What everybody ought to know about risk management in the energy industry
Risks management in the energy industry is critical for anticipating regulatory updates, understanding how they might change business operations to make compliance more efficient, reducing the regressive effects of compliance violations, and preventing compliance violations.
However, several key trends could shape risk management within the industry. Knowing about these developments can help you shape compliance procedures to improve risk management, raise productivity and reduce risks.
In this blog post, we will explore the common ongoing developments that are shaping the energy industry.
Risk management in the energy industry
A risk intelligent culture is becoming more important
Risk management in the energy industry is rapidly evolving from a set of procedures and processes that is the sole responsibility of a single team to a culture that permeates across the organisation where people across different departments and business units are responsible for upholding them.
The change in culture drives behaviours that influence day-to-day business practices and integrates risk management into business operations, making it easier to find and fix compliance gaps.
The shift in energy risk management from rules to culture has changed the way organisations see ongoing regulation from a cost and a burden to a way to facilitate stability and develop a competitive advantage.
Effective monitoring and reporting will be critical
Though most organisations report having mature risk identification, assessment and prioritisation procedures, many organisations still struggle to improve monitoring and reporting procedures.
One reason for poor reporting is the lack of proper tooling, while other organisations cannot measure and integrate risk exposures into their reporting procedures.
Hence, we can expect organisations to seek advanced regulatory platforms that streamline regulatory reporting and monitoring and convert the process into a more efficient and timely procedure.
Integrating risk management technology remains a challenge
Though there are plenty of advanced RegTech solutions that allow organisations within the energy sector to optimise energy regulation, integrating them into regulatory processes in an efficient manner remains a challenge.
While most technology is more than capable of completing end-to-end risk management processes, organisations have yet to use the technology to their full potential.
The main issue for many organisations is their ability to leverage the solution to their full potential to optimise risk management and accelerate productivity.
In the future, organisations will look for RegTech solutions that are not only made of advanced technology but also remain accessible to most organisations.
Risk management is moving toward future growth and rewarding risk
Risk management in the energy industry is shifting from a conservative approach of cost mitigation toward future growth and rewards down the line.
In the past, energy firms have used risk management to protect their internal assets. However, this focus on mitigating risk denied organisations massive growth opportunities.
Organisations were leveraging solutions to shape and execute strategic decisions to make better use of their risk management processes and technology.
The focus on growth encouraged organisations to take a different approach to energy compliance and risk management, using it as a value-oriented tool rather than a costly process.
Risk management has several key drivers
There are several drivers encouraging organisations to adopt risk management approaches and strategies.
Many organisations are turning to risk management to improve operational performance.
Compliance strategies can improve operational performance because it contributes to safeguarding overall asset integrity.
However, there is a new driver driving risk management: strategy formation.
Strategy formation was the emerging driver for many organisations because they understand that risk management can provide helpful insight into risks.
After all, proper risk management practices quantify risks and help them make the right choice with risk and reward options.
Improving risk management in the energy industry
Risk management in the energy industry is constantly evolving and becoming more complex. As our understanding of how compliance evolves, the way we deploy RegTech solutions also changes.
Regulatory teams will be looking to integrate these solutions at every stage of compliance or ensure that the platform can perform end-to-end compliance functions.
Hence, to improve risk management and turn it into a more efficient, scalable process, organisations need to invest in RegTech solutions that could be easily integrated into business operations and facilitate regulatory compliance operations.