Corporate risk manager of the year: Socar Turkey

Energy Risk Awards 2021: Risk management team plays key role in complex integration project and expands remit

Sadig Hajiyev, Socar Turkey

Socar Turkey, a subsidiary of the State Oil Company of Azerbaijan Republic, owns some of the largest industrial enterprises in the Aegean region, including petrochemical company Petkim, state-of-the-art crude oil refinery, Star Refinery, one of Turkey’s five largest storage facilities, Socar Depolama, and the Aegean region’s largest integrated container port, Socar Terminal.

Over the past two years, the company has carried out the monumental task of integrating these enormous and complex enterprises. The risk management team played a key role across the integration programme, which included defining the organisational structure and company culture, as well as achieving technical and operational integration. The programme included an enormous array of initiatives and had a large overall target to meet in terms of adding additional financial and operational value to the business.

“The role of the risk management team throughout the integration initiative was to provide assurance to top management around the realisation of this value,” says Sadig Hajiyev, group risk co-ordinator of Socar Turkey.

The team’s starting point was to identify all the uncertainties and threats that could potentially prevent the target from being met. It worked initially on a project-by-project basis, identifying and bringing together all the relevant stakeholders in order to discuss where the risks and uncertainties were.

“There were so many different lines and sources to track, so it was an exceedingly challenging project,” says Hajiyev. “We then modelled how much these risks could impact the realisation of the target by quantifying the cumulative threat.”

The team also came up with suggestions on how to mitigate these risks. The team’s risk assessments covered not only financial risk management, but also regulatory compliance and business continuity management to enable the firm to capture and optimise the value of integrated assets more efficiently.

Central to the integration programme was bringing Petkim, Star Refinery, Socar Turkey Fuel Storage and Socar Turkey Petrol Ticaret under the umbrella of Socar Turkey Refinery and Petrochemical Business Unit, and integrating them operationally.

“The integration of all these facilities with direct flows through pipelines has helped generate huge value operationally and financially,” says Hajiyev.

Other operational efficiencies were achieved by unifying suppliers and contractors across the different enterprises in order to achieve better prices, and creating one centralised maintenance team.

The range of risks and uncertainties the team monitored was enormous. For example, during the Star Refinery’s performance-testing phase in 2019, it was solely reliant on electricity from the grid and at risk of power cuts.

“If the refinery were to stop working suddenly, it could cause huge problems, and this was one of our top risks for five quarters in a row,” says Hajiyev. “We tried to predict the probability of a disruption in electricity supply and the impact this would have on operations.”

This involved meeting with all the operations teams at the refinery and the electricity supplier to gain a full understanding of the issues. On the risk management team’s suggestions, several actions were taken. One of the wider outcomes was that the government, with the support of the company, invested in the grid to improve not only the electricity supply to the refinery, but also to the local area.

“We made a lot of proposals, and all the actions taken as a result of our analysis were really effective,” says Hajiyev.

He was also keen to be involved in the ‘softer’ aspects of the integration programme, such as creating a unified company culture. Ways of doing business varied widely among the different enterprises: “Creating a mutual Socar culture for doing business was a major challenge.”

Hajiyev was keen that risk management should be a key part of the wider company culture, and is now working on a risk awareness programme to foster a positive risk culture in the organisation. “Risk management can be seen as a negative thing, and we want people to understand the positives and see the benefits of reporting risks. This will help us,” he says.

The programme involves selecting role models to influence others. “I believe risk management needs to come from the top. If senior executives model the right behaviour, it will spread through the company.”

At the beginning of this year, the risk management team – which now reports directly to the board of directors – formulated its structure and methodological approach, creating its framework, policies and procedures from scratch. “Everything is based around an objective approach,” says Hajiyev.

The risk management team is also called upon to give risk management assessments of potential new investments. “We’ve developed metrics to measure if the proposal falls within the risk appetite of the board, then we use decision trees and scenario analysis to look at the risks both of making the investment and not making it,” he says.

In recent months, the team’s remit has expanded to cover regulatory change management, business continuity management, including IT continuity. Hajiyev’s goal is to consolidate all the risk management tools and data used across the firm. By taking a holistic approach to data, he hopes to create even more actionable analysis.

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