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Risk Assessment Diagnostic:

Explorer Pipeline Services Company

Roadmap for the Presentation


Overall Results

Finance Leadership Exchange

Sectional Scores

Appendix

Top Ten Risks by Importance - Aggregate Scores


Overall Importance
Scores

Velocity of Risk

Staff Bench Strength Risk

5.45

4.67

Environmental Risk

5.29

5.93

Catastrophic Loss Risk

4.87

5.51

Regulatory Risk

4.85

3.18

Succession Planning Risk

4.83

3.64

Compensation and Benefits Risk

4.62

4.62

Management Turnover Risk

4.57

3.82

Pipeline Reliability Risk

4.40

4.89

Financial Health/Economic Uncertainty Risk

4.33

3.91

Environment, Health & Safety Risk

4.12

4.40

Aggregate Findings

Finance Leadership Exchange

Top Ten Risks by Importance - Aggregate Scores

Legend :
a Staff Bench Strength Risk
b Environmental Risk
c Catastrophic Loss Risk
d Regulatory Risk
e Succession Planning Risk

Finance Leadership Exchange

f Compensation and Benefits Risk


g Management Turnover Risk
h Pipeline Reliability Risk
i Financial Health/Economic Uncertainty Risk
j Environment, Health & Safety Risk

Risk Velocity
Very Rapid
Rapid
Slow

Risk Importance Standard Deviation Scores

Average Value
+ 1 Standard Deviation

Risks

Mean

Standard Deviation

Financial Health/Economic Uncertainty Risk

5.54

1.15

Market Decline Risk

5.00

1.69

Staff Bench Strength Risk

4.86

1.80

Industry Risk

4.83

1.68

Commodity Risk

4.74

1.36

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Top Ten Risks by Impact - Aggregate Scores


Top Ten by Impact

Impact Score

Likelihood
Score

Velocity Score

Catastrophic Loss Risk

6.85

3.08

5.07

Financial Health/Economic Uncertainty Risk

6.47

4.82

4.41

Industry Risk

6.11

3.94

2.55

Market Decline Risk

5.95

4.36

2.75

Pipeline Product Capacity Risk

5.87

3.67

4.23

Environment, Health & Safety Risk

5.68

2.62

4.88

Product Demand Risk

5.38

2.90

3.20

Customer Satisfaction Risk

5.29

2.39

3.61

Competition Risk

5.24

3.70

2.95

Regulatory Risk

5.09

4.13

2.42

Finance Leadership Exchange

Top Ten Risks by Impact - Aggregate Scores

Legend :
a Catastrophic Loss Risk
b Financial Health/Economic Uncertainty Risk
c Industry Risk
d Market Decline Risk
e Pipeline Product Capacity Risk

Finance Leadership Exchange

f Environment, Health & Safety Risk


g Product Demand Risk
h Customer Satisfaction Risk
i Competition Risk
j Regulatory Risk

Risk Velocity
Very Rapid
Rapid
Slow

Risk Impact Standard Deviation Scores

Average Value
+ 1 Standard Deviation

Risks

Mean

Standard Deviation

Catastrophic Loss Risk

6.85

2.07

Financial Health/Economic Uncertainty Risk

6.47

1.59

Industry Risk

6.11

1.94

Market Decline Risk

5.95

1.76

Pipeline Product Capacity Risk

5.87

2.83

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Top Ten Risks by Likelihood - Aggregate Scores


Top Ten by Likelihood

Impact Score

Likelihood
Score

Velocity Score

Staff Bench Strength Risk

4.70

5.43

4.00

Financial Health/Economic Uncertainty Risk

6.47

4.82

4.41

Commodity Risk

5.08

4.62

3.92

Compensation Risk

3.71

4.37

3.04

Market Decline Risk

5.95

4.36

2.75

Regulatory Risk

5.09

4.13

2.42

Industry Risk

6.11

3.94

2.55

Leadership Risk

3.38

3.93

3.32

Competition Risk

5.24

3.70

2.95

Pipeline Product Capacity Risk

5.87

3.67

4.23

Finance Leadership Exchange

Top Ten Risks by Likelihood - Aggregate Scores

Legend :
a Staff Bench Strength Risk
b Financial Health/Economic Uncertainty Risk
c Commodity Risk
d Compensation Risk
e Market Decline Risk

