$1.11B at stake: Kuwait Petroleum grapples with 93 risks, 9 ‘very high’ ones in focus

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KUWAIT CITY, Nov 19, (Agencies): The risk report recently released by the Kuwait Petroleum Corporation (KPC) highlighted a total of 93 risks, with 9 categorized as “very high” due to their elevated probability rates. These risks encompass a range of concerns, including inaccurate cash flow forecasts, data loss, equipment damage, lack of awareness about information security, breach of data confidentiality, exchange rate fluctuations, and shifts in interest rates and global financial markets. These issues carry potential financial and legal consequences that could adversely impact the corporation’s business outcomes.

Of particular note in the report is the identification of “very high” risks associated with the guaranteeing of the Vietnam refinery in the event of non-compliance with loan installment payments. This scenario could lead to the obligation of paying the entire guarantee amounting to $1.11 billion. The Kuwait Petroleum International Company has communicated to the Corporation about insufficient liquidity, raising concerns about their ability to meet payment obligations to the refinery company.

The report underscores that any failure by partners to fulfill their share of the installment would result in an initial default. The loan payment, due on May 30 with a value of $375.2 million, includes the company’s share of $131.7 million.

The Audit Bureau’s report on the Petroleum Corporation’s activities for the fiscal year 2022/2023 expressed concern that the Corporation’s risk register only accounted for “very high” risks, omitting other risk classifications. This limitation could hinder the ability to monitor and comprehend implemented risk-mitigation measures.

In response, the Petroleum Corporation explained that, in accordance with their comprehensive risk management policy, quarterly reports are submitted exclusively for very high risks to the Supreme Risk Committee. The Corporation and its subsidiaries detail treatment plans, implementation rates, and expected completion dates. Other risk classifications, considered high risks, are internally managed through the comprehensive risk management information system ERM-IS, exempting them from quarterly reports.

Regarding risk percentages, the Corporation reported a 15.6% implementation rate for procedures addressing liquidity risk, expected to reach completion by the fiscal year 2024/2025. For the risk related to damage to the institution’s image and reputation, the implementation rate is at 70%, projected for completion in the fiscal year 2023/2024.

The Corporation assures a diligent monitoring of risks linked to the Vietnam refinery in collaboration with the Risk Department of the Kuwait Petroleum International Company (KPI). Emergency plans for payment-related issues are in place, regularly updated, and subjected to monthly follow-up reports submitted to the Audit and Risk Committee under the Corporation’s Board of Directors. These reports specifically address risks associated with the Vietnam refinery and the financial condition of the facility.

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