In the last few days the Crown Court ordered five companies to pay almost £10m in combined fines for their part in the Buncefield explosion five years ago. Gordon MacDonald of the Health and Safety Executive concluded his comments to the press by highlighting the corporate governance, namely risk assessment, issues that the case raises:
From the boardroom down, companies must ask themselves these questions: ‘Do we understand what could go wrong? Do we know what are our systems are to prevent this happening? Are we getting the right information to ensure us that these systems are working effectively?’” (http://www.bbc.co.uk/news/uk-england-10660356)
It is clear that the ‘boardroom down’ control activities of energy giant Total, as well as well as local firm Hertfordshire Oil Storage Limited, were deficient. The standard of risk assessment systems and, specifically, the implementation of COMAH (Control Of Major Accident Hazard) regulations within the companies must be scrutinised for fundamental corporate risk assessment features, such as:
- clear objectives communicated to employees on risk assessment and control issues
- significant internal and external operational, financial, compliance and other risks identified and assessed on an ongoing basis
- a clear understanding by management and others on what risks are acceptable to the board
- clear strategies and policies for dealing with risks identified
- a prevailing company culture, reflected in the code of conduct, human resource policies and performance reward systems, that supports the business objectives, risk management and internal control system
- a co-ordinated effort by different parts of the company on decisions and actions
Only by addressing these areas can Total’s Lee Young’s comments that “this was an unprecedented incident from which we and the industry have learnt many lessons” be ratified.
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