Key Enterprise Processes | Hess Corporation
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Key Enterprise Processes

We apply a number of key processes in our company that 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 have also established internal expectations for reviewing potential risks in Hess’ nonoperated assets. We prioritize four main objectives: building respectful relationships; 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 the 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 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. Our Chief Financial Officer (CFO) reports to the Board regularly on the status of risk management controls within the company. Periodically, 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 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 internal 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 our operations and functional areas. The standard establishes a risk framework, accountabilities and expectations across the organization to provide a consistent and integrated risk management process across our assets, projects and business functions. Key elements of the standard include the following:

  • Consistent risk management expectations for each asset and major capital project, 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 to help ensure alignment in our risk management process
  • 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 on an annual basis. In addition, major capital projects and new 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 the 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 on Hess’ approach to managing climate risks can be found in the Climate Change and Energy section of our 2018 Sustainability Report.

Value Assurance

Major investment opportunities are assessed through our value assurance process. This process helps to provide increased objectivity 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 focus on economics, subsurface and facility design, safety, environmental and socioeconomic considerations, regulatory requirements and other nontechnical risks. In order to evaluate the potential impact of carbon cost on project economics, we apply a carbon price of $40 per tonne to the forecasted greenhouse gas emissions from significant new projects.

 

In 2018 we refreshed our value assurance process (see figure below) as a result of the company’s restructuring early in the year. We transitioned from having a centralized value assurance organization to bringing 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 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.

 

Value Assurance Process

New Country Entry

Our new country entry process helps us assess nontechnical, aboveground risks when evaluating opportunities in a new country of operation. Through this process, subject matter experts from various functions across Hess evaluate our future operations in a particular country 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 sources such as the U.S. State Department as well as leading nongovernmental organizations such as the World Resources Institute, is to categorize each risk as high, medium or low based on severity and whether the risk can be easily mitigated.

 

Through the new country entry process, 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 enter a new country. 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

At Hess, Lean is not a short-term program for achieving cost savings, but rather a holistic cultural shift, changing the way we think and act. Central to this shift has been encouraging 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.”

 

For nearly a decade, we have been implementing Lean principles across our operations to eliminate waste, create value and drive reliability and continuous improvement for our shareholders, business partners, employees and other stakeholders. In 2018 we conducted a “Take Work Out” exercise, which encouraged all workers to closely evaluate their work activities to eliminate “waste” or unnecessary tasks. The initiative resulted in over 200 completed improvements to reduce waste in routine activities.

 

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 100 employees as ELLs in 2018, bringing the total ELLs to 160 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. We plan to train and certify 100 additional ELLs in 2019.

 

Embedded Lean Leader (ELL) Certification Process

Operational Readiness

Significant operational and EHS risks can occur during commissioning and startup. During these early phases, we make preparations to help ensure that both the physical equipment and the people running the equipment can operate to Hess’ safety, environmental, production and economic performance standards.

 

For several years we have been improving and formalizing our approach to operational readiness. Project teams undergo three Operational Readiness Assessments during the development of major projects to help identify risks and opportunities and prepare for external, pre-operational regulatory reviews. The Operational Readiness Assessments are aligned with the 14 elements of our EHS & SR management system:

  • Organization and Leadership
  • Management of Change
  • Hazard and Risk Management
  • Emergency Preparedness and Response
  • Compliance
  • Incident Reporting and Investigation
  • Improvement
  • Documents and Data Control
  • Training, Awareness and Competency
  • Performance Measurement and Communication
  • Contractor Management
  • Audit
  • Design, Operations and Maintenance
  • Management Review

 

As part of each assessment, Hess subject matter experts and contractors, as applicable, engage in a collaborative workshop, contributing cross-functional insights and sharing best practices and lessons learned from other regions. The project team and senior executives regularly review the risks identified through these workshops.