The Institute of Risk Management (IRM) has issued its 56-page report entitled ‘Fuelling the Debate: Latest Risk Management Trends in the Energy Sector 2019’. The IRM has sought to provide insights and thought leadership for risk managers operating in the energy sector (including oil and gas, energy and renewables).
In addition to an exploration of the survey results, the IRM has asked industry-leading specialists to provide their advice on how risk managers can improve their performance and relevance across a range of topics, from safety and sustainability through to improving risk maturity and building effective risk cultures.
The energy sector is undergoing rapid change. Following several years of belt-tightening and cost-cutting, many oil and gas companies are looking to expand into new projects and territories, and also into renewable energy sources, according to the survey. Cost control and safety naturally remain key areas of focus. The survey finds that businesses plan to invest in new projects because they’re confident of achieving profits despite a long period of low oil prices.
Strategic risks, the global economy and an evident skills gap are considered top risks. Only 27% of respondents rated green energy as an area of concern over the next five years, raising the question as to whether or not the sector has fully digested the regulatory changes that will, for example, see electric cars as being the norm in Europe after 2035.
Socrates Coudounaris CFIRM, chairman of the IRM and risk management director at the RGA International Reinsurance Company, commented: “We’re pleased to have the opportunity to launch this document. Excellence in risk management requires a strong understanding of general concepts and techniques, but also an appreciation of the detailed risk landscape in particular sectors. Our recent work with Cambridge University took a high-level cross-sector view of the risk management perspectives of global corporates. This specialised study from our energy specialists complements that work with a more sharply focused look at the practical application of risk management in that sector. We intend to build further on these initiatives and conduct more specialist academic research with Cambridge University during 2019. We also intend to develop an ongoing Special Interest Group for the energy sector that will support risk professionals in the field.”
Coudounaris added: “It’s particularly interesting to note that one of the conclusions of this document is that there’s great scope for raising levels of risk maturity in this globally important sector. This will require attention being paid to various aspects of risk management and particularly so to competence, training and education, raising them to world-class standards. The IRM stands ready to play its part in this process.”
Level of risk maturity
The survey also assesses the level of risk maturity across the energy sector. The results are a little dispiriting, as the sector scored only three out of five. Domenic Antonucci CMIRM describes this as “…disappointing for a sector with the history, sophistication, management talent and resources of oil and gas.”
Some risk managers described as problematic a lack of resources and a failure of Boards of Directors to provide the right tone at the top. Only around 40% of respondents, for example, said they had specialist ERM software in place. This is something that, while not essential, you would expect to see enshrined within major energy companies for properly implementing risk management across large and geographically dispersed organisations.
Alexander Larsen CFIRM, president of Baldwin Global, an IRM trainer and chair of the Energy Special Interest Group, led the survey project. He explained: “I’m delighted that the report has had so much support from the industry itself. From the survey participation and IRM member feedback through to the expert insights of the contributors, this report has truly been an industry-led effort.”
Larsen continued: “Going forward, with the IRM’s support and drive and with the setting up of the IRM’s Energy Special Interest Group, we expect that the latter will drive excellence and thought leadership through numerous initiatives such as the publishing of individual expert insights and articles as well as working towards establishing a regular maturity benchmarking assessment of the industry with established and agreed benchmarking criteria.”
In conclusion, Larsen informed Risk Xtra: “It was a pleasure to have worked with so many expert contributors on this report and I would like to thank them on behalf of myself and the IRM for their contributions and professionalism in meeting all of the necessary dates in order to make this publication happen.”
*The full report can be accessed online here: https://irmcomms.wufoo.com/forms/zfa0jdr0l4827m/