- Business interruption is the top risk in the oil and gas sector with 45% of responses.
- The energy crisis is second with 34% of responses.
- Climate change is third with 32% of responses.
- Business continuity planning reviews are essential and must be regularly updated.
Johannesburg, July 16, 2024 – Business interruption is the primary concern for the oil and gas sector in 2024, according to the Allianz Risk Barometer. It is followed by Energy crisis (34%), Climate change (32%), Fire, explosion (26%) and Natural catastrophes (23%). The report, based on insights from over 3,000 risk management professionals and business leaders, highlights the growing importance of addressing these risks to ensure business continuity and safeguard against potential disruptions.
Business interruption: top risk in the oil and gas
Business interruption remains a top risk in the oil and gas sector due to various factors such as supply chain disruptions, geopolitical instability, and fluctuations in oil prices. Mitigation strategies should prioritize implementing robust contingency plans, diversifying operations across multiple geographic regions, and investing in technology for real-time monitoring of production facilities and pipelines to detect and respond to potential disruptions promptly.
Risk management and resilience essential
Establishing strong relationships with suppliers and partners, maintaining adequate inventory levels, and developing alternative transportation routes can help mitigate the impact of interruptions. According to reports[1] proactive risk management and resilience-building measures are essential for oil and gas companies to mitigate business interruption risks and maintain operational stability in a volatile environment.
Energy crisis risks retain second spot
Energy crisis risks retain the second spot stemming from factors such as supply chain disruptions, geopolitical tensions, and regulatory changes impacting production and distribution. Mitigation strategies should prioritize diversifying energy sources and investing in renewable energy technologies to reduce dependency on fossil fuels and enhance resilience to energy shortages.
Collaboration is crucial
Implementing energy efficiency measures in operations and adopting advanced technologies for extraction and refining processes can optimize resource utilization and mitigate the impact of energy crises. Collaboration with governments, industry stakeholders, and research institutions to develop sustainable energy policies and strategies is crucial. Proactive measures to enhance energy efficiency and diversify energy sources are essential for oil and gas companies to mitigate energy crisis risks and ensure long-term sustainability in a rapidly evolving energy landscape, according to reports.
Prioritize reducing emissions
Climate change risks have increased from #4 to #3 due to its contribution to greenhouse gas emissions and vulnerability to the physical impacts of climate change such as extreme weather events and sea-level rise. Mitigation strategies should prioritize reducing emissions through investments in carbon capture and storage technologies, transitioning towards cleaner energy sources such as natural gas and renewables, and implementing methane reduction initiatives in extraction and production processes.
Address climate change risks
Enhancing resilience to climate-related impacts through infrastructure upgrades, risk assessments, and adaptation measures is crucial. Collaboration with governments, stakeholders, and communities to develop sustainable energy policies and transition strategies is essential. Research suggests that proactive measures to address climate change risks are imperative for the long-term sustainability and competitiveness of the oil and gas industry in a transitioning energy landscape.
Invest in advanced technologies
Fire and explosion risks rank fourth due to the volatile nature of hydrocarbons and the complex infrastructure involved in exploration, production, and transportation. Mitigation strategies should prioritize implementing robust safety protocols, including regular equipment inspections, hazard assessments, and employee training on emergency response procedures. Investing in advanced technologies for early detection of potential hazards, such as infrared cameras and gas detection systems, can enable swift intervention and containment of incidents.
Safety of workers and communities
Establishing strict regulations and standards for the construction and operation of facilities and pipelines, as well as maintaining adequate emergency response capabilities, is crucial. Studies recommend that proactive risk management and adherence to stringent safety measures are essential for oil and gas companies to mitigate the risk of fire and explosion incidents and ensure the safety of workers and surrounding communities.
