Energy Risk
Definition
Energy Risk denotes the uncertainty and potential impact to an entity's objectives of the availability (at the desired amount and type) and cost of different forms of Energy.
A realization of energy risk is an energy risk event. Entities such are firms or the public sector may engage in formal Energy Risk Management.
Context
Energy risk materializes in the context of a given Energy System, the set of physical and societal elements that enable and govern the provision of different forms of energy in an economic system.
Energy Risk Taxonomy
Energy Risk is a type of Commodity Risk. In contrast with other commodities that refer to material substances (solid, liquid or gaseous, organic or inorganic) energy is an intangible property of matter.
- Energy Access to the desired forms of energy, both as a short-term Business Continuity risk and longer term sustainability implications.
- Energy Security, or ability to maintain access to the desired forms of energy. Disruption of energy provision may further create various forms of Operational Risk
- Energy Poverty
- Cost Risk of securing the desired forms of energy which for corporate entities may determine Business Model viability
- Legal Risk (liabilities) from Externalities associated with Energy Consumption and Stranded Assets in connection with the utilization (production, transformation or consumption) of energy forms
- Reputation Risk as stakeholder perceptions and expectations change
Relations with Other Risk Categories
The central role of energy in the modern economic means that energy risk is involve in several other expressions of Risk:
Issues and Challenges
- In recent years energy risk has been elevated into a significant Risk Type due to a combination of environmental and geopolitical events.
