GEMI Survey EHS Risk Management

1. GEMI SurveyEHS Risk Management October 2001 Carl Wirdak Occidental Petroleum Corporation

2. Outline • Survey Recap • Risk policy and program features • Risk assessment process • what is covered • how is risk assessed • Information and communication • Risk management process responsibilities • Risk management outcomes RISK MANAGEMENT

3. Survey Overview • Survey covers the management of environment, health or safety (EHS) related risk as it applies to a company’s business activities (i.e., manufacturing, transportation/distribution, product formulation and use, etc.). • Survey response rate = 69% • 27 companies responded to the survey • Not all companies completed all questions • Broad industry coverage • Chemicals, semiconductor, oil/gas, consumer products, pharmaceuticals, food/beverage, forest products, energy, transportation, etc. RISK MANAGEMENT

4. Risk Policy • >95% of respondents have an internal policy or guidance document that directs efforts to identify / manage EHS risks • Most risk management programs are formal • Acceptable risks are established on a case-by-case basis, rather than by setting “bright-line” or unequivocal limits RISK MANAGEMENT

5. Risk Policy Majority require that all risks be identified and managed RISK MANAGEMENT

6. Risk Assessment - Scope • All respondents do EHS compliance audits • 80% of respondents covered by a legally mandated risk management requirement (OSHA PSM / EPA RMP) • 88% of respondents conduct EHS risk assessments and all of these address risk issues that go beyond regulatory compliance RISK MANAGEMENT

7. Risk Assessment - Focus Physical risks appear to be the primary focus RISK MANAGEMENT

8. Risk Assessment - Process • 67% have written procedure that provides a method for categorizing EHS risks • 50% say the methodology for categorizing PSM / RMP related risks is different than for all other types of risk • 43% force rank different types of EHS risks on a common scale RISK MANAGEMENT

9. Risk Assessment - Process RISK MANAGEMENT

10. 84% of respondents address inherent EHS risks of operations 92% report on risks that go beyond those areas covered by PSM / RMP Nature of risk discussion Information / Communication • 83% include mitigation opportunities • 59% document risks left unmitigated RISK MANAGEMENT

11. Information / Communication • Facility, Corp EHS and Legal “know” the risks • Risk information communicated to Division/BU management • Corporate management does not receive risk information RISK MANAGEMENT

12. Information / Communication • Legal Department involvement • 80% of companies have legal input • Risk assessment team member or report reviewer (sometimes directs the team) • Twice as likely (40%) to have outside counsel involved in risk assessments versus EHS audits • Apply audit privilege RISK MANAGEMENT

13. Responsibilities • Identification and management of EHS risks rests with line management and facility, division, or corporate EHS staff RISK MANAGEMENT

14. Responsibilities • EHS and (to a lesser degree) other facility staff are primarily responsible for conducting and validating the risk analysis • Where corporate EHS is not involved in risk analysis, more than 25% of respondents do not validate the output RISK MANAGEMENT

15. Headcount RISK MANAGEMENT

16. Number of Companies Yes 8 11 All Risks Identified / Managed 2 3 No No Yes All Risks Eliminated Outcomes • 80% of companies require identification and prioritization of risks • Only 45% require elimination of risk • Line management is responsible for choosing accepting risks • Popular 3rd party insurance: • Operational • Business Interruption • E, S, H RISK MANAGEMENT

17. Outcomes • Benefits of EHS risk management • Lower risks • Reduced potential liabilities • Improved EHS performance • Enhanced EHS legal compliance • Lower EHS costs and lower insurance costs • Enhanced management awareness • Safer products • Smoother ISO 14000 registration • Satisfy stakeholder expectations • Created new customer service opportunities RISK MANAGEMENT

18. Outcomes • Emerging areas of risk management • Sustainability • Social Responsibility • Company and brand reputation • Community relations • Persistent chemicals • Biosafety • New issue management RISK MANAGEMENT

19. Questions / Comments • We assess existing risks to find ways to avoid conditions and designs that create significant future risk. • We use our life cycle management process, EHS management system plus RMP/PSM and EHS audits to control risk. • Has any company outsourced the risk analysis function? • Are companies considering a transparent, full disclosure policy or participation (by NGOs, etc.) on company risk assessments? • How well do companies utilize their risk evaluations related to intangible assets for financial analysts? RISK MANAGEMENT