Finance Leadership Exchange

f Regulatory Risk
g Industry Risk
h Leadership Risk
i Competition Risk
j Pipeline Product Capacity Risk

Risk Velocity
Very Rapid
Rapid
Slow

Risk Likelihood Standard Deviation Scores

Average Value
+ 1 Standard Deviation

Risks

Mean

Standard Deviation

Staff Bench Strength Risk

5.43

2.38

Financial Health/Economic Uncertainty Risk

4.82

1.19

Commodity Risk

4.62

1.33

Compensation Risk

4.37

2.40

Market Decline Risk

4.36

1.79

Finance Leadership Exchange

Top Ten Risks For All Parameters


Impact

Likelihood

Velocity

Importance

Catastrophic Loss Risk

Staff Bench Strength Risk

Catastrophic Loss Risk

Financial Health/Economic
Uncertainty Risk

Financial Health/Economic
Uncertainty Risk

Financial Health/Economic
Uncertainty Risk

Business Continuity Risk

Market Decline Risk

Industry Risk

Commodity Risk

Environment, Health & Safety Risk

Staff Bench Strength Risk

Market Decline Risk

Compensation Risk

Financial Health/Economic
Uncertainty Risk

Industry Risk

Pipeline Product Capacity Risk

Market Decline Risk

Physical Security Risk

Commodity Risk

Environment, Health & Safety Risk

Regulatory Risk

Pipeline Product Capacity Risk

Pipeline Product Capacity Risk

Product Demand Risk

Industry Risk

Outsource Provider Safety Risk

Regulatory Risk

Customer Satisfaction Risk

Leadership Risk

Pipeline Reliability Risk

Catastrophic Loss Risk

Competition Risk

Competition Risk

Staff Bench Strength Risk

Competition Risk

Regulatory Risk

Pipeline Product Capacity Risk

Commodity Risk

Compensation Risk

Finance Leadership Exchange

Roadmap for the Presentation

Overall Results

Finance Leadership Exchange

Sectional Scores

Appendix

Category- wise Aggregate Scores

Risks by Category

Impact of Risk

Likelihood of
Risk

Velocity of
Risk

Strategic Risks

4.91

3.48

3.15

Financial Risks

4.43

3.13

3.35

Operational Risks

3.86

2.96

3.29

Legal/Compliance Risks

4.01

2.27

3.24

IT & Systems Risks

3.69

2.42

3.59

Finance Leadership Exchange

Category- wise Aggregate Scores

Legend :
a Strategic Risk
b Financial Risk
c Operational Risk
d Legal/Compliance Risk
e IT & Systems Risk

Finance Leadership Exchange

Risk Velocity
Very Rapid
Rapid
Slow

Strategic Risks - Aggregate Scores


Strategic Risk

Impact

Likelihood

Velocity

Catastrophic Loss Risk

6.85

3.08

5.07

Competition Risk

5.24

3.70

2.95

Compensation Risk

3.71

4.37

3.04

Customer Satisfaction Risk

5.29

2.39

3.61

Industry Risk

6.11

3.94

2.55

Investor Relations Risk

3.00

2.18

2.88

Market Decline Risk

5.95

4.36

2.75

Pricing Risk

4.64

3.43

3.79

Product Demand Risk

5.38

2.90

3.20

Regulatory Risk

5.09

4.13

2.42

Sovereign/Political Risk

3.88

2.00

2.00

Staff Bench Strength Risk

4.70

5.43

4.00

Strategic Initiatives Risk

4.05

3.27

2.71

Finance Leadership Exchange

16

Strategic Risks - Aggregate Scores

Legend :
a Catastrophic Loss Risk
b Competition Risk
c Compensation Risk
d Customer Satisfaction Risk
e Industry Risk
f Investor Relations Risk
g Market Decline Risk
h Pricing Risk
Finance Leadership Exchange

i Product Demand Risk


j Regulatory Risk
k Sovereign/Political Risk
l Staff Bench Strength Risk
m Strategic Initiatives Risk

