This paper provides further research to understand the importance of strategic risk management within the energy sector. Beyond traditional risk considerations of catastrophe, terrorism, and the potential for operational failure, the energy sector is like almost all sectors confronted with disruptive risks through the adoption of new and more efficient technologies in this era. Additionally, our society is facing challenges regarding climate change, which forces the development towards a renewable instead of the traditional, fossil energy environment. Through mobile applications, analytics, sensors, social media and cloud computing the entire business landscape already fundamentally changed.
There are many things happening "that are beyond direct human influence and managerial control".
The rapid changing business environment with new upcoming and disruptive business models are not identifiable with the traditional risk management frameworks. The reduced ability to forecast environmental conditions and potential risk events implies "that the formal strategic and investment planning frameworks based on forecasts become inadequate". Traditional enterprise-wide risk management frameworks do not necessarily provide sufficient conditions for effective risk management outcomes. There are too many aspects to be contained, which makes it impossible to reflect all the risks within a simple, formalized control system.
The importance of strategic risk factors and related corporate responsiveness in increasingly changing market environments exhibit a need to a more comprehensive view of the risk management process. Formalized reporting and internal control systems clearly have improved in order to let the executive board prove that it has acted to their best knowledge and belief in case of potential scandals. This defensive corporate mentality hinders innovative response to business environmental changes and therefore excludes appropriate management of strategic risks. Increasing uncertainty to determine the changes or even anticipate future risk events indicate the relevance of incorporating strategic risks into the enterprise risk management practice.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Problem description and objectives
- Methodology and structure
- Strategic risk management
- Definitions
- Demarcation to operational risk management
- Strategic risks within the energy sector
- Content analysis of strategic risks
- Discussion of results
- Financial impact of a selected strategic risk
- Conclusion and Outlook
- References
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This study explores the importance of strategic risk management within the energy sector, analyzing key risks and their financial implications. The work aims to provide a comprehensive understanding of the challenges and opportunities associated with strategic risk management in this dynamic industry.
- Strategic risk management within the energy sector
- Content analysis of strategic risks
- Financial impact of strategic risks
- Methodology and structure
- Demarcation between strategic and operational risk management
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction sets the stage by outlining the problem description and objectives of the study. It also describes the methodology and structure used to approach the topic. The second chapter provides a comprehensive overview of strategic risk management, including definitions and its distinct nature in relation to operational risk management. The third chapter dives into the core of the study, analyzing strategic risks within the energy sector through a content analysis and discussion of results. It concludes with a detailed examination of the financial impact of a specific strategic risk, providing practical insights.
Schlüsselwörter (Keywords)
The study primarily focuses on strategic risk management, analyzing key risks within the energy sector. It explores definitions, methodologies, and financial implications, drawing upon relevant research and industry practices. Central keywords include strategic risks, operational risks, energy sector, content analysis, financial impact, and risk management practices.
Frequently Asked Questions
What is Strategic Risk Management (SRM) in the energy sector?
SRM involves identifying and managing risks that could fundamentally disrupt a company's business model, such as technological shifts, climate change, and regulatory transitions toward renewable energy.
How does SRM differ from operational risk management?
While operational risk management focuses on failures in daily processes or catastrophes, strategic risk management deals with external uncertainties and disruptive changes that are often beyond direct managerial control.
Why are traditional risk frameworks often inadequate for the energy sector?
Traditional frameworks rely on forecasting historical data, which fails to capture disruptive "black swan" events or rapid technological evolutions like cloud computing and advanced analytics.
What are the main strategic risks currently facing energy companies?
Key risks include the shift to renewable energy due to climate change, new efficient technologies, and changing business landscapes driven by mobile applications and sensors.
How does a "defensive corporate mentality" hinder risk management?
A focus solely on formalized control and avoiding scandals can prevent innovative responses to environmental changes, leaving companies vulnerable to strategic disruption.
- Quote paper
- Claudia Peter (Author), 2021, Importance of strategic risk management within the energy sector. A content analysis, Munich, GRIN Verlag, https://www.grin.com/document/1168638