Thorough risk assessments
Natural catastrophes ranked fifth as new entrant in the oil and gas industry due to risks such as hurricanes, earthquakes, and tsunamis, which can disrupt operations, damage infrastructure, and pose environmental threats. Mitigation strategies should include conducting thorough risk assessments to identify vulnerable assets and implementing measures to enhance resilience, such as reinforcing infrastructure, relocating critical facilities away from high-risk areas, and investing in advanced monitoring and early warning systems.
Swift and effective response to natural disasters
Establishing robust emergency response plans and coordination mechanisms with local authorities and responders can enable swift and effective response to natural disasters. Collaboration with industry peers and stakeholders to share best practices and lessons learned can also enhance preparedness and response capabilities. Proactive risk management and comprehensive disaster preparedness are essential for the oil and gas industry to mitigate the impact of natural catastrophes and ensure the safety of personnel and assets, according to research[2].
Risk mitigation: how to future-proof your operations
What these risks reveal is the extent to which risks are interrelated and aggregated in the networked world we live and work in. Faced with loss scenarios that can fall like dominoes, businesses need robust, resilient operational processes to safeguard their supply chains and ensure business continuity. Business continuity planning (BCP) reviews are essential and must be regularly updated.
View the Allianz Risk Barometer methodology and full global and country risk rankings
About the Allianz Risk Barometer
The Allianz Risk Barometer is an annual business risk ranking compiled by Allianz Group’s corporate insurer Allianz Commercial, together with other Allianz entities. It incorporates the views of 3,069 risk management experts in 92 countries and territories including CEOs, risk managers, brokers and insurance experts and is being published for the 13th time.
For further information please contact:
Johannesburg: Lesiba Sethoga | Tel. +27 112 147 948 | lesiba.sethoga@allianz.com |
About Allianz Commercial
Allianz Commercial is the center of expertise and global line of Allianz Group for insuring mid-sized businesses, large enterprises and specialist risks. Among our customers are the world’s largest consumer brands, financial institutions and industry players, the global aviation and shipping industry as well as family-owned and medium enterprises which are the backbone of the economy. We also cover unique risks such as offshore wind parks, infrastructure projects or Hollywood film productions. Powered by the employees, financial strength, and network of the world’s #1 insurance brand, as ranked by Interbrand, we work together to help our customers prepare for what’s ahead: They trust us to provide a wide range of traditional and alternative risk transfer solutions, outstanding risk consulting and Multinational services, as well as seamless claims handling. The trade name Allianz Commercial brings together the large corporate insurance business of Allianz Global Corporate & Specialty (AGCS) and the commercial insurance business of national Allianz Property & Casualty entities serving mid-sized companies. We are present in over 200 countries and territories either through our own teams or the Allianz Group network and partners. In 2023, the integrated business of Allianz Commercial generated more than €18 billion gross premium globally.
These assessments are, as always, subject to the disclaimer provided below.
Cautionary note regarding forward-looking statements
This document includes forward-looking statements, such as prospects or expectations, that are based on management's current views and assumptions and subject to known and unknown risks and uncertainties. Actual results, performance figures, or events may differ significantly from those expressed or implied in such forward-looking statements.
Deviations may arise due to changes in factors including, but not limited to, the following: (i) the general economic and competitive situation in Allianz’s core business and core markets, (ii) the performance of financial markets (in particular market volatility, liquidity, and credit events), (iii) adverse publicity, regulatory actions or litigation with respect to the Allianz Group, other well-known companies and the financial services industry generally, (iv) the frequency and severity of insured loss events, including those resulting from natural catastrophes, and the development of loss expenses, (v) mortality and morbidity levels and trends, (vi) persistency levels, (vii) the extent of credit defaults, (viii) interest rate levels, (ix) currency exchange rates, most notably the EUR/USD exchange rate, (x) changes in laws and regulations, including tax regulations, (xi) the impact of acquisitions including related integration issues and reorganization measures, and (xii) the general competitive conditions that, in each individual case, apply at a local, regional, national, and/or global level. Many of these changes can be exacerbated by terrorist activities.
