A Business Impact Analysis Report: A Case Analysis of BP America

Introduction

The business process can sometimes face unprecedented challenges and disasters that require effective preparedness. The Oil and Gas sector, in particular, is volatile, especially in the upstream production, which presents significant challenges for the oil companies in the production process. According to Abdul Rahim, Sabri, Yew and Ismail (2017), the oil and gas industry requires effective planning, especially in offshore activities, to enhance sustained operations and project management. BP America is a critical player in American oil and gas production. The company employs a significant number of employees and produces over 300,000 barrels of oil per day. Thus, given the company’s disaster history and the critical nature of the offshore oil exploration and drilling, disaster management and recovery plan is very vital to the firm.

BP America has had turbulent past that suggest that the need for the disaster recovery plan is essential and critical in their operations. Ascertained by Jorrigala (2017), disaster recovery plan requirements is very vital and challenging such that most of the small and medium-sized business tend not to implement in their operations. However, the International Organization for Standardization (ISO) stipulates that business continuity is essential for the company to continue providing products and services at an acceptable predefined rate, even in the wake of disasters (Somasekaram, 2017). For this reason, enhancing business continuity requires a disaster recovery plan that would mitigate unexpected disruptions from both unintentional and intentional human errors, as well as the natural haphazard. In 2010, BP America faced one of the most significant oil spill disasters in the US in Deepwater Horizon. While it took massive efforts to restore the organization’s operations and reputation, the company suffered a significant hit financially. Thus, in the contingency planning exercises, a practical Business Impact Analysis (BIA) is crucial for the firm, especially in the production process, IT, and human resources.

Business Processes and Recovery Criticality

The oil exploration process undergoes an extensive process, and it also involves the input of the external players hired for the drilling services. In the event of the Deepwater Horizon oil spill, BP had acquired the services of the Swiss-based Transocean Ltd drilling rig as well as Halliburton Energy Services—a Houston-based cement contractor. In the wake of the disaster, BP took most of the blame, with severe impacts. The majority of the criticism directed at BP pinpointed the company’s apparent negligence and the inadequate coordination of its plans with its affiliate partners (Greene-Blose, 2015). In this case, the company failed in asserting its power in the project management process and also underestimated the dangers of the potential disaster in the volatile operations.

Therefore, based on past experiences and the unpredictable nature of the oil drilling process, the possibilities of any other disaster occurring are apparent. This scenario necessitates an appropriate BIA for the effective disaster recovery plan, which enhances business continuity (Horney, Dwyer, Chirra, & Mccarthy, 2018). The critical business processes for BP, in this case, include IT coordination, human resource involvement, marketing and brand reputation, as well as financial planning. In the current oil exploration and drilling processes, enhanced technology is a vital component of the oil firms (Al-Shaikh, Al-Hussain, & Al-Sharidah, 2015). On the other hand, human resources play a central role, and having qualified experts in complex processes is an added advantage for the firm in their activities. Also, the marketing process for the enhancement of the brand reputation is essential, while the financial plan allows for the allocation of the appropriate resources that would enable the functionality of the critical processes.

Subsequently, it is imperative to note that there are four critical stages of the business process before, during, and after a disaster occurs (Marek, 2013). In this scenario, the primary role of the BIA is to determine the possible solutions for the potential hazards in the long run based on the standard recovery metrics. For instance, a business could be running as usual, but then an unexpected disaster strikes, just as it happened to BP’s Deepwater Horizon oil exploration process. The next significant step for the business would be the disaster recovery and resuming of the operations while during the disaster, maintain business continuity.

Figure 1: The disaster recovery process with key standard metrics (Marek, 2013).

The Recovery Point Objective (RPO)

This metric occurs after the disaster has happened and the normal operations halted. RPO determines the amount of the data loss as well as the files in the back-up storage required for retrieval to aid in resuming normal activities after the system has faced setbacks (Kerner, 2023). The RPO is often expressed in terms of time backward from when the disaster occurred, and this could be seconds, minutes, hours, and even days. In this stage, IT is critical for the coordination of various activities. The primary objective of this phase is to ensure that the company’s operations do not become grounded as a result of the disaster. BP has the resource capacity to invest in advanced technology to enhance preparedness in case of an emergency that may arise from a technical hitch-up. Investing in IT presents the company with an added advantage in shielding the business operations regardless of any business setbacks. Information technology as a form of business process could be adopted from the upstream production, all the way to the downstream output.

