Conventionally, a higher population within the world relies on the production of oil and gas simply for production of energy at either homes or work place for those dealing with machines or factories thus increasing the demand (Francis, 2014, n.p). However, the high dependency on oil and gas has created challenges and lead to depleting of the world’s oil reserves. The fear of the rapid increase in oil demand has lead to investigation of alternative ways of producing energy. Since production of gas and oil requires drilling processes, this has raised a concern on the risks that affect the environment. The oil industries are blamed for pollution of water due to oil spillage on the oceans as detailed by Josh (2014), as the effects of oil spillage. Gas industries are as well accused of air pollution as they release air contaminants. All these risks caused by oil and gas industries leads to environmental damage yet the attention is attracted when these industries experience disasters leading to environmental damage. Since most industries do not entertain the game of risk taking, most of them tend to implement safety measures that prevent environmental damage and disasters from occurring (Francis, 2014). A high number of oil and gas industries tend to apply the ethical leadership in order to manage the risks that the industries face.
An oil and gas industry faces disasters and loses due to available risks that are not well managed. This case study report aims to discuss why most industries incur the cost of cleanup and restoration of the oil spill on oceans. Moreover, the paper rationale will chronicle around the oil spillage that attracted the global attention, the Exxon Valdez spill, which culminated to the increased impact on its environmental effects (Francis 2014)). Despite the lessons learnt and extracted from the Exxon Valdez spill, oil and gas industries continue facing risks that engage disasters to the environment and air. The following discussion involves the risks that BP, Exxon and Fracking companies face in production of oil and gases.
How best do we treat risks to reduce accidents? What control measures should the oil and gas industries take to reduce the rate of accidents occurring within the industries? These are the questions that the management of industries asks when disasters occur. The oil and gas industries implemented the ways of managing risks that help reduce the rate of accidents. Managing ethical risk is achieved by ensuring that the employees are able to notice the problems occurring around the industries. Those employees who are morally upright and are responsible in managing their duties by applying the lessons acquired in ethics studies, are able to manage risks hence reducing the chances of accidents from occurring (Josh, 204, p. 34).
Apparently, Human resource management on the other hand, involves the process of planning, staffing, controlling, supervising, and empowering human labor in an organization. The primary reason for human resource management to empower and maximize the human labor performance within an organizational ethical conduct revolves outside the organization in service of the strategic objectives of the employer. Usually, organizational ethics and conduct is governed by the strategic policies and it is designed to fore tell the employees benefits, recruitment, training, performance appraisal, development, and rewarding such as management of benefit system and salary (Francis 2014). It also aids in organizational innovation processes, which might be, changing the recruitment strategies, reducing resource allocation within a certain department or reducing or increasing the number of workers in a certain department depending on its productivity or labor force required.
Based on the scientific research, human resource management can also be defined as a business arena, which is focused in promoting the employees productivity. Managing risks means preventing risks from occurring within the industry and therefore if risks are managed, the rate of accidents tends to reduce (Mouawad 2010). Hence, management of ethical risks relate to reduction of accidents in that when the employees are responsible and are able to identify the risks on time and report them, then incidents of accidents will reduce. Reduction of accidents will help the industry reduce the cost of cleanup of the oceans and the environment.
According to the case study rationale, accidents occur in the mining sites, as well as during the transportation channel of the supply chain portfolio, which have grown to be a threatening issue to the organizational ethics, risks, and managerial framework due to its complexity. In fact, the management of organizational risks revolves around the magnitude of accountability, responsibility, and job structure in the organizational divisional roles framework (Carroll & Buchholtz, 2014). For instance, when every staff, junior managers, and the supervisors adhere to the ethical and moral contextual framework, employees experience the best working conditions, fair and just remunerations, as well as deriving the feeling of the firms’ responsibility in creating the positive public image. Ultimately, due to the complexity nature of the oil and gas industries, to minimize risks, the firms ought to create an organizational inbuilt insurance policy that directly correlates to the managerial roles hierarchy accountability.
Despite the control measures applied in oil and gas companies, risks are always the fear of these companies. There are various risks that these companies face despite all the control measures implemented and have made the oil and gas companies to be criticized due to the many accidents the companies have caused (Josh 2014). While providing adequate supply of energy, the BP, Exxon and Fracking industries continue to face the risks that lead to accidents most of the time. These risks are faced due to the poor communication within the industries. The one area that requires advanced communication is between the management and the employees who interact with the processes of oil and gas production.
