Risk management more and more a part of key tasks at energy and resources companies

Not yet smooth sailing for risk management monitoring and reporting
8 June 2010

Brussels, 7th June 2010 – Risk management is one of the issues taking on increasing strategic importance at energy and resources companies. That's the conclusion drawn by Deloitte from a survey of energy and resources companies conducted in Europe, the Middle East and Africa. Although the implementation of risk management has become a common practice within these organisations, it is clear that many of them still find it difficult to monitor and report on their risks in an integrated and professional manner – and that they are not succeeding in making risk awareness part of their overall corporate culture. Belgian companies are not among the frontrunners when it comes to risk management in Europe, but instead languish behind in the chasing bunch.

In a changing world where energy shortages and climate change have become common currency, energy and resources companies are facing countless new risks. A scarcity of natural resources, political instability, ageing infrastructure and unfavourable weather conditions are just some of the problems dogging these companies. The oil spill in the Gulf of Mexico is a recent example. To delve more deeply into the issue, Deloitte has carried out a survey in the energy and resources sector aimed at highlighting the current implementation of Enterprise Risk Management (ERM). The survey, "Risk Intelligence in the Energy & Resources Industry", is based on questions and interviews conducted with 50 CEOs, risk managers and senior management Europe, the Middle East and Africa.

Belgian energy and resources companies lagging behind

nternationally, the companies involved in the production of energy also tend to be the frontrunners when it comes to risk management. The reasons for this include the significant risks associated with energy production (such as nuclear reactors), as well as the risks linked to trading in the raw materials used for producing energy or distributing and selling the energy itself on international markets. Companies that transport and distribute electricity and gas have not been involved for as long with risk management. But they are catching up fast and in some cases are even forging ahead. Finally, risk management is also beginning to filter through to water companies.

We are seeing a similar trend among Belgian energy and resources companies," says Laurent Vandendooren, Country Leader Enterprise Risk Management at Deloitte Belgium. "They may not be among the frontrunners in Europe, but they are back in the chasing bunch. The main stimulus for these companies to come to terms with risk management is the public interest of being able to guarantee safe, secure supplies of electricity, gas and water. In the years ahead, we expect to see the energy sector invest a great deal in new production capacity aimed at accommodating the growing demand for (renewable) energy. This will go hand in hand with the conversion of existing networks to smart systems capable of coping with the rise in locally produced energy and the gradual replacement of the existing, ageing infrastructure. There is also likely to be a lot of investment in the water sector to develop and maintain the network of sewers and drains to comply with European guidelines."

The report highlights a number of other trends: