Saturday, July 3, 2010

Our Crystal Ball for Planning & Risk Management

Business leaders and risk managers take note!  This report, released last month by Lloyd's, provides the most comprehensive outlook of the most significant challenge facing business in the past century: Energy Security.

In these uncertain and volatile times, we're given a clear picture of the road ahead with regard to one of our most important resources: energy.  As business leaders we must plan now for a 20-year transformation in business energy usage, within the next 10 years.  Due to the dual threats of Climate Change and Fossil Fuel Scarcity and Volatility, a dramatic re-engineering of business is required if we want our organization to continue to trade beyond 2025.  Lloyd's concludes that "Energy scarcity is now inseparable from the transition to a low-carbon economy and businesses plans should prepare for this new reality".

"A supply crunch appears likely around 2013...given recent price experience, a spike in excess of $200 per barrel is no infeasible".  Professor Paul Stevens, Chatham House

One example of the implications of carbon-based fuel scarcity is the need to reassess supply chains and just-in-time models in order to increase resilience against energy supply disruptions (in the short term) and prohibitively-rising energy prices (in the long term).

From our vantage point, there are a number of steps that businesses can take in order to increase resilience and the capacity to bounce back from the inevitable sudden shocks in the market:

1. Conduct an energy assessment and develop a 20-yr energy transition plan, including emissions reductions, renewable energy sourcing and/or investing, and new technologies  (Integra offers consulting on funding available for CO2 emissions reductions and renewable energy investment)
2. Form a new role (Chief Energy Officer) and if possible a new team, responsible for leading this major change management initiative for the long term
3. Invest in your other important resource: your people.  Transitioning to a low-carbon economy requires a completely new mindset for business strategy and risk management, and building a resilient culture is crucial to navigate the turbulent road ahead (Give us a call to find out how you can deliberately manage your organization's cultural values to prepare for the future and enhance performance today)

"Businesses which prepare for and take advantage of the new energy reality will prosper - failure to do so could be catastrophic".  Lloyd's Sustainable Energy Security Report

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