Managing Energy Sector Risks

This post first appeared on Risk Management Magazine. Read the original article.

energy sector risksIn the energy industry, one of the most fundamental issues is pricing.

According to a Thomson Reuters study, Risk Management in the Energy Sector, as prices for oil and gas fluctuate, companies can have difficulty determining if their selling prices will cover exploration and other costs. When commodity prices drop, the oil and gas sector is typically forced to cut back on drilling rigs and exploration, reduce headcount, and force cost cuts throughout the supply chain.

While supply chain risks are becoming more complex, the study found that capabilities for managing these risks are growing because of advances in big-data management, advanced analytics, machine learning and artificial intelligence.

These measures do not guarantee better performance, however, as barriers to effective risk management are often present. The biggest obstacles cited by respondents include lack of funding (25%), human capital (20%), lack of data/insight on risk (19%), executive sponsorship (18%), and technology/digital infrastructure (17%).

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