Jan. 8, 2024
Risk management
Jan. 8, 2024
In this section
Our risk management approach
Our Enterprise Risk Management Framework provides a comprehensive and structured approach to identify, prioritize, understand, and manage ExxonMobil’s most important risks. It is designed to drive consistency across risk types and support monitoring key risks. For more details on the risks we consider and manage, refer to Item 1A. Risk Factors in the 10-K.
Examples of potential risks
Managing long-term risks associated with climate change and the energy transition is a key part of managing a broad spectrum of interrelated risks.
Our enterprise risk framework includes five elements:
- A way to organize and aggregate risks.
- Robust risk identification practices.
- A prioritization method.
- Systems and processes to manage risk.
- Risk governance to support oversight.
Our approach to risk governance is multilayered and includes clearly defined roles and responsibilities for managing each type of risk. It includes a definition of the responsibilities of risk owners, functional experts, and independent verifiers. Each risk type is managed and supported by organizations that actively execute risk management processes and are responsible for specifying corporate requirements and processes. Each of these processes includes the critical elements of leadership, people, risk identification and management, and continuous improvement. Oversight responsibilities by the Management Committee and the Board and its committees are a key part of risk governance. Our Management Committee consists of our Chief Executive Officer, our Chief Financial Officer, and our two Senior Vice Presidents.
Protection of assets, the community, and the environment
We have extensive experience operating in a wide range of challenging physical environments around the world.
Effective risk management requires the ongoing assessment and mitigation of potential impacts to our people, our assets, the community, and the environments in which we operate. Before pursuing a new development, we use data and advanced computer modeling to assess the full range of potential environmental, socioeconomic and health risks associated with potential construction and operations. We also consult with communities through public meetings and other outreach, and we work with regulators to share information and seek necessary approvals. This process gives us a comprehensive understanding of possible impacts, which we use to implement measures to avoid, reduce, or remedy environmental, socioeconomic, and health risks or impacts.
When considering physical environmental risks, we evaluate the type and location of facilities and investments. As an example, changes in patterns of waves, wind, or ice floes can affect offshore facilities. Onshore facilities could be vulnerable to sea level rise, changes in storm surge, flooding, changes in wind and seismic activity, or geo-technical considerations. We conduct environmental assessments before building and operating facilities to ensure that protective measures and procedures are in place.
Hebron
The Hebron platform is located off the coast of eastern Canada in 92 meters of water. The platform is a reinforced concrete gravity-based structure designed to withstand sea ice, icebergs, and meteorological and oceanographic conditions. Hebron was engineered and wave-tank tested for storms so extreme they may occur only once every 10,000 years. On Nov. 14, 2018, the Grand Banks saw its largest storm in 30 years, estimated as a 100-year return period event. Following temporary shutdown of all Grand Banks platforms, Hebron was up and running within a week without any major issues.
Our scientists and engineers are industry experts across a variety of disciplines. Through their active participation and leadership in industry groups, they advise and gather insights to inform and improve industry standards which, in turn, are adopted to enhance our standards and procedures. We follow industry practices such as the American Society of Civil Engineers’ Climate Resilient Infrastructure: Adaptive Design and Risk Management manual of practice.1
Industry standards, including American Society of Civil Engineers (ASCE 7)2 Minimum Design Loads and Associated Criteria for Buildings and Other Structures, are also used along with professional experience to cover a range of uncertainties. After construction of a facility, we monitor and manage ongoing facility integrity through periodic checks of key aspects of the structures.
Gulf Coast Growth Venture
The Gulf Coast Growth Venture, a petrochemical manufacturing facility near Corpus Christi, Texas, is compliant with both San Patricio County and national standards (ASCE 7). Stormwater handling is a risk factor associated with the facility, so the design includes basins to retain excess stormwater to supplement the capacity of the municipal water system. The design, construction, and operations of petrochemical facilities are highly regulated by the Texas Commission on Environmental Quality.
