, risk assessment, and risk mitigation actions. Firstly, business processes are subject to risk assessments and key controls are updated where necessary. Continuing projects initiated in previous years, additional Internal Control workshops took place, particularly related to Financial Reporting. Secondly, major projects are subject to ongoing risk workshops by an independent Risk Management team from early in the proposal phase until project completion. The dedicated Project Controls department continued to work on specific improvement initiatives in the field of project execution. An important development in 2010 was the introduction of a formal Independent Project Review (IPR) process. The Project Risk Management process is reinforced by dedicated Legal, Quality Assurance, Health, Safety, Security & Environment (HSSE) and Internal Audit departments. Risk Management was reinforced during the year with the roll-out of a bespoke, on-line risk management tool “eRisk”. The principles of Risk Management in SBM Offshore are: • integration of Risk Management into the general management process; • comprehensive Risk Management assurance based on a matrix of agreed objectives at risk and analysis of the complete spectrum of sources of risk to be analysed; • communication involving all critical personnel contributing to the Risk Register; • agreement on mitigating actions and controls in a risk workshop; • Risk Management function providing facilitation, monitoring and reporting to Company Management. The policy of SBM Offshore is to accept risks which are inherent to its business activity, that are within its risk appetite and for which it has competence and an agreed control process. Controls To ensure good Corporate Governance, the Company maintains a documented system of key processes and controls. The Company recognises the need for Report of the Board of Management ongoing development in this area and attention is being devoted to assess the effectiveness of those processes and key controls as well as the application of a continual improvement process. Financial reporting controls were reviewed and tested in detail in each of the project execution centres, using a risk based approach. This process will continue in all other departments based on an objective and risk assessed approach. IT controls were tested by an external party with results showing a strong level of protection and continued improvement over recent years. Information systems The Company maintains a relatively flat organisation structure with short lines of communication. Information flows upwards to the appropriate department managers and decision making is made in consultation with other department managers where necessary. The Company has requested an external review of its information systems network. The first conclusions are that the systems support the business activities and there are no areas of major risk. As expected, there is opportunity for optimisation and improved integration of the various reporting systems. Project teams were formed and a consultant employed to help identify the process weaknesses and information gaps and propose a roadmap for the future. Internal assurance Conformance to Audit standards and compliance with Company procedures (GMS) are under the joint responsibility of the Internal Audit and Quality Assurance disciplines. Both operate independently from the business line functions and report directly to the Management Board and the Audit Committee. The objective of Internal Audit and Quality Assurance is not only compliance testing in respect of procedures and controls but also to form an independent opinion on the effectiveness of the underlying processes and controls. The audit functions of these two disciplines are planned to be combined in 2011. To best monitor compliance activities, the Internal Assurance process has been designed to consolidate all Corporate and Divisional audits. It is constructed using a variety of tools, including information from both SBM Offshore – Annual Report 2010 87
Report of the Board of Management the Internal Audit and Quality Assurance disciplines but also from risk registers, discussions with Group Management System process owners and HSSE audits as required by regulation, contract compliance and work plans. Risk profile The nature of the risks inherent to the Company’s business have not substantially changed in 2010. The projects of smaller and financially weaker clients have been delayed and high value leases require appropriate (and sometimes complex) financing solutions. The Company has been active in identifying strong financial partners to participate in such leases and has recently announced a long-term cöoperation 88 SBM Offshore – Annual Report 2010 with Mitsubishi Corporation. The extensive resources dedicated to improving Company performance could not change the course of some earlier awarded projects and their disappointing performance continued to affect the Company’s results in 2010. The project execution issues encountered can be largely attributed to mistakes in the Proposals phase, delays in timely completion of engineering deliverables and consequent disruption and delays in the construction yards. Improvements have been and continue to be made in these areas and both the probability and impact of similar events occurring on future projects have been considerably reduced. The nature and management of risk categories faced by the Company are explained hereafter. SBM Offshore employee overlooking the 'Delba III' Drilling Rig in Abu Dhabi
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Annual Report 2010
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Financial Review / Financial Statem
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1 2 Overview 11 Message from the CE
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Semi-Submersible Drilling Rig Tensi
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I am pleased to report that the Com
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Highlights 2010 Financial • Turno
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Shareholders As the shares are bein
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Corporate Strategy In line with the
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Lease and Operate The lease and ope
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Annual Report 2010 - SBM Offshore

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