Risk Velocity
Very Rapid
Rapid
Slow

Strategic Risks Standard Deviation Scores

Average Value
+ 1 Standard Deviation

Finance Leadership Exchange

Risks

Mean

Standard Deviation

Market Decline Risk

5.00

1.69

Staff Bench Strength Risk

4.86

1.80

Industry Risk

4.83

1.68

Regulatory Risk

4.50

1.56

Catastrophic Loss Risk

4.37

1.24

Financial Risks - Aggregate Scores

Financial Risks

Impact

Likelihood

Velocity

Budget & Planning Risk

3.64

2.55

2.67

Commodity Risk

5.08

4.62

3.92

Covenant Risk

4.79

2.64

3.64

Credit Risk

3.00

2.54

2.31

Financial Health/Economic Uncertainty Risk

6.47

4.82

4.41

Segregation of Duties and Internal Control Risk

3.59

1.59

3.13

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19

Financial Risk - Aggregate Scores

Legend :
a Budget & Planning Risk
b Commodity Risk
c Covenant Risk
d Credit Risk
e Financial Health/Economic Uncertainty Risk
f Segregation of Duties and Internal Control Risk

Finance Leadership Exchange

Risk Velocity
Very Rapid
Rapid
Slow

Financial Risks Standard Deviation Scores

Average Value
+ 1 Standard Deviation

Risks

Mean

Standard Deviation

Financial Health/Economic Uncertainty Risk

5.54

1.15

Commodity Risk

4.74

1.36

Covenant Risk

3.36

1.30

Budget & Planning Risk

2.88

1.83

Credit Risk

2.45

0.99

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Operational Risks - Aggregate Scores


Operational Risk

Impact

Likelihood

Velocity

Capacity Risk

3.36

2.91

2.73

Change Readiness Risk

4.00

3.61

3.52

Communications Risk

3.22

3.50

3.14

Contract Information Risk

2.71

3.28

2.71

Efficiency Risk

4.00

2.36

2.79

Employee/Third Party Fraud Risk

2.90

2.19

3.35

Leadership Risk

3.38

3.93

3.32

Measurement Risk

3.06

2.35

2.50

Outsource Provider Safety Risk

3.82

3.43

4.16

Performance Gap Risk

4.00

2.65

3.05

Physical Security Risk

4.75

2.87

4.29

Permitting Risk

3.56

2.94

2.64

Pipeline Product Capacity Risk

5.87

3.67

4.23

Pipeline Reliability Risk

4.78

2.22

4.11

Supply Chain Risk

4.18

2.47

3.27

Team Satisfaction Risk

4.11

3.00

2.88

Finance Leadership Exchange

22

Operational Risk - Aggregate Scores

Legend :
a Capacity Risk
b Change Readiness Risk
c Communications Risk
d Contract Information Risk
e Efficiency Risk
f Employee/Third Party Fraud Risk
g Leadership Risk
Finance Leadership Exchange

h Measurement Risk
i Outsource Provider Safety Risk
j Performance Gap Risk
k Physical Security Risk
l Permitting Risk
m Pipeline Product Capacity Risk
n Pipeline Reliability Risk
o Supply Chain Risk
p Team Satisfaction Risk

Risk Velocity
Very Rapid
Rapid
Slow

Operational Risks Standard Deviation Scores

Average Value
+ 1 Standard Deviation

Finance Leadership Exchange

Risks

Mean

Standard Deviation

Pipeline Product Capacity Risk

4.53

2.10

Change Readiness Risk

3.59

1.44

Physical Security Risk

3.53

1.45

Outsource Provider Safety Risk

3.41

1.66

Team Satisfaction Risk

3.33

1.56

Legal/Compliance Risks - Aggregate Scores


Legal/Compliance Risks

Impact

Likelihood

Velocity

Compliance (Regulatory & other) Risk

3.96

2.64

3.47

Environment, Health & Safety Risk

5.68

2.62

4.88

Failure to Act Risk

3.52

2.73

2.45

Governance Risk

3.63

2.50

2.72

Government Relations Risk

3.71

1.22

2.50

Illegal Acts Risk

3.54

1.64

2.90

Product Liability Risk

4.06

2.39

3.73

Regulatory Reporting Risk

3.96

2.39

3.30

Finance Leadership Exchange

25

Legal/Compliance Risks - Aggregate Scores

Legend :
a Compliance (Regulatory & other) Risk
b Environment, Health & Safety Risk
c Failure to Act Risk
d Governance Risk
e Government Relations Risk