Company representatives held hundreds of outreach meetings with local organizations, chambers, government agencies, civic groups, and neighborhoods and have addressed comments and concerns raised during the permitting process. More information on the Texas Commission on Environmental Quality permitting process can be found on its website.3
Once facilities are in operation, we maintain disaster preparedness, response, and business continuity plans. Detailed, well-practiced, and continuously improved emergency response plans are tailored to each facility to help us prepare for unplanned events, including extreme weather. Periodic emergency drills are conducted with appropriate government agencies and community coalitions to help heighten readiness and minimize the impacts of an event. Strategic emergency support groups are established around the world to develop and practice emergency response strategies and assist field responders. Regardless of the size or complexity of any potential incident, each ExxonMobil facility and business unit has access to readily available trained responders, including regional response teams, to provide rapid tactical support.
FOOTNOTES:
- American Society of Civil Engineers Climate- Resilient Infrastructure: Adaptive Design and Risk Management, https://doi.org/10.1061/9780784415191.
- American Society of Civil Engineers (ASCE 7) Minimum Design Loads and Associated Criteria for Buildings and Other Structures, https://doi.org/10.1061/9780784415788.
- Texas Commission on Environmental Quality permits and registration, https://www.tceq.texas.gov/permitting/business_permitting.html.
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Images or statements of future ambitions, plans, goals, events, projects, projections, opportunities, or conditions in the publications, including plans to reduce, abate, avoid or enable avoidance of emissions or reduce emissions intensity, sensitivity analyses, expectations, estimates, the development of future technologies, business plans, and sustainability efforts are dependent on future market factors, such as customer demand, continued technological progress, policy support and timely rule-making or continuation of government incentives and funding, and represent forward-looking statements. Similarly, emission-reduction roadmaps to drive toward net zero and similar roadmaps for emerging technologies and markets, and water management roadmaps to reduce freshwater intake and/or manage disposal, are forward-looking statements. These statements are not guarantees of future corporate, market or industry performance or outcomes for society and are subject to numerous risks and uncertainties, many of which are beyond our control or are even unknown.
Actual future results, including the achievement of ambitions to reach Scope 1 and 2 net zero from operated assets by 2050, to reach Scope 1 and 2 net zero in Upstream Permian Basin unconventional operated assets by 2030, to eliminate routine flaring in-line with World Bank Zero Routine Flaring, to reach near zero methane emissions from operated assets and other methane initiatives, to meet greenhouse gas emission reduction plans or goals, divestment and start-up plans, and associated project plans; technology advances including in the timing and outcome of projects to capture and store CO2 supply lower-emission fuels, produce hydrogen, produce lithium, obtain data on detection, measurement and quantification of emissions including reporting of that data or updates to previous estimates, and use plastic waste as feedstock for advanced recycling; progress in sustainability focus areas; and reserve or resource changes could vary depending on changes in supply and demand and other market factors affecting future prices of oil, gas, petrochemical or new market products and services; future cash flows; our ability to execute operational objectives on a timely and successful basis; policy and consumer support for emission-reduction and other advanced products and technology; changes in international treaties, laws, regulations and incentives, including those greenhouse gas emissions, plastics, carbon storage and carbon costs; evolving reporting standards for these topics and evolving measurement standards for reported data; trade patterns and the development and enforcement of local, national and regional mandates; unforeseen technical or operational difficulties; the outcome of research efforts and future technology developments, including the ability to scale projects and technologies such as electrification of operations, advanced recycling, CCS, hydrogen production, or direct lithium extraction on a commercially competitive basis; availability of feedstocks for lower-emission fuels, hydrogen, or advanced recycling; changes in the relative energy mix across activities and geographies; the actions of competitors; changes in regional and global economic growth rates and consumer preferences; actions taken by governments and consumers resulting from a pandemic; changes in population growth, economic development or migration patterns; military build-ups, armed conflicts, or