Critically analyse the role of the board of directors and senior Essay

Critically analyse the role of the board of directors and senior management in managing enterprise risk in an energy company - Essay Example Energy and Resources companies have come increasingly under the regulatory purview. Due to brisk changes in the industry, they face stiffening regulatory requirements, ever-increasing cyber issues and rapidly changing technology. Such compliances and risks have a strong impact on the company’s operations and business strategies that makes it utterly imperative for the management to adopt approaches to manage and mitigate risks and cope up with regulations. Risk Management in the Energy Sector A good progress has been made in the past in developing comprehensive enterprise risk management (ERM) programs. ERM is set to become an industry standard for management of risk because it is probably the most effective way to manage risk internal or external to the organization (Accenture Global Risk Management, 2011). The key risk areas that have been identified for energy and resources sector can be listed as follows: 1. High competition in the industry participants: Energy industry pa rticipants have a very unique competitiveness. Each player has a different advantage within the industry. One firm may have a good resource support while the other might be a technologically strong firm and a third would have a huge market. Nowadays, competition is shifting and each firm is trying to develop on every frontier. International firms are thus facing challenges by national players reducing their market size. 2. Limited sources of alternative energy: Despite the fact that there are alternatives to limited source of non renewable energy, energy companies still haven’t been able to progress much on developing much on alternative sources. Alternate sources have an irreplaceable demand, but on the supply side, they face a lot of constraints. There hydrocarbon content on earth is enough to last a century, but the problem lies in lack of knowledge on its development and usage. These sources are limited by limitations in scale, feasibility and fitness (Holmes, 2004). 3. G overnment Interventions: Most of government regulations in the energy industry are directed towards regulating supply. Operational policies, regulations on carbon emissions and energy security norms affect both the demand as well as the supply side of energy business. Role of Board of Directors and Senior Management Post recession, the scene for energy companies has not only been tough but also challenging in terms of greater project undertakings and complex compliances. Companies have also had to venture in remotest regions simply to manage demand and supply side challenges. Management has to focus on strategy, production, enterprise risk along with operational excellence. With the advent of regulators, management has started to recognise the need for risk management to enhance business performance. With time, a lot of change has come in managing enterprise risk. New tools, better techniques and risk measuring methodologies have come up. One can only predict how enterprise risk man agement shall evolve in the coming times. As Energy sector risk officers, senior managers and the board of directors need to be have the capability to comprehend what possible risks could potentially arise in the near future and how exactly to take preventive measures that will help in combat. With such approach, all downsides that