Mitigation Plans for PERTAMINA’s Global Bond Potential Risks Harvard Case Solution & Analysis


Corporations that are involved in a dynamic industrial environment like PERTAMINA, the major operational activities of the Corporation and of its subsidiaries are highly dependent on the factors that are mostly external and are not in control of the corporation or any of its subsidiaries. PERTAMINA is a corporation that is involved in oil and gas business that is the core business of the company. Other than exploration, activities like production and development are highly complex and involve various risks that are important to cater for the corporation. There are other risk factors that are also involved in the business and exist in within the company’s internal, external environment.

Besides these factors, catering and satisfying the stakeholders is also important who consistently demand an effective corporate management system and seek applications that involve corporate governance at an excellent level and are becoming highly demanding regarding these factors. Demanding corporate governance involves implementing risk management in the corporation and also in the subsidiaries that are an important aspect of good corporate governance.

Risk management has been given prior importance in PERTAMINA, as the company in early 2004 took the initiative of implementing risk management properly and by providing the guidelines about risk management also strengthens the organizational structure. The oil and gas industry has been quite volatile and unpredictable due to intense competition between the competitors and also the unrest in the different countries of the world possessing major resources of oil and gas.

For this reason, corporations are being encouraged to implement risk management or to be more precise enterprise risk management. Implementing enterprise risk management will help the companies involved in the oil and gas sector, especially to improve their status as a global player and strengthen their brand image and to achieve goals set by the companies in a global perspective. It is important that the implementation of risk management activities must be integrated and should take into account every subsidiary in order to minimize the risks involved in the business.

Enterprise risk management offers many benefits to the organizations or corporations in every industry not specifically in the oil and gas sector. First of all, enterprise risk management helps in minimizing or reducing the performance change that is not desired by the corporations and also put together the views about risk management in one place through integration. Besides that, it also helps in gaining trust from the stakeholders and most importantly the investors that are necessary for financing the business and guide in developing a corporate management system that is feasible and attractive for the corporation.

The issues regarding environmental concerns and the changes occurring in this regard are being answered through enterprise risk management, and it creates an integrated path between the corporate structure and the strategy of the company. Similarly, all the business processes and the human resource of the corporation can be integrated using enterprise risk management. Implementing enterprise risk management is not an easy task, and the corporation will have to face some turbulent facts, especially when making risk management as part of the culture.

PERTAMINA is making significant efforts to make the process a complete part of the company and in order to do this successfully the efforts have been accelerated. Several projects were started by the company that is doing great and satisfactory job; however, the company aims to achieve the breakthrough project by the end of 2008 that will be significant in implementing risk management in PERTAMINA.

Company Profile

Established in 1957, PERTAMINA a state-owned company delivering energy services to the country. The company is involved in various sectors, especially oil and gas and it also deals with new and renewable energy and all the business units of the company are integrated and well organized. The company is doing business on a commercial basis and is not only restricted to Indonesia but has expanded globally as well. Since the company is a state-owned unit, for this reason, the efforts of the company always strive to utilize every potential of the country and give best for the welfare of the nation.

The company has a strategic role to play towards the economy of the country for which the company has shown a great deal of commitment. In order to reflect the company's commitment towards the national interest, major improvements along with innovation have been brought in every business units of the company and all operations have been designed according to the international standards to meet the global demand. The focus of the company towards renewable energy is one of the major milestones for the company that also reflects the company's commitment towards the national economy and national interest.

The alternative methods for energy that the company has developed so far are quite efficient, and the company is focusing more on building such sources that can be convenient, environmentally effective and most importantly sustainable. Besides these initiates regarding renewable energy, the company kept its vision clear and remained determined on becoming a stronger player globally and to be known as a renowned national energy company. The efforts of PERTAMINA are significant, and the company has seen significant growth in the recent years..........................

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