November 05, 2014
McLean, Va — The energy sector is in the midst of a major, global transformation – driven by key forces that impact organizations’ ability for strong, long-term performance. These forces are creating demands that require increasingly greater attention of oil and gas and utility companies. True competitive advantage depends on an organization’s ability to predict and identify these changes before and as they occur, as well as finding the right balance to manage them efficiently and effectively.
“We are in the midst of an incredible transformation bringing increasing complexity to the market,” said Gary Rahl, executive vice president at Booz Allen and leader of the firm’s energy business. “This pace of change requires an anticipatory mindset – it’s about knowing what opportunities and risks are coming and then innovating to reach key stakeholders including suppliers, employees and consumers.”
To help commercial energy companies thrive in the new year, Booz Allen has assembled its annual list of likely sector business trends for 2015 and beyond, many of them focused on the need to predict what’s coming. The list is based on conversations with CISOs, chief risk officers, CFOs and other leaders in the commercial energy sector, as well as Booz Allen’s vast knowledge of the energy market and its strong commitment to protecting companies’ most vital assets.
The Top Energy Sector Business Trends for 2015:
- Experts agree: the energy sector is the greatest target for cyber threats. No energy company wants to be the first “Cyber Macondo” or “Cyber Blackout.” Energy companies must move beyond simply putting up electronic barriers to protect their IP, supply chain, operations and networks and instead build the capability for proactive advanced threat detection across a now multi-dimensional threat surface. Coupled with this challenge is the weighty task of assessing the security of third-party vendors and protecting critical business assets from those who should not have access. And finally, in today’s cyber world, business continuity and crisis management plans must include cyber incident response plans because nations, customers and the industry cannot risk a digital disruption that results in major physical, economic or reputational damage.
- The regulatory balancing act is more difficult. Complex and changing national and local regulations, including environmental requirements, will continue to force energy companies to balance risk, cost and operational efficiencies to stay compliant. The industry must navigate an alphabet soup – NERC, and NRC to name a couple – of regulations that demand investment in a unified compliance framework to implementing a sustainable institutionalized compliance culture, especially when firms are operating in multiple jurisdictions and or geographies.
- The risk model adds a new value: reputation. As customers begin to realize they have energy choices, they are calling on oil and gas and utility companies to answer the question, “Why should you matter to me?” The result is that firms must spend more time understanding their market ecosystem of customers, investors, communities and competition. In addition, regulators are tying customer satisfaction to rate cases, making reputation much more of a commodity. Organizations that fully embrace using integrated techniques to provide 360-degree awareness will have more insight into their reputation and be better equipped to respond to events to proactively manage risk across the enterprise.
- Health, safety and environment (HSE) gets predictive - The focus on managing and minimizing HSE incidents will shift from a pure training and process approach to one that integrates predictive and preventative models. When firms apply advanced analytics techniques to historical data, they can develop predictive models that identify potential incidents before they occur. This predictive management will be applied across energy companies’ employees, suppliers, training and processes to apply fit-for-purpose training and awareness.
- Capital investments will get predictive, too. Capital investments have become increasingly complex and shareholders and investors are paying closer attention to the risk payout. To prevent excessive risk taking, cost overruns, or regulations slowing the pace of progress or capital dilution, energy companies will need to employ advanced risk analytics to analyze and quantify capital spend to effectively plan for future needs, to predict potential issues and execute successfully.
- The silver tsunami has struck. A major demographic shift within the energy industry is underway that will leave many companies with shortages of key skills: an aging workforce. In an industry where innovation is a commodity, knowledge is certainly a new capital. The key to surviving this generational handoff, and even taking competitive advantage of it, is to carefully plan to ensure knowledge continuity is maintained – just as a corporate enterprise plans for business continuity.
- Data is creating opportunities and challenges. The emergence of vast amounts of new data, from smart meters to digital instrumentation, is presenting both an opportunity and a challenge within the energy industry. While data has been viewed as an asset, many organizations are struggling with how to transform data into insights and a competitive advantage. Energy companies will continue to invest in enhancing the customer experiences that deliver better, faster service using mobile and social media platforms. In addition, cloud and mobile technology are helping enterprises get the most out of their joint ventures, but also must ensure security is a top priority to reduce cyber vulnerabilities.
- Risk management must move from the backroom to the boardroom. Energy companies know how to manage individual components of risk related to HSE, IT, investments, regulations, and even reputation, but those risks in total must be fully understood at the CEO and board level because the combination of a failure in one or multiple components could be devastating to a company. Having a complete picture of risks at the highest level ensures that the company, and not just a department or an asset, are being well protected.
More information about Booz Allen’s energy practice is available here.
This press release was updated in May 2015.