Energy Risk Management
Definition
Energy Risk Management means the totallity of techniques, practices or behaviors that aim to identify, measure and mitigate the Energy Risk faced by an individual or an organization.
Energy Risk management includes the culture, processes and structures that are put in place to effectively manage potential negative events. As it is in general not possible or desirable to eliminate all energy risk, the objective is to reduce risks to an acceptable level (formally termed Energy Risk Appetite).
In the context of the Energy Transition of the Energy System, the need to better manage energy risks has elevated the concept of energy risk management into a separate discipline with more formally specified language, rules and tools.
- Energy Risk Identification, apply an analytical approach to the task of identifying, classifying and enumerating the various energy risks that an entity is facing
- Energy Risk Measurement, quantify (produce numerical measures) for the energy risks that are amenable to such quantification
- Energy Risk Mitigation, reduce or eliminate perceived energy risks exercising whatever options are available to do so
Energy Risk Frameworks
An Energy Risk Framework is a formal set of rules, policies, prescriptions, tools etc. that indicate how an entity organizes its energy risk management activities. Implementation of the framework may be a legal requirement (e.g. imposed by regulators) or a best-practise prescription (e.g. developed by a sectoral association of businesses). Example: the ISO 50001:2018 Standard.
Energy Risk Culture
The concept of Energy Risk Culture captures less tangible but equally relevant aspects of energy risk management. It denotes the combined set of institutional/corporate values, norms, attitudes, competencies and behaviour related to energy risk awareness (perception of energy risk) and risk taking (active management decisions) that determine a firm’s or organizations commitment to and style of energy risk management
Issues and Challenges
- Societal and organizational resistance to rigorous energy risk management can occur at any level of an organization, as it may
- interfere with existing behaviors practices, hierachies and internal organizational arrangements
- conflict with existing incentive schemes
- Blind spots. In the most extreme case biases may manifest as smaller or larger blind spots, namely areas of risk that are, wittingly or unwittingly, left completely unmanaged
