The London School of Economics recently published whitepaper, Energy Risk Management for UK Business, concludes that the risks associated with business energy will continue to grow over the coming years.

The report continues that the increase in financial, legislative and reputational risks associated with business energy mean that within today modern and often complex environment, organisations need to put into place strategies to reduce their exposure to potential risks.

Dr Fankhauser, author of the paper states, ‘The risks faced by UK business related to energy will continue to grow. Energy price volatility and increases, reputation and price risks from carbon regulation, and increasing regulatory and technological complexity all combine to ensure energy will continue to pose a significant risk for UK businesses moving forward.’

The whitepaper follows recently released statistics, the npower Business Energy Index, which revealed organisations of different sizes, rank energy as posing a greater risk than many other issues, including health & safety, credit and security. In general, the increased risk is due to the increase and volatility of energy prices, with carbon regulation and increased regulatory and technological complexity also adding to the issues.

To conclude, the report suggests that energy suppliers should help organisations by acting within an advisory capacity with regards to possible energy efficiency products and terms available. Whilst we agree in principle with what the paper highlights, the day in which energy suppliers advice clients on how to efficiently deal with energy risks, which in turn potentially affects their own beloved profit margins, is still a significant way from being a reality.

The ongoing dichotomy of suppliers that are under increasing pressure to increase margins, in a marketplace that will be reducing its consumption over time provides an increasing dilemma. This particularly affects the big, vertically integrated players, who are beginning to focus their efforts and resources on the higher margin upstream areas.

The downstream, or retail supplier divisions, that the business and consumer market has to deal with has been diluted in its resources, capabilities, experience, and inclination to do a thorough and complete job. They can often be seen to hide behind ‘lifestyle marketing’, providing a barely adequate service, desperately cross-selling higher margin products and maintaining retention strategies, bordering on obfuscation, whilst trying simply to increase prices, rather than improving the business model.