An increase in financial, reputational and legislative
risks associated with business use of energy means
organisations need to put in place effective plans to
reduce their exposure to future risks. This is the key
finding of a new white paper – 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 the
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.

Role of suppliers
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.

Risks will grow
“The risks faced by UK business related to
energy will continue to grow. Energy price
volatility and prevailing 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 stepchange
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 can be downloaded at
www.npower.com/whitepaper.