Recovery Time Objective (RTO)

The Recovery Time Objective (RTO) is the standard metric that determines the maximum tolerable amount of time required to restore the critical operations to functionality (Marek, 2013). This metric is dependent on the extent of the disaster as well as the preparedness of the company. The company could outline how critical components of operations are going to get restored, from the human resource data, financial data, as well as the vital operational data. In the case of physical damage and the loss of lives of the employees, the company can devise ways through which the skills gap can be filled to restore the normal operations.

Work Recovery Time (WRT)

After the recovery process, and the system restoration, WRT determines the maximum tolerable amount of time that the firm requires to verify data integrity and the whole operational system (Marek, 2013). In this process, the company can also seek to ascertain the state of the replaced infrastructure, the employees, as well as their suppliers. Thus, the IT, Human resources, and finance departments become a crucial component in this case. At this stage, the company seeks to normalize its operations after the disaster.

Maximum Tolerable Downtime (MTD)

The MTD defines the amount of maximum time that the business activities can be disrupted without resulting in unacceptable consequences. In the oil and gas sector, dangers associated with upstream oil production not only require effective preparedness for any disaster but also need the input of the management in acceptably coordinating the operations. While having the disaster recovery plan is instrumental for the firms in this sector, a plan that is not implemented due to the avoidance of the risks is the best (King, 2010). Most disasters in the oil and gas sector are detrimental and the recovery process may sometimes not be enough to mitigate the losses from financial, to human resources and infrastructure.

Resource Requirements

In the wake of the 2010 Deepwater Horizon disaster, BP’s reputation took a hit across the US, and there were massive calls for the boycott of its products. The company incurred massive losses financially as well as in terms of personnel and infrastructure (Mejri & De Wolf, 2013). Based on these past experiences, there emerged the need to prioritize key areas of weaknesses to strengthen their disaster preparedness, and as well as the recovery process. For this reason, this report pinpoints essential resource requirements, including the IT infrastructure, financial capital as well as human resources.

Investing in the latest IT infrastructure is very instrumental in the current oil production processes. The technology is vital in identifying potential technical failures leading to the increased capacity in pinpointing weaknesses for rectification to avoid disasters (Al-Shaikh et al. 2015). In the case of an emergency, the IT can system can be central in providing possible solutions. Hence, another critical resource factor, that is, human resources, emerges as a vital factor in the maintenance of IT infrastructure. The company must invest in qualified IT personnel that would promote proper safeguarding of the critical data. This function can also be granted to the external IT service providers with extensive expertise in data storage and recovery.

Another crucial resource requirement is the financial capital necessary for the implementation of essential strategies for disaster recovery. The amount of money that the company incurs during the disaster can sometimes be damaging. BP’s last huge Deepwater Horizon disaster caused massive financial implications estimated at around 17 billion dollars in 2010 (Houdet & Germaneau, 2011). Financial resources play a critical role in enabling essential processes. In the wake of any disaster, the fiscal budget aids in the accomplishment of the central plans. These may include the purchase and installation of the new infrastructure, paying off of the employees as well as catering for the marketing budget.

The Recovery Priorities for the System Resources

The recovery priorities for the system resources is crucial in the identification of the aspects that can aid the running of the firm even in the event of the disaster and prevent the total grounding of the operations. In the recovery process, the organization should ensure that its system is capable of retrieving the critical backed up data that can facilitate the running of the firm’s operations during the setbacks (Alhazmi & Malaiya, 2012). In the case of BP’s operations, among the critical recovery priorities include the financial data, the data on employees, and the data on infrastructural records. The recovery priorities should reflect the utmost organization objectives and should also reflect the organizational mission and vision. An organization must have defined significant and pivotal operations that can aid can aid continuity of operations even in the wake of the disasters.

Conclusion

Disasters can strike any time during the business operations, and they come in various ways and forms. For the smaller and medium-sized firms, it can be detrimental and sometimes leads to the extinction of the operations. However, larger firms with extensive services and massive financial muscle can sustain these setbacks to recover and restore their previous state. In this paper, the main point of emphasis was directed to the physical disaster that can face oil and gas companies in their offshore operations. While some may not involve a direct impact on the system data, there must be mechanisms and ways of addressing the damage on the company’s assets, human resources, reputation, and financial position. While disasters strike anytime in any form, the recovery process is essential for the business continuity.

Sources

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