Introduction
The realm of the global economy poses a range of challenges to companies entering it, primarily due to intense competition between corporations that are attempting at monopolizing a particular market niche. In the context of the specified environment, financial risks are not simply probable, but nearly unavoidable, hence the need for an efficient enterprise risk management (ERM) framework (Lam, 2014). At present, three crucial areas of ERM have gained especially high levels of attention among global companies, in general, and the oil and gas industry, in particular (Elhoush & Kulatunga, 2017). These are the problems associated with cloud computing (particularly, the risk of data leakage), disruption of global supply chains in the course of natural disasters, and drastic effects of fracking on the environment (Suda, Rani, Rahman, & Chen, 2015). The issues mentioned above can be handled by adopting the principles of sustainable development and resource management, coupled with regular updates of security systems and staff education.
Future Trends: Historical and Current Data
Previous experiences of organizations managing enterprise risks shows that most of the strategies tended to prioritize the management of cataclysms and financial risks that could be encountered in the global market (Elhoush & Kulatunga, 2017). While the observed approach could be justified by the drastic effects that the specified problems implied for companies working in the global market, the lack of preventive measures was a subject of concern. Therefore, changes were in order because of the shift in corporate priorities. The update in the Environmental Protection Agency (EPA) and the introduction of legal standards for companies operating in the GCC market, particularly, in the oil and gas industry, could be seen as another important step in improving the ERM strategies. The vast range of penalties and legal repercussions that oil corporations were to suffer in case of violating the set regulations showed a new trend with a focus on environmentalism.
In retrospect, the introduced change could be seen as a significant improvement of the framework for handling ERM issues since it necessitated massive improvements in the areas such as waste management, and sustainable use of resources (Suda et al., 2015). The specified change must be regarded as crucial for the companies working in the realm of the UAE oil industry since an array of production processes were extraordinarily harmful to the environment. Nevertheless, the proposed legal regulations have not helped replace fracking with a process that could be less damaging to the environment (Elhoush & Kulatunga, 2017). However, the specified alterations caused a shift in the management of a range of ERM processes in the oil industry, creating the platform for a new and improved strategy that could be designed in the future.
According to the current evidence, there are three primary aspects of ERM in the context of the UAE oil industry, which require undivided attention of organizations. These include “standardization, integration, and centralization” (Muralidhar, 2010, p. 63). Out differently, firms operating in the UAE oil industry have to remove the barriers that prevent them from complying with the corresponding legal standards, increasing their added value, and introducing a set of rigid principles for decision-making within the company’s context (Elhoush & Kulatunga, 2017). An overview of the historical data and current situation will reveal that numerous UAE companies functioning in the oil and gas industry are incapable of meeting the set criteria (Suda et al., 2015). The observed problem occurs due to the lack of consistency in the implementation of ERM strategies across the oil industry in the GCC countries, in general, and in the UAE (Muralidhar, 2010). Given the current data, future trends seem rather unsatisfying since there is no comprehensive ERM approach that would ensure security within the industry and encourage organizations follow established standards closely.
The shift toward managerial and leadership-related issues in the ERM processes should not be deemed as the means of avoiding some of the most controversial aspects of present-day oil industry issues such as fracking and the subsequent pollution (Mirgani, 2017). Quite the contrary, these trends in ERM help embrace a massive change in the oil industry by reinventing the system of values that guides decision-making processes in UAE oil companies (Suda et al., 2015). For example, the focus on standardization will help improve the quality principles according to which companies operate.
Nevertheless, UAE oil companies face a range of challenges when shaping their ERM techniques in the realm of the target market. Among essential difficulties that oil firms in the UAE need to overcome, one must mention six key concerns. These include the lack of a clear project definition, documentation issues, deficiency in skilled workforce, inability to restrict camp size facilities to a reasonable size, baseline schedule problems, and inadequate production design (Elhoush & Kulatunga, 2017). Thus, oil companies, and especially the ones located in the UAE, need to revisit their approach toward project management and the allocation of available resources. Unless a sustainable approach is introduced, UAE oil organizations may face numerous obstacles.
