The IRM sought to provide insights and thought leadership for risk managers in the energy sector (including oil and gas, energy and renewables). In addition to an exploration of the survey results, 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 to improving risk maturity and building effective risk cultures. These are mentioned in the survey results and contained in two insights sections after each of the main parts of the survey.
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 into renewable energy sources, according to the survey.
Cost control and safety naturally remain key areas of focus. But the survey found that businesses plan to invest in new projects because they are 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 5 years, raising the question whether the sector has fully digested the regulatory changes that will, for example, see electric cars as the norm in Europe after 2035.
Socrates Coudounaris, CFIRM, Chairman of the IRM and Risk Management Director, RGA International Reinsurance Company says, “We are also pleased to have the opportunity to launch the document at the prestigious Kuwait ERM conference taking place today. Our relationships with firms in the region have always been excellent and we welcome the opportunity to strengthen them further. 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 the Cambridge 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 during 2019. We also intend to develop an ongoing special interest group for the energy sector that will support risk professionals in the field. It is particularly interesting to note that one of the conclusions of this document is that there is great scope for raising levels of risk maturity in this globally important sector. This will require attention to various aspects of risk management and particularly to competence, training and education, raising them to world class standards. The IRM stands ready to play its part in this process,” Coudounaris continues.
The survey also assessed the level of risk maturity across the industry. 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,” in Moving up the risk maturity curve for the oil and gas sector.
Some risk managers described as problematic a lack of resources and a failure of the board to provide the right tone at the top. Only about 40% of respondents, for example, said they had specialist ERM software, something that whilst not essential, you would expect from major energy companies for properly implementing risk management across large, geographically dispersed organisations.
President of Baldwin Global, Alexander Larsen, CFIRM, IRM Trainer and Chair of the Energy Special Interest Group, led the project and comments, “I am delighted that the report has had so much support from the industry itself. From the survey participation and IRM member feedback, to the expert insights of the contributors, this report has truly been an industry led effort. Going forward, with the IRM’s support and drive, and with the setting up of the IRM’s Energy Special Interest Group (SIG), we expect that the SIG will continue to drive excellence and thought leadership through numerous initiatives such as 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.”
“It was a pleasure to have worked with so many expert contributors and I would like to thank them on behalf of myself and the IRM for their contributions and professionalism in meeting all the necessary dates to make this publication happen,” Larsen adds.
The report can be accessed at https://irmcomms.wufoo.com/forms/zfa0jdr0l4827m/