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Companies will face several risks caused by an upcoming era of uncertainty and volatility in energy supply, according to a report by Lloyd's of London and U.K. think tank Chatham House.
The report, “Sustainable Energy Security: Strategic Risks and Opportunities for Business,” says companies must address the reliance of their supply chains on potentially? vulnerable energy sources, adapt to the likelihood of increased regulation aimed at reducing carbon emissions, and consider the potential reputational risks associated with a greater focus on carbon policies, among other things.
“Businesses across the board need to make a serious assessment of their vulnerability to change and volatility on the energy scene. There are huge opportunities as energy systems evolve to include users and increase resilience and efficiency,” said Bernice Lee, research director at London-based Chatham House, in a statement. “There is also the potential for heavy or even catastrophic financial and environmental losses,” she added.
Companies will need to address the risk posed to their supply chains by fuel price hikes or disruption to energy or water supply, according to the report.
Severe disruption to energy or water supply also could prompt political, economic and security risks, the report notes.
The need to find new sources of energy could pose risks for the shipping industry, according to the report. The development of energy resources in the Arctic, for example, could necessitate the use of new and riskier shipping routes, it said, and more frequent weather-related events caused by climate change could cause an increase in shipping accidents.
Future weather events could pose risks to existing energy sources, the report added.
For example, much of the infrastructure in the Gulf of Mexico that was hit by Hurricane Katrina in 2005 has been rebuilt in the same position, leaving it vulnerable to any similar future weather event.
The report can be found online at www.lloyds.com.