BP Report: Black Swan …or just a bird covered in oil!?


Does complexity guarantee “system failure”? (revisited)

Even before this event became highly politicized it was shaping up to stand as a 21st Century monument to a culture of Corporate mismanagement: Economy before ecology! The incentives to “cut corners” were simply too great. I have argued before that, all too often, sound risk management comes a poor second to generating profits.

It tends to be “dressed up” as compromise…until it hits the fan!

Anyone care to draw a line?: Global financial meltdown – Toyota – Gulf of Mexico spill – ???

This was/is a hugely complex operation requiring enormous financial and human resource. A tight chain of command communicating and coordinating across several companies. Undertaking a range of interdependent functions as part of a feat of engineering that would not have been possible just a few years ago. NO SCOPE TO TAKE CHANCES, TO CUT CORNERS OR TO BE ABLE TO CONTEMPLATE GAMBLING WITH THE ECOSYSTEM OF A VAST AREA.

Even a company like Toyota (Lexus), whose reputation for quality was well-deserved, were tempted by the lure of $100m per annum savings! I’m sure someone better informed than me has already worked out what their direct financial losses have been, in addition to fines, settlements and the long lasting reputational damage for a proud brand.

BP said in a statement that the report, like its own investigation, had found the accident was the result of multiple causes, involving multiple companies.


But, it said, the company was working with regulators “to ensure the lessons learned from Macondo lead to improvements in operations and contractor services in deepwater drilling”.

Transocean, which owned the Deepwater Horizon rig, said that “the procedures being conducted in the final hours were crafted and directed by BP engineers and approved in advance by federal regulators”.

‘Avoidable’ blow-out

The new report criticises BP, which owned the Macondo well, Transocean and Halliburton, which managed the well-sealing operation, and blames inadequate government oversight and regulation.

“The opening is worthy of any British tabloid – a picture of the inferno, a core as bright as the sun, surrounded by scarlet flames and billows of black smoke”

Mark Mardell
BBC North America editor

Specific risks the report identifies include:

  • A flawed design for the cement used to seal the bottom of the well
  • A test of that seal identified problems but was “incorrectly judged a success”
  • The workers’ failure to recognise the first signs of the impending blow-out
    “Whether purposeful or not, many of the decisions that BP, Halliburton, and Transocean made that increased the risk of the Macondo blow-out clearly saved those companies significant time (and money),” the presidential panel wrote.

“BP did not have adequate controls in place to ensure that key decisions in the months leading up to the blow-out were safe or sound from an engineering perspective.”

Don Boesch, a member of the investigating commission, told the BBC’s World Today programme they had identified “a whole sequence of poor decisions with unfortunate consequences when put together”.

He said that not all the faults lay with BP, although the company did have overall responsibility.

“Most of the mistakes and oversights at Macondo can be traced back to a single overarching failure – a failure of management ”

National Oil Spill Commission report

The release of this report prompted me to revisit this blog item from last year – it contains a couple of interesting links – and, bearing in mind that it was written and compiled without the access that the investigating commission will have enjoyed I reckon both tell us what we already “knew”…

According to one journalist, whose speciality is deconstructing accidents, it does (see below). Naturally we at Ontonix would like to respond to this statement: When complexity reaches the point of “critical complexity” system functionality is lost and failure can ensue. System  complexity can be managed…that is what we do! More Complexity Facts from Ontonix Nevertheless this is an interesting and worrying observation. One that, when taken in the … Read More

via Get “fit for randomness” [with Ontonix UK]

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4 Responses to BP Report: Black Swan …or just a bird covered in oil!?

  1. Geary Sikich says:

    See my article “When is a Black Swan not a Black Swan” http://www.continuitycentral.com/feature0778.html

    Also, my article – “Black Swans – or just wishful thinking and misinterpretation.

    Geary

    • Geary
      Many thanks for leaving a comment and a link to your excellent article that I would urge any other readers with a interest in looking beyond the perspective of conventional risk management.

      I would be interested to get some feedback on your understanding of our quantitative approach to risk management. Obviously, increasing business and product complexity are risks much talked about by some of the largest global consultancies even though none have a verifiable definition.
      Best

      David

  2. John Marke says:

    Vaguely familiar arguments, David. How can I argue with this logic? But you need to elaborate a bit more on the Toyota example.
    Regards,
    John

    • Hi John,
      Thanks for taking the time to leave a comment and my apologies for the delay in responding. Partly due to a couple of days of mainly “out and about” but also due to the fact that I haven’t been able to track down the information, which, if my recollection is correct, included a copy of relevant Toyota documentation.

      Essentially, the gist was that a cost-based decision was made to change elements (from memory a new supplier) of a component related to the accelerator assembly that would lead to savings of the order of $100m p.a. Compromising on the quality that was THE FOUNDATION of a, justified and hard earned reputation. Perhaps interpreted as an “Engineered” accident in the terms of Mr Langewiesche.

      Good to hear from you.

      David

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