Risk management in energy firms must handle a prioritized risk profile and integrate with technologies to stay ahead of the evolving risk curve.
Technology advancements have powered energy companies to enhance their business operations with real-time visibility, data-driven analysis and decision-making, and mobility. However, while these advances have informed a shift in business models, they also increase risk exposures.
This expanded risk exposure requires energy firms to enhance enterprise risk management processes. An enterprise-wide Risk Management (ERM) contains the key to pressing questions on identifying, analyzing, and mitigating risks faced by energy organizations. It evaluates energy firms’ systems, processes, and risk landscapes to coordinate a tailored risk control framework.
One core exercise that facilitates implementing a meaningful ERM program in energy firms is identifying these key components of a business environment and their interplay for attaining the required flexibility to develop and execute a strategic risk plan.
An energy firm must measure how well its functional units are integrated with the overall organizational outlook. Moreover, technology infrastructure requirements must be factored in to support an energy organization to streamline and automate risk management processes.
The proper techniques and models for risk evaluation and accounting methodologies must be prioritized to tailor a robust risk management strategy. It is also vital to have adequate controls that govern the various compliance requirements.
Laws and industry standards should navigate these regulatory policies. Finally, energy firms must craft a tactical risk plan based on important elements like a dynamic network to leverage energy assets, the scope of asset control, the physical commodity presence, and a focus on market trends. This central strategy must be used as the cornerstone to derive the organizational risk tolerance, the risk control limits, and the risk capital.
A market-centered enterprise-wide risk management program can steer energy firms toward sustained progress.
