Prague, 6 October 2009
Marsh, the world’s leading insurance broker and risk adviser, is urging European oil and gas firms to put risk management systems in place that enable them to identify, mitigate and manage the broad range of risks facing their organisations.

Marsh’s advice follows the publication of its new Oil and Gas Industry Risk Footprint report, which details the 25 most commonly identified risks that feature in the risk registers of oil and gas companies in Europe.

The new report identifies that while strategic and financial risks account for 15 of the 25 top risks facing organisations in the oil and gas industry, only five focus on operational risk, four on hazard risk and just one – breach of regulatory requirements – on regulatory risk.

Among the most common operational, financial, strategic, regulatory and hazard risks to oil and gas firms identified by Marsh are:
• Reduced availability of viable reserves
• Significant drop in demand for energy brought on by use of green technologies
• Disadvantageous regulatory changes/political decisions, eg exploration activities
• A reduction in exploration opportunities
• A major environmental incident or natural disaster
• Energy price volatility

The top operational risks identified were the risk of having inadequate systems and structures and the inability to recruit and retain suitably qualified staff.

Stephen Roberts, Leader of the Strategic Risk Practice at Marsh, explained: “Oil and gas companies need to expand their risk management processes to ensure that all elements of the organisation’s risk footprint are captured. With enhanced understanding of all the risk issues and how strategic risks affect their organisations, they can manage risk appropriately and cost effectively.”

In Marsh’s experience, a firm’s failure to effectively capture the spectrum of risk it faces may result in:
• Share price drop
• Ineffectual contracts
• Ineffective commercial venture e.g. joint venture, alliance, partnership
• Missed strategic objectives

Andrew George, Leader of the Marsh’s Energy Practice for Europe, the Middle East and Africa, added: “The financial crisis has swept through global oil and gas industry with unprecedented force, resulting in a great deal of uncertainty around investment decisions.

"Given the fluctuations in global commodity prices, the oil and gas industry will be faced with difficult investment decisions that will likely affect their future prosperity. Firms taking long-term decisions need to have robust risk management procedures in place in order to reduce the level of uncertainty involved in any deal. Other risks such as environmental risk, diminishing natural gas supplies and investing in developing technologies and new territories also need to be considered. By having a more complete picture of the risks facing their organisations, oil and gas companies can gain a stronger competitive footing that will be key to their recovery.”

In order to address the risks faced by companies in that sector, Marsh will host its third National Oil Companies (NOC) conference on 22 - 24 February next year in Dubai. The conference – ‘NOCs into the Future: the Challenges and Opportunities ahead’ – will focus on the risks faced by NOCs as they make their key strategic and operational plans. Marsh's last NOC conference in 2008 attracted over 500 senior level attendees from NOCs in all parts of the world.