Finance Leadership Exchange

f Illegal Acts Risk


g Product Liability Risk
h Regulatory Reporting Risk

Risk Velocity
Very Rapid
Rapid
Slow

Legal/Compliance Risks Standard Deviation Scores

Average Value
+ 1 Standard Deviation

Risks

Mean

Standard Deviation

Environment, Health & Safety Risk

3.77

1.60

Compliance (Regulatory & other) Risk

3.00

1.38

Product Liability Risk

2.94

1.73

Governance Risk

2.86

1.20

Failure to Act Risk

2.82

1.39

Finance Leadership Exchange

IT & Systems Risks - Aggregate Scores

IT & Systems Risks

Impact

Likelihood

Velocity

Business Continuity Risk

5.04

2.75

5.05

Information Access Risk

2.95

2.47

3.31

Infrastructure Risk

2.93

2.65

2.50

Network/System Failure Risk

3.85

1.79

3.50

Finance Leadership Exchange

28

IT & Systems Risks - Aggregate Scores

Legend :
a Business Continuity Risk
b Information Access Risk
c Infrastructure Risk
d Network/System Failure Risk

Finance Leadership Exchange

Risk Velocity
Very Rapid
Rapid
Slow

IT & Systems Risk Standard Deviation Report

Average Value
+ 1 Standard Deviation

Finance Leadership Exchange

Risks

Mean

Standard Deviation

Business Continuity Risk

3.53

1.31

Infrastructure Risk

2.73

1.28

Network/System Failure Risk

2.50

0.79

Information Access Risk

2.44

0.79

Roadmap for the Presentation

Overall Results

Finance Leadership Exchange

Sectional Scores

Appendix

Risk Diagnostic Survey Categories


About the Survey Grid: For each of the risks listed below please select the most appropriate (a) degree of impact, (b) likelihood of occurrence, and
(c) velocity. This response is your opinion on the emerging risk from your perspective in the business.
Degree of Impact:
Definition: If this risk were to materialize, what would be the percent profit loss to your organization?
Likelihood of Occurrence:
Definition: What is the probability this risk will occur?
Velocity:
Definition: If this risk were to materialize, how rapidly would the risk manifest itself and harm your organization?
To level set, we have identified the definitions for each criteria below:
Degree of Impact
1-3
Low
4-6
Medium
7-9
High

Approx. 1%- 5%
Approx. 6% - 10%
Approx.11% 15%

Likelihood of Occurrence
1-3
Low
Very Rare to Unlikely
4-6
Medium
Moderate
7-9
High
Possible to Likely
Velocity of Onset
1-3
4-6
7- 9

Low
Medium
High

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Over 12 Months to 9 Months


9 Months to 3 Months
3 Months to Immediate

Analysis Methodology
Ranking Calculation
To determine the ranking (for each category- Impact/Likelihood/Velocity) we calculate a simple average of the responses. For e.g., if we want to
calculate the Impact score for a Risk X and the number of responses are as follows : (total responses : 31)
In this case, the average impact score is as follows : ( 10*9 + 6*7 + 8*6 + 4*2 + 3*1 )/31 = 6.16
Importance Calculation
To determine the importance scores for each risk we calculate the square root of the product of the impact and likelihood scores of each
individual response, and then calculate a simple average of the responses.*
* The importance scores calculated as the square root of the average impact and likelihood scores may produce different results due to
difference in the methodology.

