BW LPG: facing risks in these difficult times

Risk management is not just about compliance and good governance. It is fundamental to our decision-making process at all levels of the organization. Our risk strategy and policy determine how we plan for and respond to risks related to our business strategy, preventable operational incidents and unforeseen events.

BW LPG takes a comprehensive and systematic approach to identifying, measuring, prioritizing and responding to the risks that challenge our most critical day-to-day operations. Our enterprise risk management (ERM) is based on the principles of ISO 31000 and the Committee of Sponsoring Organizations (COSO) ERM framework. Through effective risk management, BW LPG aims to maximize value through an appropriate balance between growth, return, risk and resource deployment strategies.

To pursue sustainable development and growth, we have also integrated climate-related physical and transition risks into our ERM framework. It also provides information to our stakeholders to understand the risks, impacts and opportunities that climate change brings to BW LPG.

Improved reporting in alignment with key frameworks
Our ERM describes all relevant risks related to our business, including environmental, social and governance risks. Our reporting is aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) framework which examines the risks and opportunities of the global transition to low-carbon or carbon-neutral solutions, and the related physical risks to changing weather conditions.

Risk management framework at BW LPG

We regularly review our framework, policy and risk register to ensure relevant processes and effective mitigation.

A TCFD-aligned approach
We identify and perform risk assessments in accordance with the TCFD by:
1. Engage customers, investors and lenders in understanding possible risks to our business and operations;
2. Follow the evolution of international standards and environmental regulations in maritime transport; and
3. Identify and manage climate-related and business risks within our ERM framework.

TCFD and us
The TCFD guides our understanding of the risks and opportunities that can arise from climate change. In the short term, we are continuing with our proven secure income strategies and our organizational transformation. This includes a focus on pioneering technology and digitalization of our fleet, as well as business agility to meet changing market needs.
Long-term decarbonization trends present risks and opportunities. Changes in LPG market fundamentals and growing demand for climate action pose the greatest risks to our industry. They also present opportunities to expand and scale commercial offerings along the energy value chain. We monitor developments in carbon taxes, carbon capture, green technologies, green pathways and regulations as we develop our ESG strategies.

What we have done
Risks and opportunities are prioritized based on severity of potential impacts and feasibility respectively. Our Supplemental Risk Assessment Document provides a summary of our full risk assessment.

Management is focusing on transition risks in strategic planning, fleet development and capital expenditure plans. These risks are also guiding the planning for the transition of our next-generation and existing fleet. Physical risks related to climatic events influence travel planning and operations.

BW LPG’s decarbonization roadmap includes investing in vessels that emit less GHGs and are more energy efficient. Regular ESG reporting also facilitates competitive financing that is linked to ESG performance metrics, resulting in cost savings and better risk management.

BW LPG is a pioneer in the use of low-emission LPG propulsion technology, and we are committed to using LPG as a sustainable transition fuel as we work to achieve IMO’s 2050 ambitions.

what are we going to do
At BW LPG, we will strengthen our climate risk management with quantitative assessment and scenario analysis, ensure business and enterprise agility to seize opportunities created by the global energy transition, and assess the implications of long-term trends to ensure our business relevance and sustainability.

Internal checks and balances
Internal audits complement BW LPG’s rigorous and transparent reporting. The Internal Audit team is an independent function that reports directly to the Audit Committee, and the team is mandated to review business activities, including but not limited to capital projects scale, ethics compliance and processes related to anti-corruption and anti-corruption. corruption, safety and security, supply chain and human resource management. It reviews the adequacy of the organization’s internal controls and risk management processes. Their findings and recommendations are communicated quarterly to the Audit Committee.

We have an authorization matrix that outlines the functional and financial approvals required to execute transactions. This is an important part of our internal control structure to ensure that contracts and transactions are carefully assessed. Payment transactions are also subject to multi-level approvals.

We also have a risk rating framework to understand existing and emerging risks. Red flags are identified to provide a clear and methodical approach and guide all employees in assessing business risks. To assess business partners, we conduct an annual due diligence and, where appropriate, request recognized certifications and standards.
Source: BW GPL