The focus of many energy and utilities companies has so far been on maintaining operations, liquidity and supporting their employees and customers during lockdown. Now many are starting to talk about what the future will look like, so they can plan for the new reality.
In my last blog, I looked at what that could mean for how we operate and the skills we’ll need in the workforce. But one of the biggest lessons that COVID-19 has taught us is that we need to re-evaluate our approach to managing risk. With energy and utilities employees recognised as key workers during the crisis, the sector is likely to be under even greater pressure from the public, investors and government to be prepared for global risks in the future.
Prepare for the next big risk
So, what’s the next big risk facing energy and utilities companies? Before COVID-19, I was spending a lot of my time talking with clients about climate risk and decarbonisation. Climate risk may have briefly dropped down the agenda as companies focus responding to the pandemic, but we expect it to return even stronger over the medium term. People have noticed the better air quality and those who have been able to work from home haven’t missed their commute.
Protect your brand reputation
It’s not just the E of environmental, social and governance (ESG) that will be a priority in the new reality. During the crisis, more focus has been put on social and governance too. There’s been a greater sense of community across the country – as people have helped out their elderly neighbours with shopping, and as we’ve all come together each week to applaud the NHS.
Companies have been supporting their communities and cancelling dividends. But, as businesses return to the workplace, there will be tough decisions to make that could impact brand reputation. As economies start to rebuild, how businesses behave will be key to building trust and a new ‘social contract’ between government and business.
Expect more intervention
In my previous blog, I explored how the COVID-19 pandemic has positioned energy and water as ‘essentials for life’. Having poured money into the economy to keep businesses going during the pandemic, the government and regulators could take a more interventionist stance post COVID-19, particularly for essential industries, such as energy and utilities.
Of course, the immediate risks continue to be related to the ongoing impact of COVID-19 – and for oil and gas companies, a collapse in oil prices. But as we move into recovery and start thinking about the new reality, now’s the time to rethink our approach to managing risk. We need to be prepared for the next global risk of this nature. That will mean stepping away from the static nature of many of today’s risk registers, used to manage compliance and record risks, and making sure we understand the interdependencies between risks in much greater detail. It will mean conducting dynamic risk assessments and putting in place contingency planning based on possible extreme scenarios – like the one we’re currently living through.
For our full take on the themes we think will shape the industry’s future, read our article COVID-19: The new reality for Energy & Utilities. And please get in touch if you’d like to discuss what the new reality could mean for your business and how you can prepare.