Oil and gas companies face many risks in their operations. They have to deal with high costs, volatile prices, safety issues and other factors that can affect their profits. To cope with these challenges, they need to have a good risk management program that can identify and address the potential problems. Here are 3 of the top challenges that the oil and gas industry has to deal with today.
Litigation
Societal trends such as social inflation can increase the risk of an oil and gas company facing a lawsuit. Safety, environmental issues, and evolving plaintiff attorney tactics are among the factors contributing to more lawsuits and higher jury awards according to Travelers.
To prevent lawsuits, businesses should prioritize safety and prevent accidents that can injure workers. They should also use contracts and insurance to transfer and cover the risks of oil and gas operations. These are the best ways to avoid litigation defense costs and liabilities.
Supply Chain Impacts
Supply chain disruptions are a major challenge for oil and gas companies. These disruptions can affect the cost and availability of materials and equipment needed for drilling and production activities. To cope with these challenges, oil and gas companies should adopt effective supply chain management strategies.
These strategies can include inspecting the quality of alternative suppliers, buying materials in bulk to avoid shortages, and ensuring proper storage and protection of inventory.
Additionally, oil and gas companies should review their insurance coverage to make sure they have adequate and accurate valuation of their inventory. By doing so, they can reduce the risk of operational delays and losses due to supply chain issues.
Market Volatility
Oil and gas companies face many challenges from global events and natural disasters that can affect their operations and profits.10 To cope with these uncertainties, they need to have a robust business plan that considers their capacity and reserves, and a comprehensive risk management program and a business continuity plan that are up to date. These strategies can help them maintain their operations in changing market conditions and recover quickly from any incidents such as equipment failure, cyberattack, fire, flood or earthquake.
Final Word
Oil and gas operations face many challenges, but you can overcome them with knowledge, plans and strategies. Make sure you update and review your contingency plan often with a qualified professional who knows the risks and needs of your business and industry.