Best ERM Practices in Financial and Non-Financial Organizations
Seeing that most of the current risks faced by global companies and specifically the firms functioning in the oil industry are linked to poor management and the lack of motivation, it is reasonable to consider handling the specified concerns as the roots of most of the problems. The close focus on project management can also be seen as an important addition to the set of principle that must guide an oil company in the UAE and in any other part of the world. The specified requirement implies restructuring some of the existing corporate management approaches, leadership strategies and values defining decision-making in UAE oil firms. For example, the propensity toward empowering staff member s to deliver a better performance must become a common trend in toil companies since it helps invest in the workforce and encourage employees to develop loyalty to their companies (Lam, 2014). The resulting rise in motivation among employees will ensure a more responsible attitude toward key workplace processes, including waste management and compliance with the existing ethical and environmental standards (Elhoush & Kulatunga, 2017). As a result, massive risks associated with environmental damage, financial losses, and a reduction in the competitiveness of an organization will become easily preventable.
The risks associated with poor project management should also be addressed with the help of an improved leadership framework. One must also create a tool for defining the level of uncertainty of a particular risk, as well as establishing the principles of risk transfer. the latter involves transferring responsibilities associated with particular risks to the managers that are related to the source of the identified risks directly. For example, when addressing the problem of fracking mentioned above, one must transfer a certain part of liability for a possible damage to the groundwater foreman and the software inspector, who determine the presence of a threat and calculate the probability of its occurrence (Elhoush & Kulatunga, 2017). With the rise in responsibility levels and the focus on the aftermath of reckless decision-making, one will be able to avoid massive losses and, thus, will contain a possible damage.
In addition, a framework based on a five-step ERM tool is bound to have a positive impact on organizational performance levels globally. The suggested tool includes five crucial stages, which are risk identification, its assessment, classification, mitigation, and controlling (Elhoush & Kulatunga, 2017). The offered technique serves as the assisting tool in selecting an appropriate risk management strategy and using a proper set of measures for handling a specific risk. For example, in a scenario involving a cataclysm, the high probability of a physical damage to people and company’s resources will be identified. Subsequently, the steps that are necessary to avoid the specified issues will be selected.
In the context of a non-financial organization, the promotion of ERM needs to be based on the enhancement of ethical standards and values. It is imperative to give people an opportunity to feel that they are valued by a company and that they contribute to the organization’s development. The resulting increase in the levels of motivation and self-worth will to not only lead a significant performance improvement but also encourage staff members to acquire new skills and knowledge (Lam, 2014). Thus, the consistent learning will become a possibility in an organizational environment.
In addition, active information sharing an efficient data management approach should be seen as a key to preventing issues and handling existing risks. The identified concept is especially important for non-profit organizations since the amount of financial resources is restricted in their context. Because of the lack of financial incentives and rewards, the members of non-profit companies may fail to retain the motivation required to follow the existing guidelines precisely. Thus, the threat of failing to detect a possible risk or manage it at the earliest stages of its development becomes increasingly high (Elhoush & Kulatunga, 2017). Consequently, the active use of the available communication tools for keeping the dialogue between a company members consistent is imperative.
For non-profit entities, the use of social media and mobile applications for sharing crucial data may become the primary method of keeping the data flow consistent. The proposed approach will also contribute to a steep reduction in the number of errors made by staff members. Indeed, there is no need to stress that employees are especially prone to making mistakes in the workplace without the latest information provided. Therefore, the use of modern media and IT devices will lead to a more effective data transfer and the following rise in the performance levels among participants. As a result, a rapid increase in the efficacy of companies, in general, and firms working in the oil and gas industry, in particular, is expected. The improvement of project management will help address some of the controversies in the functioning of modern corporate entities. With a set of enhanced ethical standards, organizations will succeed in pursuing their goals.
References
Elhoush, R., & Kulatunga, U. (2017). The effectiveness of project risk management: A study within the Libyan oil and gas industry. In 13th International Postgraduate Research Conference (IPGRC), 14-15 September 2017, University of Salford, UK.
Lam, J. (2014). Enterprise risk management: From incentives to controls (2nd ed.). New York, NY: Wiley.
Mirgani, S. (2017). Introduction: Art and cultural production in the GCC. Journal of Arabian Studies, 7(1), 1-11.
Muralidhar, K. (2010). Enterprise risk management in the Middle East oil industry. International Journal of Energy Sector Management, 4(1), 59-86.
Suda, K. A., Rani, N. S. A., Rahman, H. A., & Chen, W. (2015). A review on risks and project risks management: Oil and gas industry. International Journal of Scientific & Engineering Research, 6(8), 938-943.