Top Risks Facing Executives in Natural Resources Industry

July 6, 2016

Natural resource industry executives say operating in more technically challenging physical environments is the leading risk to their business, followed by currency and interest rate fluctuations and cybersecurity.

The new Natural Resources Risk Index by Willis Towers Watson, the global insurance advisory and brokerage firm. The index was compiled using responses from 350 executives across the natural resource industry — including oil, gas and chemicals, power and utilities, and metals and mining — to rank 50 risks in accordance with their impact and how difficult each one is to manage.

“Unearthing new stores of natural resources has become an increasingly challenging task,” said Mark Oakley, head of Willis Towers Watson’s Natural Resources, North America. “It requires producers to adapt to ever more demanding environments and technically complex projects during a period when the pressure to generate returns and provide the highest possible operational efficiency is greater than ever. The cost of getting things wrong is also at an unprecedented high.”

The industry executives named currency and interest rate fluctuations, and increased cybersecurity and data privacy risks as the ensuing top risks to their business.Natural disasters and epidemics, technology that opens up the marketplace to disruptors, and vulnerability to reclamation obligations round out the top six risks.

Risks and Opportunities

“The survey results show that the industry is united on its views of the key risks it faces today and over the next 10 years,” said Oakley. “Certainly geopolitical instability and regulatory change, coupled with digitalization and new technologies, have created new risks for the industry to understand and mitigate. At the same time, a changing industry landscape provides opportunities for companies willing to embrace a degree of risk.”

The survey also showed that executives are troubled by shifts in the way that today’s governments approach regulation. In the next decade, it is likely government regulation of the industry will increase. “If companies want a role in shaping the regulatory agenda, they need to engage proactively with government and other key stakeholders, and put forward their point of view,” said Oakley.

Industry leaders are also concerned about the risks associated with digitalization and new technologies. Companies’ growing dependency on IT infrastructure has ushered in a litany of new risks. “In all its varieties — from unintended data breaches to cyberterrorism — cyber-risk is now a boardroom issue for the industry — one that executives would never have dreamed of, 20 or even 10 years ago,” said Oakley.

The global research found marked differences between how organizations in different regions view risk, with the number one perceived risk varying significantly across the world. North American natural resource leaders are preoccupied with increased cybersecurity and data privacy risks. In Europe, the risk posed by operating in more technically challenging physical environments was highlighted as the principle concern. In South America, uncertainty over climate change and environmental policy was the top concern.

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