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Risk Assessment Diagnostic Survey


Categories
Strategic Risks:
Catastrophic Loss Risk
Definition: The risk that a majornatural or man-madedisaster could threaten the companys ability to sustain operations, provide essential
products and services or recover operating costs.
Competition Risk
Definition: The risk that actions of the companys competitors or new entrants to the market threaten competitive advantage.
Compensation Risk
Definition: The risk that compensation and additional incentives are inadequate to maintain the human capital required to sustain and grow the
business.
Customer Satisfaction Risk
Definition: The risk that a lack of appropriate focus on customers needs and wants threatens the companys ability to meet or exceed customer
expectations, resulting in poor customer retention.
Industry Risk
Definition: The risk that changes in opportunities and threats affecting the industry threaten the attractiveness or long-term viability of the industry.
Investor Relations Risk
Definition: The risk that misrepresentations of company activities through media, crisis or employee communications jeopardizes investor
confidence in the company.
Market Decline Risk
Definition: The risk that advances or changes in technology, the business environment, and/or consumer habits will drastically shrink the number of
customers who utilize the companys services.
Pricing Risk
Definition The risk that a product, good and/or service is severely under or overpriced and causes the company to miss out on potential profits.

Finance Leadership Exchange

Risk Assessment Diagnostic Survey


Categories
Strategic Risks (contd.) :
Product Demand Risk
Definition: The risk that a scenario arises in which the company cannot meet the product demands of its customers and the company loses out on
potential revenue.
Regulatory Risk
Definition: The risk that changing regulations threaten the companys competitive position and capacity to conduct business.
Sovereign/Political Risk
Definition: The risk that adverse political actions (i.e. pricing regulations, taxes, domestic tariffs) threaten resources and future cash flows.
Staff Bench Strength Risk
Definition: The risk that the company does not have an employee talent pool deep enough to absorb staff departures.
Strategic Initiatives Risk
Definition: The risk that failures to align new initiatives, planning and execution with established company vision and direction lead to the
misapplication of company resources.

Finance Leadership Exchange

Risk Assessment Diagnostic Survey


Categories
Financial Risks:
Budget & Planning Risk
Definition: The risk that non-existent, unrealistic, irrelevant or unreliable budget and planning information for the company may cause inappropriate
financial decisions.
Commodity Risk
Definition: The risk that uncertainties of future market values and of the size of the future income, caused by the fluctuation in the prices of
commodities will cause volatility in the companys cost base.
Covenant Risk
Definition: The risk that continual misses of bank covenants will either cause the company to pay additional money to amend or cause the bank to
take specific measures against the company.
Credit Risk
Definition: The risk that the exposure to actual loss as a result of a default (or other failure to perform) by an economic or legal entity with which the
company does business causes a loss of revenue for the company.
Financial Health/Economic Uncertainty Risk
Definition: The risk that economic factors beyond company control will have a negative impact on financial results and/or the ability to achieve
objectives.
Segregation of Duties and Internal Control Risk
DefinitionThe risk that adequate segregation of duties and internal controls are not in place to ensure the integrity of information and to
prevent/detect fraud.

Finance Leadership Exchange

Risk Assessment Diagnostic Survey


Categories
Operational Risks:
Capacity Risk
Definition: The risk that the implementation of a policy or project will exceed the company's management capacity.
Change Readiness Risk
Definition: The risk that the company is unable to implement process and product/service improvements quickly enough to meet business
requirements.
Communications Risk
Definition: The risk that ineffective communication channels may result in messages that are inconsistent with authorized responsibilities or
established performance measures.
Contract Information Risk
Definition: The risk that insufficient or inadequate information is collected to track contract commitments and to perform effective contract
management.
Efficiency Risk
Definition: The risk that inefficient operations threaten companys ability to provide service at or below competitor cost levels.
Employee/Third Party Fraud Risk
Definition: The risk that fraudulent activities perpetrated by employees, customers or suppliers, agents, brokers or third-party administrators against
company for personal gain (misappropriation of physical, financial or information assets) exposes the company to financial loss.
Leadership Risk
Definition: The risk that supervisors fail to perceive, diagnose or address employees' performance problems on a timely basis.
Measurement Risk
Definition: The risk that non-existent, irrelevant and/or unreliable non-financial measures may cause erroneous assessments of and conclusions
about operational performance.