The major risk that BP, Exxon and Fracking oil companies face is the risk of oil spillage (Mouawad 2010). Most companies produce oil and gas with the fear that the oil or gas might spill at any time causing harm. Oil can spill from the tanks filled with oil especially when being transported through the seas. The Exxon Company experience oil spilling risk in 1989 when the oil being transported started to lick from the tanks due to the unusual right turns made in order to dodge floating ice. In BP, the company changed its name to BP (Beyond Petroleum) after the explosion that killed 15 employees in order to convince the stakeholders that the company is committed to make safety and sustainability in the environment. The case of oil spillage in Exxon Company repeats itself in BP Company when the Deepwater Horizon oil rig exploded in Mexico under the supervision of Exxon Oil Company.
In general, the oil spillage risk leads to the environmental risk that Oil Companies face. The grilling processes are said to contribute to pollution of water and air through the release of air contaminants. The companies not only get gas and oils from beneath the oceans but also from dry grounds. A mistake of oil spillage from the pipes transporting oil or gas will lead to destruction of the environment (Mouawad 2010). BP made a mistake of using a less costly design that is described and deemed ‘risky’. BP Company also used a faulty blowout preventer that had stuck blades which gave space for oil to leak out.
Notably, the risks and challenges facing the oil and gas industry chronicles around poor supply chain portfolio design and lack of accountability and responsibility in the sector. Ultimately, comparing the risks and challenges of BP, to that of Exxon and the Fracking Industry, BP faces organizational strategy structure system challenge that ought to assess and combat the risks and challenges involved in the transportation of the oil and gas products. This has led to the occasional sales lag, which dictates the organizational risks and challenges framework in terms of monetary loses incase of accidents (Francis, 2014). On the other hand, at large, Exxon and Fracking industry lacks the moral and ethical workplace accountability, which manipulates the degree and magnitude of each employee’s roles in managing and curbing theft/corruption in the oil and gas sector. For example, the Exxon Valdez Oil spillage massacre may have been primarily caused by poor delegation of supply chain portfolio system, where accountability and responsibility of the oil spillage may have culminated from irresponsibility of ethical conduct at workplace.
Most industries are thriving to come up with systems that are founded on trust since ethics refers to the state of knowing what is right and wrong with the capability of handling your responsibilities as required of you. To come up with trusted systems, employees need to have positive and reliable behaviors that will help them manage their responsibilities as required by the industry. Ethical leadership should be implemented in oil and gas industries for the easy management of risks (Josh, 2014, p. 74).
Ethical leadership helps risk management by helping the management of an industry to protect the reputation of the company and increase the engagement of employees in work by ensuring that they work where ethical conduct is the norm. Human resource management (HRM), also called personnel management, consists of all the activities undertaken by an enterprise to ensure the effective utilization of employees toward the attainment of individual, group, and organizational goals (Josh, 2014). An organization’s HRM function focuses on the people side of management. It consists of practices that help the organization to deal effectively with its people during the various phases of the employment cycle, including pre-hire, staffing, and post-hire. The pre-hire phase involves planning practices. The organization must decide what types of job openings will exist in the upcoming period and determine the necessary qualifications for performing these jobs. During the hire phase, the organization selects its employees. Selection practices include recruiting applicants, assessing their qualifications, and ultimately selecting those who are deemed to be the most qualified. Ultimately, Ethical leadership helps management to manage risk and promote sustainability hence maintaining stakeholder’s value different steps (Carroll & Buchholtz 2014). These steps that aid in reducing and managing risk include:
A good business will always kick off with a plan on how to manage and use the resources available in the industry. So as to attain successful ethics programs in planning, the industry has to know what common ethics challenges are within the industry, what are the greatest areas of risk eg, which group is at risk, what ethics resources will be of help to the group at risk and who will be helpful after all the ethical leadership application.
At this point the industry is able to come with ethical programs after identifying the needs of the industry needed in managing the risks. When the industry places its resources to ethics, it then gets a chance to make a difference in that it increases the employee’s reporting of any observation on risks that occur within the industry (Freudenburg & Gramling, 2011). Management comprises of organizing a series of actions, mobilization of resources and control of human labor within governmental or nongovernmental organizations with an aim of achieving their objective in the cheapest and effective way possible. The actions involved in this case are as follow: planning, controlling, coordinating, staffing and development, communication, supervising, and decision making processes. Management ensures that all the actions mentioned above are observed to the fullest. There are several types of managements required in any organization which are basically classified into two. Non human management is the first type of management. Ethical leadership in an industry helps reduce pressure to compromise standards and this makes the employees more active in reporting any risk to the management before the problem gets out of control.
