Creating Value in an Economic Downturn – A Risk Management Opportunity?

Everyone knows that the energy industry remains firmly locked in a major downturn – regardless of the recent slight rally in oil prices. But in these gloomy trading conditions, are there opportunities for energy industry risk managers to add real value to their organisation?

Bill Creedon, Head of Corporate Risk and Broking for Willis Towers Watson in North America, certainly seems to think so. Speaking at Willis Towers Watson’s North American Energy Conference in Austin, Texas, last week, Bill suggested that there was indeed an opportunity for risk managers to add more value to their organizations. He drew the delegates’ attention to several key dynamics affecting energy risk, including the greater inter-connectivity of the global economy and the volatility of commodity prices.

He also made a point of stressing the correlation between the way a company manages its people and the way it manages its risk, and the need for energy companies and risk intermediaries to adopt a more sophisticated and integrated approach in the future.

Bill Creedon speaking at the Willis Towers Watson energy conferenceIn particular, he cited three risk arenas as examples of how risk managers can add more value and contribute more effectively to the bottom line of their companies’ balance sheets. These were:

  1. Management of human capital risk: the creation of effective talent management programs can help accelerate the transition towards a more professional risk culture.
  2. Responding holistically to cyber risk: risk quantification is now of far greater value to energy companies than the price of the risk transfer options available to them.
  3. Responding pro-actively to geo-political risk: again the emphasis should be on risk mitigation, so energy companies must ensure that their risk mitigation strategies are be embedded at board level if they are going to be truly effective.

What energy delegates think of risk

The energy industry delegates at the conference were also asked a series of questions which elicited some interesting responses.

C-suites are more interested in risk than ever before

72% agreed that, with cost cutting in the industry of paramount importance, effective risk management is now more highly valued by energy industry C-suites than ever before.

ART purchase is now a realistic option for energy companies

50% thought that the purchase of alternative risk transfer (ART) products was now a feasible alternative for energy companies, while 80% agreed that ART products would become more attractive to the industry in the future.

There is a direct correlation between healthy employees and healthy profits

78% agreed that there was now a direct correlation between healthy employees and healthy profits.

Geo-political risk can now destroy an energy company

70% agreed that mismanagement of a company’s geo-political risk can destroy its brand and reputation.

More insurance capacity is needed for trade credit risk

90% feel current market capacity for political and trade credit risk will have to increase as the global geo-political situation continues to deteriorate.

90% agreed that the current market capacity for political and trade credit risk will have to increase as the global geo-political situation continues to deteriorate.

The energy industry needs to up its game on cyber risk

75% agreed that the North American energy industry needs a more comprehensive approach to cyber risk management, or a truly catastrophic cyber-attack on the industry is inevitable in the future.

More innovation is needed in the energy insurance markets

66% agreed that In the light of the changes to the risk profile of the North American energy industry in recent years, the energy insurance market needs to take a fundamental look at its current products.

You can find more details on this conference, including copies of all the presentation materials here.

For any other enquiries with regard to this conference, please contact Mark Oakley on +1 713-625-1037 (Mark.Oakley@WillisTowersWatson.com)

About Robin Somerville

Robin is the Communications Director for the Willis Towers Watson's Natural Resources Industry Group and is based i…
Categories: Energy

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