Risk management is taking on increasing strategic importance at energy and resources companies, however, many still find it difficult to monitor and report on their risks in an integrated manner and many companies have not yet made risk awareness part of their overall corporate culture.
A global report, released by Deloitte, found that more and more energy and resources companies are seeing the value of introducing risk reporting alongside traditional financial reporting.
Yet, many of these companies do not yet have any form of integrated risk reporting available. Information is often fragmented and there is no overall vision of what risk reporting should consist of, making it difficult for companies to measure and report on their risk.
The Deloitte report also found that many energy firms are focusing on improving Enterprise Risk Management (ERM ) capabilities to meet existing requirements and in anticipation that risk management expectations will continue to increase.
“From a global perspective, energy and resources companies are becoming more and more attuned to risk,” said John England, Deloitte’s global leader for enterprise risk services, energy & resources.
While companies are more aware of the significance of risk to their business, he said there are still a number of steps that need to be taken to develop appropriate risk management systems.
“Given the current trend toward increased regulation broadly, and the slate of pending legislative and regulatory actions focused on risk management, it is a safe bet that risk management compliance requirements will continue to grow more rigorous globally,” said England.
The report, Risk Intelligence in the Energy & Resources Industry, also found that companies which have developed sufficient maturity in the area of risk management are now shifting their attention towards value creation.
As a company’s maturity in risk management increases, risks relating to strategy and how to implement it (risks associated with the development of new products, penetrating new markets and completing acquisitions) grow in importance.
According to the report, good management of these risks is likely to be driven by the profit potential, but they can also have negative consequences if they are not controlled properly.
Training and education play an important role in creating a genuine risk culture, according to Deloitte, but the report found that only 30 percent of companies appear to have a training plan for risk management.
“Risk management is an integral part of the corporate culture [and] it has become an essential part of maintaining credibility within the industry,” said Deloitte Belgium partner, Laurent Vandendooren, one of the authors of the report.
“Training provides the first step in building risk awareness, and companies should incorporate risk management courses as part of their overall training plans.”
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