Energy and utilities - building on best practice

The power and utilities sector is fairly heavily regulated in the UK and this discussion highlighted the need for organisations to achieve balance between the regulators’ requirements for continuity, security and safety and the organisation’s own additional objectives.

In the area of nuclear generation, safety is the main priority since a failure in this area would result in a plant being closed down by the independent body that governs this sector. Indeed, all participants agreed that failure to enforce a rigorous health and safety policy would impede their ability to attain corporate objectives and satisfy their stakeholders, and that instilling the right risk culture was integral to achieving such a policy.

Ownership and accountability were considered key elements of such a culture. Effective enterprise risk management involves building on and developing existing areas of best practice and enabling managers in other parts of the organisation to access this expertise and benefit from solutions developed for similar problems. One participant also stressed the importance of being involved in the strategic planning process where risk management can really create value for a company.

Service continuity was a leading concern for those organisations involved in the distribution side of the power and utilities industry, and climate change was regarded as another very important issue. More extreme weather incidents such as the recent UK floods also provoke questions on the appropriateness of design standards, particularly since some utilities and power plants were constructed some years ago when such incidents could not be envisaged and planned for.

Environmental issues were also very important for participants, with awareness that an environmental problem could produce not only a financial loss but also severely affect reputation and brand.

There was consensus that regulators should consider longer term investment and strategy planning, say with a time horizon of 25 years. This was particularly important because of the length of time from conception to delivery of the necessary infrastructure. Such planning would also help to remove the uncertainties that this sector faces.

A recent global survey produced by Aon showed that the top risks perceived by the energy and utilities sector were reputation, environment/weather, regulation and business interruption. And these were very much the focus of this roundtable discussion.