Industry Research Report: New risk management insights in the power and utilities sector (executive highlights)

The current downturn in the global economy has been swift and severe. It raises important questions about how organisations conduct their business – and particularly about how they assess and manage risk. It also poses two fundamental and interconnected threats for the power and utilities industry.

The first is a short-term decline in demand driven by falling industrial activity across the region. While the power and utilities industry customer base is spread across all industries, smoothing and diluting some immediate recessionary risks, it is heavily regulated, a public service industry in effect, with statutory obligations preventing many companies from withdrawing their service or supply in the event of non-payment.

The second fundamental threat of the downturn is the lack of available investment capital, a symptom of this bank-led recession, and a reluctance on the part of many project developers and operators to incur more debt at this time. Not only can this delay power projects in the near-term, it can also have significant bearing on the long-term outlook for the industry, namely its ability to meet long-term demand expectations while reducing CO2 emissions, increasing energy efficiency levels, and investing in renewable energy and clean technologies as set by the European Union’s 2020 targets.

To examine how organisations are responding to the downturn, Marsh commissioned the independent research agency Ipsos to conduct a survey of changing attitudes to risk management across European organisations. Over 700 organisations were interviewed across 12 countries and 7 industry sectors; of these, 56 are in the power and utilities sector. This comprehensive study of the European power and utilities sector examines the industry’s immediate risk management concerns, its confidence in its ability to manage these, and reviews how power and utility companies plan to address risk management in the coming months.