Vermilion’s Enterprise Risk Management Process
Risk associated with climate change has been quantified for each business unit utilizing the Enterprise Risk Management process. This process is utilized to assess implications and identify mitigating measures that are required to limit or reduce risk and potential liabilities to an acceptable and manageable level. Risk is assessed based on the anticipated impact severity and probability of an event occurring in consideration of human, environment, financial and social license to operate. Stakeholders in risk assessment include internal (Board of Directors, Executive, Staff) and external parties (Landowners, NGOs, investors, the general public, industry groups). Vermilion proactively conducts operational and engineering reviews aimed at increasing efficiency, including reducing emissions and monetary expenditure requirements at major facilities.
One of the key roles of the board and company senior leadership is to provide risk oversight for Vermilion, including sustainability-related risks.102-30
As a responsible company, effective risk and crisis management is vital for Vermilion. We use a multi-layered approach to ensure identification, awareness and effective management of our business-related risks, including sustainability risks. This includes identifying business opportunities that may arise from changing conditions.
Our Enterprise Risk Management program enables us to identify and continually monitor risks – including economic, environmental and social risks – defined in the following categories:
Risk is assessed based on the anticipated impact severity and the probability of an event occurring, in consideration of human, environment, financial and social license to operate factors. We use our corporate risk register to assess implications and identify mitigating measures to limit or reduce risk and potential liabilities to an acceptable level. This provides uniformity across the company while allowing for customization in each of our Business Units.
Risk Identification: Staff in operations and departments throughout the company feed into this risk framework in their own areas of expertise. This includes our Health, Safety and Environment team, Sustainability team, technical teams and Marketing (Economics) team. 102-31 Our staff also play a key role in identifying potential risk areas through their participation in the anonymous surveys prior to and after our quarterly global town halls. Their feedback and questions are shared with the Executive team, which in turn uses the information to guide strategy discussions, and reports back to staff with responses to concerns, ideas and suggestions raised. The feedback is also communicated to the Board when considered material.
In addition, external stakeholder engagement is used to identify risks that are important to those external to the company, including communities, landowners, investors, government and regulators, NGOs, the public and industry groups.
Risk Management: To manage identified risks, our internal control processes are proactive, and designed to help us achieve our business strategy of delivering modest annual growth in production and cash flow while also providing reliable and growing dividends to our shareholders. Our management approach reflects this, with a 10-year long-range plan that covers business strategy and related goals and objectives.
Risk awareness and management are the responsibility of the Board and the Executive team. Vermilion’s Board independently reviews the effectiveness of our identification and management of risk quarterly, through its four committees. This gets translated into action by our Executive team, through implementation of associated policies and procedures that the Board approves.102-31
Risk identification occurs in several ways. Teams and specialist staff across the business – including HSE, Finance, Governance, Economics and Sustainability - identify risks and work together as needed to assess impact and probability. The results are provided via briefings and advisory services to senior management, the Executive team and the Board of Directors. In the past year, this has included Board briefings and strategy discussions on topics such as Disruptive Technologies (e.g. Electric Vehicle Impact), Energy Storage, Renewable Energy, and Regulatory Changes in Oil and Gas Producing Regions.
Board governance of risks, including economic, environmental and social risks, is self-assessed annually against our corporate performance scorecard indicators. These include both standard industry metrics and internal measures of performance that are compared to plans established by management and approved by the Board of Directors each year. 102-30
Our corporate risk register is reviewed annually, and updated on an as-needed basis.