The report depicts the importance of adapting systematic risk management system in terms of Pinwheel action framework to develop the existing business operations in Oil and Gas industry. For preparing this paper the selected organization is Falkland Oil and Gas Limited (FOGL). The difference between innovation and invention and for sustainability in the competitive market the usefulness of business strategies are also elaborated in this report.
Various models of innovation and their implementation in the energy industries are also elaborated. The application and critical analysis of Pinwheel Risk Management Action framework to drive success in Falkland Oil and Gas Limited (FOGL) and the role of systematic risk management is also illustrated in this paper. Eight sequential steps of Pinwheel risk management framework is are maintained to develop and ensure the performance of the organization to bring success in the competitive marketplace.
Difference between innovation and invention
During critical analysis, it has been found that there is a vast difference between invention and innovation and the differences are as follows:
Invention: The term invention is referred to as something that is entirely new. It means creation of a new product for the first time is known as invention. Single personality can be an inventor (Ming Chen 2014). Outcome of an invention cannot drive a business organization towards success until innovation added to the system strategically.
Innovation: In today’s world of economy, a continuous drumbeat has been identified that helps the business organizations to come up along with new business strategies and ideas as well. The developers need not to implement something new while implementing the innovation model rather they just have to add certain new approaches with the existing system. The developers must concentrate on innovation than invention (Tudorie, Ioana nicolau and craciun 2013). With the help of innovation the energy industry can process new products, services and methods as well. For the end user innovation provides services with additional values cheaper business functionalities and operation. Innovation and new technologies are complimentary to each other. Innovation is referred to as a primary driving force that is needed to develop the economic condition of the energy industries.
Successful implementation of innovation in the growth of energy industries
After successful implementation of different innovative models, the energy industries will be able to gain sustainable growth in terms of competitive advantages marketplace. The strategies will provide a range of economic opportunities to the business by providing catalyst investment to the existing system (Simeone 2015). Under the industrial strategies innovation acts as the major player that helps to drive affordable energy and transparent growth. It has been found that, over $28 million of energy innovation projects are implementing in different business organizations that are reducing the overall cost of the energy requirement.
In the current innovation approach research and innovation helps to commercialize the leading ideas by reducing the rate of carbon emission. Competitive failures are associated to incorrect technology transfer, inappropriate policy and wrong infrastructure also (Marcelino-Sádab et al. 2014). Development of these aspects will help the energy industries to reach to the sustainable growth in the competitive market.
For accelerating the energy efficiency the energy storage including the thermal, electricity and power to gas storage are using at a large scale by the energy industries (Ming Chen 2016). It helps to reduce the time and cost at the same time. Both the public and private sector industries are getting commercial benefits from innovation. In order to gain growth in the energy industries the developers consider different key elements such as- cost, different natural resources, environmental objects, various productivity growth objectives and opportunities for the new energy markets and industries as well.
Different models of innovation and its critical awareness
While analyzing the innovative models used in oil and gas industries to gain competitive advantages, it has been found that these are individually dependent on the business types. The innovative models are as follows:
Incremental model: In order to make an existing system much better and efficient the incremental models are used by the energy industries (Boyens et al. 2014). It can be said that almost innovative models are incremental by nature it means that based on business and user requirement these dummy models are developed.
Process innovation model: It helps to deliver significantly new or completely improved product in the market.
Service model: It is referred to as a considerably changed form of service model that serves innovative service to the users efficiently (Teixeira et al. 2015).
Sustainable model: These are mainly built to maintain sustainable growth of the oil and gas companies in the competitive market.
Open source innovation: In order to promote redistributive access to the users for newly designed products pragmatic open source methodology is used.
Real world application of these models in the oil and gas industries
The role of innovation is highly found in the oil and gas industries. The consequence of innovation is strictly associated to the Oil and gas industry. Innovation is referred to as one of the core part of internal culture of any business organization (Surridge et al. 2013). Over the past few years certain extraordinary advances are identified in the oil and gas industry than others.
As the energy industry has faced many challenges while applying the innovation model in their risk management strategies thus, in order to mitigate these challenges FOGL should focuses on their risk management strategies. However, the organization that makes the risk management strategy as a major priority got high payoff. During partner selection and talent selection, the oil and gas industry faces major challenges (Sundararajan et al. 2014). In order to achieve gateway growth by overcoming these challenges in real time applications most of the oil and gas companies use innovation models.
Role of Systematic Risk Management for successful implementation of innovation in Falkland Oil and Gas Limited
Systematic risk management approach helps to determine as well as overcome the risks efficiently from the core business area. The implementation of strong and effective risk management and control system in the enterprises help to promote enough sustainability in the financial department of the business organizations. For FOGL also their system is the main technical drive. In order to protect the firms against market, credit, legal operations and other functions risk management frameworks are needed to be considered. Risk management helps to identify and mitigate both the predicted and unpredicted risks of the business organization. The main problem of FOGL states that it is facing systematic risk in their financial department as the price of oil is not increasing according to the increasing demand. The risks associated to marketing, credit, operations and liquidity can be resolved after the successful implementation of the risk management framework.
After successful implementation of systematic risk management framework in terms of Pinwheel risk management action framework, in Falkland Oil and Gas Ltd it will be able to resolve the issues that have been identified during critical analysis of its business strategies. The risk management approach will help them to develop its business performance considering different factors. The factors are as follows:
- It will be able to deliver business sound strategies and its successful execution in Falkland Oil and Gas Ltd.
