Coordinated approach essential as energy risks rise: Analysis
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Energy companies need to adopt sophisticated enterprise risk management strategies to counter low-frequency but high-severity disasters associated with Arctic exploration, ultra-deepwater drilling, shale gas extraction and other risks, according to a Marsh Inc. analysis.
According to the paper, “Managing Risk on the New Frontiers of Energy Exploration,” energy firms play a vital role in helping economies to develop and face complex risks associated with new technology as well as political and regulatory volatility.
Andrew George, London-based chairman of Marsh's global energy practice, said Wednesday that “myriad financial, physical and political risks are converging to create a risk landscape that is perhaps the most complex — and challenging — in the sector's history.”
Energy companies are taking a more holistic, enterprise risk management view of the risks they face, noted Will Bruce, a principal consultant in Marsh Risk Consulting in London, at a briefing Wednesday.
Many risks that energy companies currently face are exacerbated by “new frontiers” such as Arctic exploration and hydraulic fracturing, known as fracking, Mr. Bruce said.
While there has been somewhat of a “disconnect” between financial risk management and insurance risk management at energy companies, those disciplines now are working together much more to buy insurance and alternative risk transfer products that are more suited to the risks that energy projects face, Mr. George said during a briefing in London.
For this more holistic approach to work, however, he said energy companies need to provide good data to brokers and underwriters.
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