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Energy risks for business set to increase

11 November 2010

A new ‘white paper’ published this week says businesses should plan to reduce exposure to future energy risks.

An increase in financial, reputational and legislative risks associated with business usage of energy means organisations need to put in place effective plans now to reduce their exposure to future risks.  This is the key finding of a new white paper published today, Energy Risk Management for UK Business, commissioned by npower from the London School of Economics.
The white paper follows statistics in the latest npower Business Energy Index, which revealed that businesses rank energy as posing greater risk to them than health and safety, credit and security.  They scored energy 6 out of 10 in terms of level of risk it poses; this was in contrast to the highest risk which was legislation, scoring 6.7 out of 10.
To address this concern and to stress the importance of immediate action, the white paper provides a guide to current energy risks and forecasts how they will grow in the future.  It concludes by urging businesses to ensure energy is a board-level consideration and to control their exposure to risk by working in a collaborative manner internally - by combining the energy management and procurement processes. 
The paper also looks at how the role of energy suppliers is changing.  No longer can they simply supply energy; they now need to help businesses to manage their consumption and procure energy in as cost-effective way as possible, to ensure their survival.  It concludes by highlighting the role that energy suppliers now need to play is as a consultant to help organisations manage energy risks.
The white paper stresses how organisations that are quick to act and implement effective risk management strategies can not only reduce their exposure, but also benefit from cost and carbon savings and strengthen their reputation.  Businesses should also be aware of changes to external factors including legislation, so they are able to react effectively and manage their exposure to these risks as they evolve.
“The risks faced by UK business related to energy will continue to grow.  Energy price volatility and increases, reputation and price risks from carbon regulation, and increasing regulatory and technological complexity all combine to ensure energy will continue to pose a significant risk for UK businesses moving forward,” says Dr Samuel Fankhauser, author of the paper, principal research fellow at the Grantham Institute on Climate Change and the Environment at the London School of Economics and a member of the Committee on Climate Change.  
“As a result, businesses should ensure they are best-placed to manage these risks, by developing an integrated strategy with board-level support that brings together the management of energy consumption and energy procurement.  This will be a step-change for many organisations, but it is crucial they do this now so they can take advantage of cost and carbon savings and the reputational benefits of successful regulatory compliance and energy management,” he adds.
David Cockshott, head of industrial and commercial markets at npower, adds: “Our aim in commissioning the white paper was to reveal the risks energy poses to businesses, show how they are likely to change in the future and ultimately, how organisations can manage these risks.  We believe that energy suppliers have an important role to play in helping companies to manage their exposure to energy risk and we continue to develop products and services to assist in this way. 
“One of the key areas we help to develop in our work with businesses is the integration of energy management and procurement within the organisation.  We are committed to assisting both departments in developing a collaborative strategy to manage energy consumption and purchasing, as both are intertwined and one affects the other.”
The white paper, Energy Risk Management for UK Business, can be downloaded at

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