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, such as those related to process safety, climate change and cybersecurity. Our enterprise risk management (ERM) program, which includes consideration of EHS & SR risks, delivers 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 Risk Management Standard. The status of EHS & SR risks and mitigations are also discussed at the Board’s EHS Committee meetings, as appropriate. Periodically, our Chief Financial Officer and CRO provide an update to the Board on enterprise level risks, including the relative risks of assets and projects within the portfolio. Corporate Risk oversees day-to-day implementation of the ERM process, including developing and verifying compliance with relevant policies and standards. 

Hess’ ERM framework 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. 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, 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 and risk plan in place that are 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 our 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 it exists or – where a framework does not exist – we evaluate the potential impact of carbon cost as set out in our planning guidance. In April 2021, we updated our planning guidance to expand the evaluation for all significant investment decisions to include a sensitivity using the IEA’s Sustainable Development Scenario carbon pricing (see the Climate Change and Energy section of this website).

Through our value assurance process we bring in technical experts from across the company, who are 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. 

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Due Diligence

Our due diligence processes help us assess nontechnical, aboveground risks when evaluating opportunities, including those in new geographies. 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. 

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 and Innovation

For more than a decade, Hess has been implementing Lean thinking and methodologies across our operations to eliminate waste, improve safety and reliability, drive continuous improvement and create value for our shareholders, business partners, employees and other stakeholders. We have encouraged our leaders to develop a Lean mindset, learn fundamental Lean skills and apply them to business problems. The leaders then coach and develop employees and contractors on Lean thinking and how they can identify and solve problems themselves. While Lean started as a series of special projects, it is now integrated into our company culture, and our workforce is empowered to be an “army of problem solvers” focused on continuous improvement.

Building on the successes and lessons learned from our efforts to integrate Lean into the Hess culture, we are expanding this culture to include both Lean and innovation. We see these as complementary mindsets that will help us achieve significant performance improvements. Through Lean thinking, we encourage our people to identify opportunities for incremental improvements – ways to do what they already do better. An innovation focus helps our people think of entirely new ways to do what they do, producing step change improvements.

In 2020, we progressed several initiatives aimed at further operationalizing these principles into how we work. For example, we developed innovation guidelines that establish a common framework for driving innovation and integration with Lean across our organization. We also further developed an innovation funnel process to collect ideas from employees and a variety of relevant industry sources, identify ideas that have the potential to add value, rank ideas for future development and select those that align with our priorities for piloting. This process helps formalize and organize innovative thinking and drives ideas from conception to implementation. Moving forward, we will continue to expand our efforts by developing Lean and innovation leaders, fostering internal collaboration networks and sharing learnings from these pilots across the organization.