UK utilities risks: What’s top of the register?
Marsh McLennan partnered with Utility Week Intelligence for the third consecutive year to develop insights into the rapidly changing risk landscape faced by the UK utilities industry. Here are some of the key findings.
The top risk is cybersecurity
"There’s a lot of uncertainty about cyber, which is why… it is a very high risk and why it is always on the board’s agenda."
The top three risks according to the report:
1
A serious cybersecurity breach occurs
2
Policy does not develop fast enough or lacks the necessary detail to enable utilities to invest appropriately for the future
3
Geopolitical volatility and/or international conflict causes major disruption to markets /supply chains/major policy development
Managing risk – who’s feeling confident?
Policy and regulatory risk
Five out of the top 10 risks across utilities in the report relate to policy and regulation. Some of the risk factors respondents are interrelated. For example, ‘regulatory environment is not agile enough to withstand market shocks’ can be connected to ‘policy not developing fast enough or lacks the necessary detail to invest’. In turn, this is linked with risks to do with ‘international competition proving a bigger draw for investment than UK enterprises’.
For more on policy and regulatory risk, including prospects for regulatory reform
Societal risks
In this year’s survey, the dominating societal risk shifted from last year’s ‘ability to pay’ to concerns about misinformation and population growth. ‘Widespread and/or frequent misinformation incidents (e.g. via traditional and social media)’ were deemed the highest overall risk across energy and water when it comes to societal risks. The top societal risks were:
Environmental risks
Extreme weather remains the most likely environmental risk for utilities, but the cost of essential resources is the only risk factor that has risen year-on-year. Cost of essential resources, driven by climate change, is of greatest concern to energy retailers, with 78% saying it was ‘likely’ or ‘extremely likely’ to become a risk in the next five to 10 years.
Investment and skills risks
The biggest potential skills risks are centred on losing skilled workers to other sectors and maintaining skills to keep pace with changing requirements. These risks came sixth and seventh respectively in the top 10 risks across utilities.
Digital and security risks
A serious cybersecurity breach followed by an inability to manage growing digital complexity are top of the pile for utilities when it comes to risk. A serious cybersecurity breach is ranked top in the digital and security risks by all utilities in terms of the risk most likely to occur, scoring 63% for networks and energy retail, and 60% for water.
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