Essentials of Risk Management
Kyle Nutt
American Public University Systems
January 19th 2014
MGMT311 – Organizational Behavior

Essentials of Risk Management An effective risk management system is essential when it comes to the success of an organization. Without a proper risk management plan in effect avoidable mistakes can happen that can have detrimental effects on company. An effective risk management plan will identify potential risks as well as provide ways to avoid these risks to ensure a safe workplace, and financial stability for the organization. Although financial risks are very important for a company, safety risks can severely harm an organization’s employees, users, and reputation. A company that failed to properly implement an effective risk management plan is BP Chemical Company (BP). The risk management failure of BP caused many issues for the organization, employees, so much more including people, places, and things. In 2010 an explosion and fire in the Gulf of Mexico on the Deepwater Horizon oil rig was a result of a poor risk management plan that lead to the death of 11 as well as the release of millions of gallons of oil into the Gulf (Zolkos & Bradford, 2011). According to a report done by the U.S. Coast Guard and Bureau of Ocean Energy Management the investigators found no evidence that BP performed a formal risk assessment of critical operational decisions made in the days leading up to the blowout. BP's failure to fully assess the risks associated with a number of operational decisions leading up to the blowout was a contributing cause of the Macondo blowout (Zolkos & Bradford, 2012). The lack of a proper risk management plan failed to identify the potential risks that lead to the devastating explosion that could have been prevented. One of the main causes of the event that took place was ignoring important warning signs, as