"Discuss with reference to this BP case study the problems of corporate risk and liability entailed by the factors of uncertainty and lack of reliability of equipment. (in this case the blow-out preventer) State other examples and analyse them. How can companies plan for such contingencies and manage a major disaster when it arises in a damage limitation exercise?"
The Deepwater Horizon oil spill of 22 April 2010 is perhaps the most striking example of a corporate disaster due to a company’s lack of certainty regarding some of its operations. First, it is the largest accidental marine oil spill in the history of oil industry, then it took the authorities and the companies almost three months to stop the leak and finally the spill caused extensive damage to wildlife and marine habitats and to the Gulf’s tourism and fishing industry, leading to one of the most complex trial of the US. And even more important, this accident was not caused by a natural disaster like Fukushima’s nuclear disaster was.
What is more is that the responsible for this disaster are said to be BP and Transocean, hence companies with the means and power to prevent and stop such a disaster from happening. One might expect from a firm like BP to have efficient and safe equipment, especially when one knows how dreadful an oil spill can be. It seemed however that building oil gusher at such depths made it almost impossible for them to be absolutely sure of their equipment safety, a problem combined to a series of cost-cutting decisions which led to the spill. The obvious conclusion is that some companies assess risk not only in terms of safety but also of gain. Indeed if there is a really minor risk of equipment default and dreadful consequence but which is balanced out by huge cost cuts and gains, it might be worth the try. This seems to be how some industrial companies think but it doesn’t mean they are evil, it probably just means they do not realise how bad the risk and the consequences can become. Authorities have a role to play in this matter, either with regular safety controls made by an independent state agency or with such fines in case of disasters that it would deter other firms from taking risks out of economic advantages. The second is what is being made with BP currently and maybe governments and protection agencies should make an example of it. Chernobyl accident is another good example of human mistakes leading to a disaster. This nuclear accident, which occurred on 26 April 1986 in Ukraine, began with a test on the fourth reactor of the plant. Several procedural irregularities helped to make the accident possible such as insufficient communication between the safety officers and the operators in charge of the experiment. But the causes were reassessed later on and it was discovered that the reactor in itself was flawed and ill-designed. Companies have only one way of planning for such contingencies and it relies in research and development and therefore in spending for safety. Firms ought to build prototypes and test them before actually using them, especially in the nuclear field where accidents are most of the time unexpected and hard to manage. One has to acknowledge however that in both cases of Chernobyl or the BP oil explosion and spill, the efforts made to manage the disaster and the consequences were huge, efficient and quick.
The most common cases of disaster either nuclear or oil-linked are however most often due to natural conditions more than human mistakes: storms, hurricanes… Fukushima nuclear disaster was brought about by the earthquake and tsunami which stroke Japan in March. Government and local authorities response to the reactors meltdowns and radiation were severely criticized for their lack of communication with the public and the outside world, also trying to minimize the impact of the accident and the spread of radiation. However I think that those types of accidents, provoked by natural causes, cannot be judged as sternly as the ones caused by human misbehaviours. Government and safety agencies can’t forecast everything, especially something as powerful as the Japanese tidal wave. Populations can be prepared to events such as earthquakes and that is indeed the case in Japan but no one can expect them to react promptly and by ready to deal with melting reactors when the cause is a tsunami.
Thus corporate risk assessing and disaster managing strongly depends on the type of disaster, either humanly caused or natural and the responsibility is also not the same. No one is looking for a scapegoat for Fukushima’s disaster. Let’s wait and see how BP’s trial turns out. I expect the fine and consequences for the firm’s health will be such that oil firms will start increasing their safety controls and equipment.