Most employees would retain their desires to do the right thing in oil and gas industry but are influenced negatively by the company the keep. A company with a strong ethics program helps to build a strong ethics culture where employees are committed to doing right no matter the level of work. In this, the chances of experiencing risks in the industry are low since all the employees are reporting the small problems as ethical leadership skills have taught all of them (Francis, 2014). It then becomes easier for the management to manage the risks as they occur before they mature to the worst level of causing severe damages. In respect to the case study rationale, the establishmen of cultural norms at workplace, and catering for societal way of operations dictates the establishment of an ethical organizational struture. The organizational framework must be able to accumulate the different employees’ backgrounds, strengths as well as strategizing on acceptance and recognition of distinct employees’ voice opions (Josh, 2014. Through the establishment of strong ethical cultural performance norms such as setting evaluational grounds for employee performance appraissals, proper channels of promotional basics, as well as defining the delegation responsibilities in the organizational authoritative hierachy.
As the industry proceeds with the production of oil and gas, more needs tend to arise apart from the existing needs. The industry needs to take into consideration the needs that require its attention and know what is working and what is not. The company needs to employ the emerging vulnerable and keep revisiting the state of ethics related with the risk assessment so as to minimize the chances of risk.
Therefore, involvement of the employees in ethics programs with ethical leaders will enable the employees to be more responsible and observant in their workplace. The employees will be in a position to identify problems and detail them to the management. Ethical leadership practiced in oil and gas industry will help the management to realize the risks at an early stage and take actions before all goes wrong (Josh, 2014). Ethical leaders will be able to lead the other employees into doing what is right and in this way risks will be easily managed.
Conclusion
To sum it up, it is more appropriate to say that most people in the world depend on the production of oil and gas for availing energy. Those with machines and factories have the highest rate of demand of oil and gas. Day after day the rate of oil and gas demand raises continuously and this has rise of various risks and challenges that faces oil and gas production in industries. Many accidents have occurred in oil and gas industries due to the risks that are noted and the management ignores them until the worst happens.
Many of the oil and gas industries tend implement the ethical management of risks so as to reduce accident incidents to the environment and within the industry. The major risk that has been noticed to trend within oil and gas industries is the risk of oil spillage where most of oil and gases leak through the tanks and the pipes that are used in transporting the oil to different stations. Industries tend to implement the ethical leadership programs in managing the risks by educating the employees on how to be responsible in handling their responsibilities and reporting any problem that is occurring within the industries so as to handle the risks at an earlier stage.
Oil and gas industries are recommended that they should adopt the ethics programs so as to educate all the employees on how to handle their duties and do what is right and avoid accidents within the industries. Those industries using faulty leak preventers are recommended that they should seek advice from experienced engineers and allow them investigate the pipes and tanks before storing the oil and gases. All the oil and gas industries are also recommended that they adopt the ethical leadership skills if they wish to improve the value of the stakeholders and maintain the good reputation of the company. Ultimately, the organizational ethical misconduct mentioned above, has for years been solved by the major construction business personnel by hiring foreign labor white required skills for accountability and responsibility at workplace. This act in turn, renders most of the Australians jobless therefore, ought to become more vibrant and accountable in the occupations, since losing the opportunity to be a part of the globalized economic growth created by the construction industries has led to mistrust and the unfaithfulness, as well as lack of workplace morals as governed by the labor laws in the organizational set up.
Carroll, A & Buchholtz, A 2014, Business and society: Ethics, sustainability, and stakeholder management. Nelson Education: New Jersey
Francis, R 2014, ‘Ethics as a risk management strategy: The Australian experience,’ Journal of Business Ethics, vol. 45, no. 4, pp.375-385
Freudenburg, W & Gramling, R 2011, Blowout in the Gulf: The BP oil spill disaster and the future of energy in America. MIT Press: New York
Inkpen, A.C. & Moffett, M 2011. The global oil & gas industry: management, strategy & finance. PennWell Books: Bolton
Josh, K 2014, The effects of oil spill and clean-up on dominant US Gulf coast marsh macrophytes: a review. Environmental pollution, vol. 108, no. 2, pp.129-139
Samson, P 2013, ‘World crude oil and natural gas: a demand and supply model,’ Energy economics, vol. 24, no. 6, pp.557-576
Mouawad, J 2010, For BP, a history of spills and safety lapses, New York Times: Blackwell.
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