The following sections of this report include deep dives into each Scenario #1, #2 and #3. Each scenario deep dive was presented in a workshop format to a group of subject matter specialists who were charged with reporting back on pre- and post-event management as follows:
Pre-Event: Key Risk Management Actions
Post-Event: Measuring and Assessing Recovery
• Management decision support • Actioning mitigations/triggers • Risk transfer ideas • Playbook/simulation o Process for expat movements o Shut down facilities vs repair o Increase activities at other sites
• • • • •
What are key metrics for monitoring event impacts Who is responsible for management of event Information process for resolution/damage assessment Actions/mitigations to respond to scenario External factors affecting metric
We report below on the scenarios and the pre- and postevent expert analysis.
Scenario #1: Geopolitical Crisis: Middle East Conflict Energy resources are located in some of the most politically volatile areas of the world, and part of the business process of the energy value chain is to manage the risk of geopolitical crises that arise from time to time.
region also suffers from intense security competition49 largely due to the Shia/Sunni divide, petropolitics 50 and its geostrategic relevance to great powers. 51 Security competition most prominently manifests itself through the support of proxy forces throughout the region,52 direct intervention,53 and weapons proliferation.54 Additionally, the U.S. invasion of Iraq in 2003 destabilised the region, causing Iran and Saudi Arabia to recalculate their interests within the regional balance of power further intensifying security competition.55 The rise of the role of non-state actors has accelerated the Arab Spring, 56 and will continue to challenge domestic governance 57 while actively encouraging security competition abroad. See Figure 9 for a summary of historical conflict across Saudi Arabia and Iran and Table 2 for a summary of notable conflicts between Saudi Arabia and Iran.
Geopolitical risks are an inevitable part of doing business in the Middle East considering that it is one of the largest production areas of energy and a global choke-point for shipping oil and gas around the world. Conflicts in the Middle East have impacted the energy sector on many previous occasions. The first two decades of the 21st century has witnessed an escalation in tensions throughout the Middle East resulting in widespread instability. Relationships throughout the region remain complex and interconnected, and several factors drive regional competition including religious ideology. In this scenario we consider the potential for a wider-scale conflict arising through the constant tension of the Shia/ Sunni divide in the region. The Shia/Sunni divide dictates the structure of alliances within the region with most states aligning either with Shia Iran or Sunni Saudi Arabia 47 (with the exceptions of Qatar and Turkey perhaps 48). The
49 50 51 52 53 54 55 56 57
47 (Abdo, et al. 2017) 48 (Dalay 2018) Cambridge Centre for Risk Studies
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(Posen 1993) (Jaffe and Elass 2016; Luciani 2011) (Wright 2018) (Rabi and Mueller 2018) (Sharp 2018) (Iran Action Group 2018) (Sky 2015) (Hoffman 2018) (Wittes 2016) Scenario Applications: Stress Testing Companies in the Energy Value Chain
