Key Enterprise Processes | Hess Corporation
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Key Enterprise Processes

 

Several key processes in our company help to identify and mitigate risks in potential, new and existing operations; achieve operational excellence; and evaluate investment opportunities.

 

While these processes are focused on our operated assets, it is important to note that we also review potential risks in Hess’ nonoperated assets. We generally prioritize four main objectives for nonoperated assets: making a positive contribution to local communities; influencing project outcomes by focusing on issues with the greatest potential impact; establishing governance structures and project assurance plans; and documenting and internally sharing high-value lessons learned. As these assets represent a significant portion of Hess’ capital spend, we have continued to conduct targeted, high-level reviews of nonoperated activities, including production operations, facilities and designs.

Enterprise Risk Management

Hess applies a comprehensive, standardized approach to identifying and managing risks of all types across our operations. Our enterprise risk management (ERM) program, which includes consideration of environmental, health, safety and social responsibility (EHS & SR) risks, provides a framework that enables Hess’ Board of Directors and executive leadership to work together to strengthen the consistency of risk consideration in making business decisions. Our Board of Directors has ultimate oversight over the ERM process and is charged with understanding the key risks affecting the company’s business and how those risks can be managed. Annually, our Chief Risk Officer (CRO) provides the Board’s Audit Committee with a comprehensive review of Hess’ enterprise-level risks, the status of the ERM program and risk management strategies utilized under our corporate risk policy. The status of EHS & SR risks and mitigations are also discussed in detail at the Board’s EHS Committee meetings. Periodically, our Chief Financial Officer (CFO) and CRO provide an update to the Board on enterprise-level risks, including the relative risks of assets and projects within the portfolio. The CFO and CRO oversee day-to-day implementation of the ERM process, including developing and verifying compliance with relevant policies and standards.

 

Hess’ ERM process is used to develop a holistic risk profile for each asset and major capital project, drawing input from subject matter experts, performance data, incident investigations, lessons learned and recent audits. In these risk assessments, we identify risks and assess their likelihood and potential impact to people, the environment, our reputation and our business.

 

Our Risk Management Standard, which applies to all assets and major capital projects, helps to align and integrate risk management across the company. Key elements of the standard include the following:

  • Consistent risk management expectations, including risk plans, standardized risk identification and prioritization tools, ERM assessments, functional risk assessments, identification of key external stakeholders and an engagement process and timeline, integrated risk registers, and risk monitoring
  • A hierarchy of risk assessments, integrated across technical and functional areas, that outlines the level of management review applied to different tiers of risk and drives consistent risk prioritization of mitigation actions on an integrated basis
  • A standardized risk monitoring process with accountabilities and an operating rhythm to help ensure appropriate monitoring, alignment and escalation of risks and mitigations

 

As part of our ERM process, all assets are required to have a risk assessment in place that is refreshed at least annually. In addition, major capital projects and new development opportunities that go through the value assurance process (described below) must have risk assessments completed prior to each value assurance stage gate. Risk registers and reports that are generated through these processes are reviewed and updated periodically as part of asset and major project operating rhythm meetings.

 

We also require that functional-level risk assessments be included in each asset’s or project’s risk plan. Examples include identifying and validating concept selection or confirming the technical basis of design for a facility.

 

Climate risks are considered throughout both enterprise and functional risk assessments from the perspective of potential financial, physical, reputational and regulatory impacts. Further discussion of Hess’ approach to managing climate risks can be found in the Climate Change and Energy section of this website.

Value Assurance

Major investment opportunities are assessed through our value assurance process. This process helps to provide increased objectivity in our investment decisions by including those who are not directly involved with the asset or project in internal reviews. Following this process helps to provide assurance that our capital allocation and portfolio management decisions are based on independently reviewed, high quality input.

 

The value assurance reviews are risk based and focus on economics, subsurface and facility design, safety, environmental and socioeconomic considerations, regulatory requirements and other technical and nontechnical risks. In order to evaluate the potential impact of carbon cost on project economics, we apply either actual carbon pricing where a regulatory framework for such exists, or a sustained $40 per tonne cost of carbon to the forecasted greenhouse gas emissions from significant new projects.

 

Through our value assurance process (see figure below) we bring in technical experts from across the company, chosen based on how their skills and experience contribute to the project under review. Including experts from across the organization creates learning opportunities for participants to take back to their respective assets and functions and apply to future assurance processes.

 

The value assurance process is closely aligned with our ERM process so that we can apply consistent methodologies and criteria to risks across our company.

 

Due Diligence

Our due diligence processes help us assess nontechnical, aboveground risks when evaluating opportunities, including those in new geographies. Through this process, subject matter experts from various functions across Hess, and such third-party subject matter experts as may be necessary, evaluate our future operations in a particular location through a detailed risk questionnaire that accounts for social, environmental, legal, external affairs, compliance, commercial and supply chain risks. The purpose of the review, which draws on available information from governmental and nongovernmental organizations, is to categorize each risk as high, medium or low based on severity and whether the risk can be easily mitigated.

 

Through these due diligence processes, we endeavor to enhance the quality and breadth of information available to Hess leadership for the evaluation of new opportunities. The process also helps the project team mitigate identified risks once a commitment is made to proceed. Ultimately, the process is complementary to our ERM and value assurance workflows, utilizing the necessary information at key decision points in our investment and project planning processes.

Lean

For more than a decade, we have been implementing Lean principles across our operations to eliminate waste, improve reliability, drive continuous improvement and create value for our shareholders, business partners, employees and other stakeholders. We have encouraged our leaders to learn fundamental Lean skills and then apply them to business problems. The leaders then coach and develop employees and contractors to generate solutions themselves. The result is a distinctive Lean culture in which continuous improvement comes from the entire workforce – our “army of problem solvers.”

 

In 2019, we conducted a follow up to the prior year’s “Take Work Out” initiative, which helped to reduce unnecessary tasks; the new initiative, called “Breakout,” helped us to identify and address persistent pain points in efficiency that require multifunctional or cross-team efforts to resolve. The initiative resulted in about 200 improvement opportunities, five of which were selected by senior management to be the initial focus of improvement efforts.

 

To support the day-to-day implementation of Lean principles, we use a standard process for selecting, training and developing embedded Lean leaders (ELLs), who, after completing the process outlined in the figure below, help to train their teams in basic Lean skills, improve processes and eliminate waste in their respective work areas. We certified approximately 50 additional employees as ELLs in 2019, bringing the total number of ELLs to about 200 enterprisewide. ELLs participated in multiple kaizen (Japanese for “improvement”) workshops held across our value stream to provide sustainable improvements to business results for their respective assets or functions.