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Carrying out a risk assessment presupposes addressing every single factor that may affect a project in any possible way; in other words, economic, political, financial, cultural, and social issues need to be taken into account so that the members of the project could feel secure. Drilling for oil, which is the subject of Moylan’s article, showcases the complexity of risk assessment, as it is one of the projects that are fraught with numerous risks. Particularly, the risk of failing to obtain the required amount of oil to cover the expenses taken deserves to be mentioned; however, the specified threat also entails other risks, such as the threat of significant damage to people’s health and the environment in the light of the fact that “only a fraction of the 100 billion total would be recovered” (Moylan par. 2).
First and most obvious, the members of the organization as the key stakeholders deserve to be mentioned. In case the project turns out to be a failure and the environmental hazard is unleashed, the company will suffer significant financial losses for covering the damage and compensating the people involved (Hunter 37).
Additionally, the government authorities should be mentioned as the stakeholders in the specified case. According to Brouthers and Bamossy, governmental institutions are affected significantly in the instances of international significance: “strategic choice that firms [SOEs] make is inherently affected by the formal and informal constraints of the institutional framework” (Brouthers and Bamossy 286). The subject matter, in its turn, can be related to the problems of an international scale, seeing that the process of oil retrieval may pose a threat of a global scale due to the fractures in the crust and, therefore, the threat of an oil spill (Moylan par. 20).
Finally, the entire community can be viewed as stakeholders in the light of the fact that damage to the environment, particularly, to the soil and, possibly, the groundwater (in case of an oil spill) will affect the evolution of species and cause the contamination of groundwater. Although drilling will occur in an area that is not currently inhabited by people, it still contains the land resources that may be affected to a huge degree if an accident occurs (Suslick and Schiozer 3).
The risks, therefore, vary from environmental (groundwater contamination) and health-related increase in disease rates and possible epidemics caused by polluted water) to societal (the stress caused by the possible relocation, people’s fear for their health and even life) and economic (significant drop in the amount of workforce due to the effects that drilling may have on the local population) and political (the state’s refusal to support the company’s further operations due to the problems that oil drilling may cause) (Tainter and Patzek 87).
The risks listed above can be defined as external and relate to the company, particularly, the threat of a financial loss that the organization may take if its leaders decide to pursue the goal of drilling for oil in the designated area. However, apart from the organization, other stakeholders may suffer. As it has been stressed above, people living in the vicinity may face health and environmental risks, as well as economical and societal ones related to their possible relocation. Local entrepreneurship, particularly, SMEs, which depend on the local workforce, as well as the local customers, will also be affected in case pollution makes people move; therefore, a significant drop in the economic stability of the region can be expected if the process of drilling for oil gets out of hand (Lerche viii).
Every entrepreneurship or project involves a certain amount of risks; however, when these risks affect the community and concern not only economic but also environmental issues, the adequacy of further encouragement of the company’s actions should be doubted. Therefore, drilling for oil in the designated area should be postponed until further identification of all avenues available for managing the risks listed above and preventing a possible environmental, economic, and social catastrophe. Therefore, it is highly recommended that UCOG should reconsider its current risk management strategy and reinforce it.
Brouthers, Keith D., and Gary T. Bamossy. “The Role of Key Stakeholders in International Joint Venture Negotiations: Case Studies from Eastern Europe.” Journal of International Business Studies 28.2 (1997), 285–308. Print.
Hunter, Nick. Off-Shore Oil Drilling. London, UK: Raintree, 2012. Print.
Lerche, Ian. Oil Exploration: Basin Analysis and Economics. New York City, New York Academic Press, 2013. Print.
Moylan, John. “Oil Discovery Near Gatwick Airport ‘Significant.” BBC News. 2015. Web.
Suslick, Steven B. and Daniel J. Schiozer. “Risk Analysis Applied to Petroleum Exploration and Production: An Overview.” Journal of Petroleum Science and Engineering 44.1 (2004): 1–9. Print.
Tainter, Joseph A., and Thomas W. Patzek. Drilling Down: The Gulf Oil Debacle and Our Energy Dilemma. New York City, New York: Springer Science & Business Media.