Finance Leadership Exchange

Risk Assessment Diagnostic Survey


Categories
Operational Risks (contd.):
Performance Gap Risk
Definition: The risk company performance suffers in terms of quality, cost and/or cycle time due to inferior operating practices.
Supply Chain Risk
Definition: The risk that a breakdown in the movement of goods and information between the organization and its suppliers and customers reduces
performance.
Team Satisfaction Risk
Definition: The risk that team satisfaction declines causing poor team morale, work ethic, and lack of productivity.
Pipeline Reliability Risk
Definition: The risk that failure to protect the organizations infrastructure, personnel, and critical information from criminal threats or attacks, both
internal and external, impairs the organizations ability to conduct business.
Physical Security Risk
Definition: The risk that failure to protect the organizations personnel, hardware, programs, networks, and data from physical circumstances and
events causes serious losses or damage.
Outsource Provide Safety Risk
Definition: The risk that a third-party provider of outsourced or contract services provides an unsafe and/or safety deficient working environment
that exposes the organization to liability, loss of business reputation and other costs.
Pipeline Product Capacity Risk
Definition: The risk that management fails to effectively prioritize and/or estimate market supply and demand for pipeline through-put capacity
resulting in a failure to maintain appropriate levels of petroleum products in the pipeline (i.e. reduced demand for diluent).
Permitting Risk
Definition: The risk that the organization is unable to identify, obtain, and understand the permits necessary to continue and expand operations,
infrastructure and production.

Finance Leadership Exchange

Risk Assessment Diagnostic Survey


Categories
Legal/Compliance Risks:
Compliance (Regulatory & Other) Risk
Definition: The risk that non-compliance with customer requirements, prescribed organizational policies and procedures or laws may result in poor
performance or legal action.
Environment, Health & Safety Risk
Definition: The risk that an actual or potential threat of adverse effects on living organisms and the environment may arise as a result of the
organization's and employees activities.
Failure to Act Risk
Definition: The risk that the company or company employees are aware of a transgression and fail to report it due to either an unwillingness to
come forward or the lack of an adequate, anonymous reporting mechanism.
Governance Risk
Definition: The risk that failure to create organizational transparency by defining the mechanisms the company uses to ensure that its constituents
follow established processes and policies may create a corporate culture of noncompliance and unaccountability.
Government Relations Risk
Definition: The risk that the participation of the company or its employees in unlawful practices with regards to illicitly influencing the decisions made
by the government, legislators and/or officials, or organized groups may lead to legal action against the organization.
Illegal Acts Risk
Definition: The risk that illegal acts committed by managers or employees expose the company to fines, sanctions and the loss of customers
profits, reputation, supply chain and/or business partners, etc.
Product Liability Risk
Definition: The risk that a product failure will cause harm to a customer and bring a product liability lawsuit, resulting in lost business for the
company, the inability to market and sell a product or products or a significant cash outlay to satisfy customer claims.
Regulatory Reporting Risk
Definition: The risk that incomplete, inaccurate and/or untimely reporting of required financial and operating information to regulatory agencies may
expose company to fines, penalties or sanctions.
Finance Leadership Exchange

IT & Systems Risks:

Risk Assessment Diagnostic Survey


Categories

Business Continuity Risk


Definition: The risk that the business could not recover in a timely fashion in a disaster recovery situation.
Information Access Risk
Definition: The risk that failure to adequately restrict access to information (data or programs), which may result in unauthorized knowledge and use
of confidential information, or overly restricting access to information may preclude personnel from performing their assigned responsibilities
effectively and efficiently.
Infrastructure Risk
Definition: The risk that the company does not have the information and technology infrastructure (e.g. hardware, networks, software, people and
processes) it needs to effectively protect/support the current and future information requirements of the business in an efficient, cost-effective and
well-controlled fashion.
Network/System Failure Risk
Definition: The risk that the information network/system suffers from inability to operate to specification or produce the desired output.

Finance Leadership Exchange

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