Removing Risk from Energy Risk Management: 4 Steps

Where to start…

Proactive risk management can help limit organizations’ exposure to energy market volatility. Successful strategies apply forward-looking market analysis and factor in global, regional and national nuances. Of course, managing risk is imperative because risk and volatility are unavoidable. The last 40 years of crude oil prices, which have a direct impact on the cost of electricity and natural gas, show how often and drastic energy expenses can swing.

The ultimate irony, however, is that developing and implementing a strategy to deal with the inevitable is often fraught with risk. However, that’s one thing within a company’s control. There are four key steps to build an effective, lasting approach to managing energy price risk. The outcome? Lower costs. Less exposure. More clarity.

Seek simplicity, efficiency and flexibility

It is important to select a consultant that can help you develop and meet your risk management objectives across multiple regions, and respond to your needs now and in the future.

Choosing a supplier or other vendor for risk management services alone can be inconvenient and inefficient. This approach often leads to one provider that delivers risk services, another to validate invoices, and still another that provides sustainability services or other energy cost management support. Selecting one supplier for all services establishes consistent, efficient, scalable and aligned services. A single-source third-party allows organizations to deal with one centralized account manager for all related inquiries.

A glass fiber manufacturer cut total electric power costs more than 4 percent taking this approach. Companies that require risk management across multiple countries, whether centrally or regionally managed, should strongly consider third-parties with a global footprint and demonstrated expertise. The end result is flexibility of deployment and a consistent approach across multiple commodities and countries. This simplifies and standardizes governance and management without compromising quality.

One down, three more to go:

1- Build your strategy on independent intelligence
2- Establish clear governance at the outset
3- Set KPIs and track results

For the full details and to remove risk from your risk management strategy, download our ebook.

And hear energy experts discuss best practices for risk management here.

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