2012 Sustainability selection - SBM Offshore

Risk Profile
The risks inherent in SBM Offshore’s core business activities did not change substantially during 2012, although a
number of new risks were identified, these include:
• The costs of bringing to close legacy projects, particularly in countries of operation where regulatory standards are most
stringent such as Norway and Canada. The evacuation of the Yme platform in Norway has put to halt the remaining
completion activities. The decision to fully impair the full book value of the Yme platform has been made.
Discussions with the client are on-going to find an agreement. A provision has been made to cover the cost of a potential
decommissioning.
• The potential costs of environmental pollution following events in the Gulf of Mexico have resulted in a tendency for SBM
Offshore’s clients to try and allocate more potential risks liabilities to the Group. In general, the trend towards tougher
contractual requirements has continued during 2012.
• The ongoing compliance investigation into potentially improper sales practices may expose the Group to the risk
of penalties or fines.
• An industry wide risk is related to an overall shortage of competencies in the total range of skills required in the Group’s
activities.
• Recent Internal Audit findings have pointed to some necessary improvements in critical safety issues on several of our
vessels. Action has been taken to address these findings across the fleet.
The general nature of the risk categories confronting the Group and the way in which these are managed are
explained below.
3.6.2 Risk Categories / Risk Factors
Strategy
The strategy plan has been refocused towards the Group’s core business and competency of FPSO and related
products.
Irregular Order Intake
Inherent to the oil and gas capital goods business is the irregular order intake of these high value projects. Moving
forward, the Group intends to focus its marketing and sales efforts on core products, which have historically
yielded good margins. This strategy is in line with market conditions which are currently buoyant.
The Group takes steps to reduce the risks inherent in irregular orders, using the following strategies:
• Concentrating its marketing activities on projects which are most likely to go ahead, given the resources and skills
available.
• A continuing emphasis on developing effective, low cost, technology-based solutions to build competitive advantage.
• Directly employing core teams of project managers and competent engineers working alongside contractors supporting its
design teams as well as outsourcing detailed engineering to a shortlist of qualified subcontracting firms in low cost
countries.
• Diversifying the locations in which projects are executed (Monaco, Houston, Schiedam, Kuala Lumpur, Paenal yard, Rio
de Janeiro and Brasa yard) to provide greater flexibility and responsiveness to client needs whilst broadening
opportunities to source skills and reduce costs. Projects may be diversified even further in the future in response to local
content requirements.
• Growing both its lease and operate, and parts and services businesses to generate predictable and profitable long-term
revenue streams.