Energy Politics and the risk of civil unrest

Thank you all for joining the October 28^th call on “Energy and the potential for civil unrest”, and the great interaction and exchange of thoughts, ideas and scenarios. It was a pleasure to see the ideas inspiring a range of interconnectivity and potentials that went beyond this initial trigger, and contributed to: This highlights some of the values that risk management brings to the table:  

• A wide-ranging group of scenarios 
• Different perspectives on consequences and events for different counties, sectors and models
• Known Unknown elements bring put forwards and thereby extending knowledge and variety
• Bringing forwards curiosity combined with experience and knowledge to deliver insight. 

Interestingly we heard that the energy scenario initiator appears not to be global but local and depends on each Country’s energy portfolio (and cultures of civil unrest). Interestingly it was stated that there are however similarities in the food supply chain area which are having potentially similar repercussions. So there is a clear dynamic surrounding each persons and company’s and countries situation. 

Time is playing an important role with 4 elements to be considered. Short and long term and short and long duration. While this is complicated enough it can be further influenced when the actual risk level becomes the norm. Ie when oil prices and supply chain issues, which are considered a risk currently, become the norm as time elements change and actions differ. These are the “permanent effects of system shocks”.  

A fifth dimension of time is the speed of change, or acceleration, of these events. It will require constant vigilance of events and daily responses depending on sit actions and thereby risk management cant not be seen as a monthly reporting exercise but a continuous and valuable part of decision making across all management levels. Even though energy in some areas can be considered as a large risk the overriding question remains: “are we vulnerable”? This is summarised in the questions 

• Will it hit? 
• When will it hit? 
• How will it effect me? 

Failure to respond to even a small event can be catastrophic and have long term consequences making the traditional severity X frequency calculation very ineffective. This is exacerbated when looking at many current risk management business models. Quarterly or even annual reporting of risks and opportunities clashes with immediate or hourly updates on social media concerning events.  

Hidden in the discussion were a couple of elements that can be easily missed. Those of indirect and intangible risks and opportunities. Some examples noted in the discussion: 

• If they can't eat, heat their home, drive to work as fuel, energy and food prices are either too high or items are unavailable what will the general public do? Can we expect people not to arrive at work? Will there be disruptions caused by strikes? Will the additional stress be pushed towards governments or company management? Companies don’t work without people so it might require a deep dive into what purpose or objective really means. 
• Sitting back and waiting in a form of “hibernation” might be a good tactic. As we emerge from this hibernation, assuming that a transformation of our business model and culture occurred, could generate opportunities unforeseen prior to the shock. Here management will be key in having the dynamics, agility etc to decide and move forwards. 
• Permanent transformation. As noted earlier, a permanent transformation can lead to opportunities. So instead of reacting to the shock and trying to get back to normal we need adaptive resilience to catalyse the change to the Future. 

The risk manager’s future role could be considered as a way to bring to the table: 

•  A way of identifying a new “source of truth”. 
• Identifying where “reset” will be the future path and therefore a new and challenging scenario workshop is needed. The new journey will be a mix of reset processes with traditional systems where a rethink will be needed 
• For those anticipating being in the cross-hairs of public attention (e.g. high-profit energy companies), anticipating for consideration communication with stakeholders, and in particular “destination” of profits. Public sentiment is likely to be less severe for those investing profits in securing energy supply or sustainability initiatives than those announcing windfall dividends, for example 

• Local scenarios need to be considered and managed as a portfolio but with local focus. Meaning risk managers might see a variety of solutions being played out across different sectors, and businesses but care must be taken than the global portfolio is still optimised. 
• Permanent effects of shocks - When risks levels become the daily norm then opportunities can arise. Its important to understand when the current and future situations will be normal and therefore require a different management approach. 
• Risk management needs to be embedded and part of the daily management decision making process across all levels. 
• Such global events, and possibly similar scenarios, can be leveraged as a way to look forwards and plan the future journey. Blending new with old and providing insight into company strengths, weaknesses and opportunity capture. Acting as a trigger for change and a deeper look into the scenarios used in the normal risk management process.  

For the next call planned end November we invite you to propose some topics for discussion.