terrorism; and other factors discussed in this release and in Item 1A. “Risk Factors” in ExxonMobil’s Annual Report on Form 10-K for 2022 and subsequent Quarterly Reports on Forms 10-Q, as well as under the heading “Factors Affecting Future Results” on the Investors page of ExxonMobil’s website at www.exxonmobil.com. The Advancing Climate Solutions Report includes 2022 greenhouse gas emissions performance data and Scope 3 Category 11 estimates for full-year 2022 as of March 1, 2023. The greenhouse gas intensity and greenhouse gas emission estimates include Scope 2 market-based emissions. The Sustainability Report, the Advancing Climate Solutions Report, and corresponding Executive Summaries were issued on Jan. 8, 2024. The content and data referenced in these publications focus primarily on our operations from Jan. 1, 2022 – Dec. 31, 2022, unless otherwise indicated. Tables on our “Metrics and data” page were updated on April 26, 2024, to reflect full-year 2023 data. Information regarding some known events or activities in 2023 are also included. No party should place undue reliance on these forward-looking statements, which speak only as of the dates of these publications. All forward-looking statements are based on management’s knowledge and reasonable expectations at the time of publication. We do not undertake to provide any further updates or changes to any data or forward-looking statements in these publications. Neither future distribution of this material nor the continued availability of this material in archive form on our website should be deemed to constitute an update or re-affirmation of these figures or statements as of any future date. Any future update will be provided only through a public disclosure indicating that fact.
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The Advancing Climate Solutions Report contains terms used by the TCFD, as well as information about how the disclosures in this report are consistent with the recommendations of the TCFD. In doing so, ExxonMobil is not obligating itself to use any terms in the way defined by the TCFD or any other party, nor is it obligating itself to comply with any specific recommendation of the TCFD or to provide any specific disclosure. For example, with respect to the term “material,” individual companies are best suited to determine what information is material, under the long-standing U.S. Supreme Court definition, and whether to include this information in U.S. Securities and Exchange Act filings. In addition, the ISSB is evaluating standards that provide their interpretation of TCFD which may or may not be consistent with the current TCFD recommendations.
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Actions needed to advance ExxonMobil’s 2030 greenhouse gas emission-reductions plans are incorporated into its medium-term business plans, which are updated annually. The reference case for planning beyond 2030 is based on the Company’s Global Outlook research and publication. The Global Outlook is reflective of the existing global policy environment and an assumption of increasing policy stringency and technology improvement to 2050. However, the Global Outlook does not attempt to project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050. As future policies and technology advancements emerge, they will be incorporated into the GIobal Outlook, and the Company’s business plans will be updated as appropriate. References to projects or opportunities may not reflect investment decisions made by the corporation or its affiliates. Individual projects or opportunities may advance based on a number of factors, including availability of supportive policy, permitting, technological advancement for cost-effective abatement, insights from the company planning process, and alignment with our partners and other stakeholders. Capital investment guidance in lower-emission investments is based on our corporate plan; however, actual investment levels will be subject to the availability of the opportunity set, public policy support, other factors, and focused on returns.
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SUPPLEMENTAL INFORMATION FOR NON-GAAP AND OTHER MEASURES
The Resiliency section of the Advancing Climate Solutions Report mentions modeled operating cash flow in comparing different businesses over time in a future scenario. Historic operating cash flow is defined as net income, plus depreciation, depletion and amortization for consolidated and equity companies, plus noncash adjustments related to asset retirement obligations plus proceeds from asset sales. The Company’s long-term portfolio modeling estimates operating cash flow as revenue or margins less cash expenses, taxes and abandonment expenditures plus proceeds from asset sales before portfolio capital expenditures. The Company believes this measure can be helpful in assessing the resiliency of the business to generate cash from different potential future markets. The performance data presented in the Advancing Climate Solutions Report and Sustainability Report, including on emissions, is not financial data and is not GAAP data.