- It will help to understand deep business environment including risk management strategies.
- The risk management the system will give innovative ideas that can adapt new strategic plans very quickly.
- This will also give many opportunities to Falkland Oil and GAS Ltd.
- It will deliver strategic alignment, planning, risk management strategies throughout the business organization.
Systematic Risk management plan for Falkland Oil and Gas Limited
Critical analysis of Pinwheel Risk Management action framework
Discussion on Pinwheel Risk Management Action Framework
Pinwheel framework is generally used to manage the occurred risks in business organizations (Schodl and Turowski 2014). This is focused to the strategic alignment along with the risks and reward functions. In order to formalize strategic risk management approach energy industries make partnership with ERP (Enterprise Resource Planning) risk management groups. The set of issue that generally most of the business organizations face are as follows:
- Demographic and regulatory risks or as a whole macro environment risk,
- Productivity risks
- Functional and operational risks
- Marketing and credit risks
This Pinwheel risk management framework helps the business organization to mitigate these identified issues very much carefully. Before applying the Pinwheel risk management framework in the real time application FOGL is required to frame the design accurately. For corporate and strategic business development the top down approach of risk management is required to be adapted by FOGL. The steps of Pinwheel risk management framework are as follows:
- Evaluation of business intelligence
- Evaluating the strategic purposes and vision of the business organization
- Determine the goal and aspiration of the business
- Identification of the critical initiatives
- Project plan the budget integration
- Control and monitoring the system
- Accessing the strategic performance
Figure 1: Steps of Pinwheel framework
(Source: Ming Chen 2014, pp-3)
Risks faced by Falkland Oil and Gas limited
While analyzing the risk factors it has been found that Falkland Oil and Gas Limited is facing significant risks. The risks faced by FOGL are as follows:
Regulatory changes and scrutiny: The top executives of Falkland Oil and Gas Limited has identified that the health and safety needs are expanding due to the restricted hydraulic fracture. The price of oil is not increasing according it demand and as a result the organization is facing high financial loss (Schulze et al. 2016). Due to rapid regulatory changes the organization also facing major challenge in the competitive market.
Economic condition and the price risks: The sudden price drop of oil forced FOGL to replace their financial growth with survival. Survival in the competitive market has become their main objectives. This is identified as another major risk. In order to make complete recovery how much time they actually needs is still not known.
Cyber security: The energy producing companies including FOGL is also completely aware of cyber security. However due to lack security management the confidential data are getting theft by the external attackers. This is another risk to FOGL.
Consumer related risks: Due to lack of financial support the organization failed to deliver products as well as service to its consumers as per their demanded time. As a result the rate of customer’s turnover also increases widely.
Mitigation of the identified risks of FOGL by applying Pinwheel Risk Management Action Framework
In order to mitigate the identified risk from the core business of FOGL and for gaining benefits from the members and competitive market, the concept of pinwheel action framework is needed to be applied in Falkland Oil and Gas Company considering the roles and responsibility of the project development team members and their activities.
The systematic processes of Pinwheel Risk Management Action Framework are as follows:
Step 1- Business intelligence evaluation: FOGL should hire appropriate business intelligence vendor through which they could take effective decision for their organizational success. This process starts with critical analysis on the broad trends (Wolff and Kononenko 2014). For understanding the global business condition internal and external factors are also required to be analyzed.
Step 2- Refining the strategic functionalities and vision: After understanding the business trends and the external key factors FGL authority will get an opportunity to set their mission, vision and business priorities in this step (Abrahamsen et al. 2015). It will help the organization to gain commercial benefits by giving high quality consumer services.
Step 3- Determination of business goals and aspiration: In order to achieve long term business benefits specific financial targets along with long term vision and goals should be determined in this step.
Step 4- Developing strategic priorities: FOGL should develop their business into consumer focused one to gain competitive advantages. They should also enhance their business culture by enhancing the distributive nature (Zou, Kiviniemi and Jones 2016). It will help them to build their brand image with a risk free solution.
Step 5- Identification of critical initiatives: Before implementation of BI with their business process FOGL must measure the ROI and cost benefit analysis to understand whether the business is beneficial or not.
Step 6- Project integration: All the factors and perspective of the business intelligence are required to be integrated together to gain competitive advantages and constant revenue (Schulze et al. 2016).
Step 7- Monitoring critical initiatives: After adapting BI with their existing system the management authority should monitor the progress sophisticatedly.
Step 8: Strategic performance access: In this step all the important information should be executed effectively for the business organization considering the long terms objectives and risks also.
From the overall discussion it can be concluded that the after successful implementation of pinwheel development framework model, Falkland oil and gas Ltd. will be able to gain sustainable growth in terms of competitive advantages in the marketplace. The role of ITC risk management system is also elaborated in this paper. Additionally the steps of Pinwheel risk management action framework are also appropriately applied for Falkland Oil and Gas Ltd including the roles and project team members and their activity schedule is also illustrated in this paper. The strategies will provide a range of economic opportunities to the business. Development of these aspects will help FOGL to reach to the sustainable growth. Additionally for developing the business strategies a Gantt chart schedule and work break down structure s also developed in this paper.
Identification of roles: The commercial and non commercial roles and responsibilities of the employees are required to be divided equally so that they could efficiently complete their tasks on time.
Retention model development: If any issue is identified then in order to solve those issues appropriate workable revenue retention model should be developed.
Ensuring transparency: In order to ensure the transparency, secure financial audit and effective legislative error level should be chosen so that issues get mitigated faster.
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