Businesses face various risks that can affect their operations, such as fluctuating energy prices or shifting regulations. To avoid falling victim to these potential challenges, it’s crucial to proactively manage them.
This is where risk management (or Enterprise Risk Management [ERM]) comes in. It involves identifying, assessing, and addressing potential threats to key areas of a company, including its finances, legal standing, strategy, and security.
In the energy sector, we’re exploring seven significant risk factors that must be considered:
In the energy industry, fluctuations in supply and demand can significantly impact both prices and availability. These risks can arise due to geopolitical events, changes in consumer consumption patterns, or supply disruptions (such as natural disasters or infrastructure failures). Energy companies must be able to forecast supply and demand trends to minimize the impact of these fluctuations on their business operations.
Energy companies that operate internationally or deal in global markets are exposed to exchange rate risks. The value of currencies can fluctuate, and such changes can affect the profitability of international transactions. For example, if an energy company in the U.S. buys oil priced in a foreign currency, a change in exchange rates could increase the cost of that oil. Hedging strategies and careful financial planning are often employed to mitigate this risk.
Economic uncertainty can have a direct impact on energy prices, demand, and investments. Recessions, inflation, or changes in consumer spending can reduce the demand for energy. In turn, this can lead to lower prices or financial strain for energy companies. Economic instability can also lead to increased costs, particularly in sectors like energy, where infrastructure investments are necessary.
While new technologies, like wind turbines and solar panels, offer potential for efficiency and cost savings, they also introduce risks, such as unexpected failures or the potential to disrupt traditional energy markets. Energy companies must manage the integration of new technology while ensuring reliability and cost-effectiveness.
To manage risk, energy companies often diversify their portfolios, investing in a variety of energy sources (such as renewable energy, oil, and natural gas) and geographic regions. Diversification helps to spread the risk, so if one market or energy source experiences a downturn, other segments may offset the loss. This strategy helps ensure a more stable financial position.
Natural disasters and environmental challenges, such as climate change or pollution, can disrupt energy production and damage infrastructure. Companies must address environmental risks through sustainable practices and compliance with environmental regulations to minimize operational setbacks.
Energy companies must comply with government regulations that affect everything from pricing and taxes to environmental standards. Changes in policy or regulation can create financial or operational challenges, and failure to comply may result in penalties or legal issues.
Energy risk management requires a comprehensive process involving three main stages:
The University of Texas Permian Basin offers graduate-level online programs that can help you hone your expertise in energy management as you build broader skills and key credentials for a stronger career.
Developed specifically for energy business professionals, this 30-credit program leverages UT Permian Basin’s longstanding connection with the energy industry to provide a firm grounding in financial principles.
Our MS in energy business includes courses that examine risk management, including:
This new 30-credit program caters to one of the most sought-after business concentrations. Tailored toward training current and future executive managers, the MS in finance program includes a balanced and intuitive approach to areas of financial management including corporate financial strategy, investments and electives such as real estate and financial planning. This program also gives the students the ability to select energy classes as electives.
Our online Master of Science in Finance includes courses that explore risk management from corporate and energy perspectives:
This 33- to 42-credit program explores financial management in depth to help you develop career-critical operational acumen and leadership skills. A highly marketable degree, this MBA provides a strong financial management emphasis while also exploring accounting and investments.
Our online MBA in business administration with finance focus includes courses that explore risk management from energy industry and other perspectives:
This 36- to 45-credit program examines core business areas such as risk management, marketing, accounting, and finance analytics from general and energy industry viewpoints. Our MBA with Certificate in Energy Business boasts a stackable credential option, a unique advantage which enables you to simultaneously earn a Graduate Certificate in Energy Business. That’s two valuable graduate credentials you can complete in about the same amount of time it takes to finish the MBA on its own.
This online program includes courses that examine risk management, including:
The energy industry faces constant change, from shifting regulations to new technologies and environmental concerns. If you’re going to manage these risks, you’ll need specialized knowledge in finance, strategy, and energy markets. UT Permian Basin’s online graduate programs combine quality, flexibility, and affordability to help you build the expertise energy companies need right now.
Our programs hold AACSB accreditation, a distinction earned by only 5% of business programs worldwide. You can complete your master’s degree in as little as four semesters through our 100% online format. Study at your own pace from anywhere—no campus visits required. You can start in spring, summer, or fall and learn to forecast supply trends, navigate exchange rate risks, and integrate new technologies: the real-world skills that help energy businesses identify and address their biggest challenges.
Give your energy industry career a vital boost. Apply now to one of UT Permian Basin’s master’s degree programs.
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