Professional Services to Address Critical Infrastructure Disruptions
The industrialized world today is highly dependent on a relatively small number of utilities that supply power, water and fuel, that are facing environmental, social and political threats in increasing numbers. Such hazards can compromise Critical National Infrastructures (CNIs) and businesses, on a single entity, market region or even global scale. There are now security companies and consulting firms that are taking on the responsibilities that traditionally belonged to governments in increasing numbers. What potential disruptions to critical infrastructures should companies pay most attention to?
Local events, global implications
The operations of global companies can be temporarily disrupted by local crisis. These could range from political unrest and natural hazards to failures of CNIs and in the longer term, include demographic change and demand for resources.
Without proper monitoring and control procedures, the consequences of unexpected disruptions can easily escalate if organizations only focus fire fighting measures as crises occur – as seen by some recent examples in the airline, oil and energy EPC sector. A disaster in a high-risk country, like the 2011 March earthquake in Japan, may not only impact local company assets and revenues, but the consumer and investment climate on a global scale as well.
A disruption in the supply or a hike in price of energy or raw materials for power generation, refining and chemical production plants can be highly detrimental, while the impact on the mining, oil production, forestry and agriculture sectors is somewhat less.
Important CNI categories
Critical National Infrastructures can be grouped into categories. In the case of natural and political hazards, the most CNIs tend to be power plants, pipelines, refineries, terminals and logistic routes. These also happen to have the biggest impact on the day-to-day operation of energy and utility companies since they tend to operate globally, are energy intensive and are dependent on sound supply from intermediates.
The responsibilities of companies and governments in CNI risk management are unspecified in most countries, since most CNIs are owned by the private sector, which in turn relies on local governments to determine safety regulations. The degree of government involvement does not necessarily go hand in hand with the technological development of a country. Some countries have a tradition of having strong regulatory bodies.
In the US and the UK, the self-monitoring of companies has been encouraged and only recently has there been close cooperation between CNI owners and government officials. This public-private cooperation, driven by concerns for national safety, is likely to be an area of significant investment.
The increase in potential disruptions
The numbers of CNIs that are at risk are on the increase around the world.
Firstly, there have been an increasing number of investments in CNIs in developing regions that can compromise national safety. These include nuclear projects in India and China; deepwater oil production in the US, Brazil and Africa; the development of hydropower plants across the world; new refinery and chemical projects mainly in China and India.
Secondly, there is the constant threat of climate change, population growth, political unrest and availability of raw material across the world. Extreme weather conditions in Europe, aging power grids in the US and China, the decaying infrastructure of Russia’s oil and gas industry and unrest in the Middle East and Northern Africa are such some examples.
Thirdly, there is the rising threat of attacks to vulnerable information systems. The US Department of Energy and the US Department of Homeland Security for example, have launched a roadmap to secure the control systems in the energy sector.
Turnkey service solutions
A range of companies, such as G4S, Control Risks and International SOS, provide consulting and operational services, ranging from risk management consulting, information management to hands-on security training. Companies can decide between comprehensive risk management by one company or a combined selection of services from various suppliers.
The security specialists, and to some extent insurance companies, can be seen as the most common service providers in the risk management business. Internal and external data are in the best cases, linked to the risk manager’s information dashboard at all times, to assist in monitoring and decision making.
Practical examples of common services include:
- An updated database of organization’s assets, locations and regional contact persons
- Centralized travel management to track the members of the organization
- Timely information about hazards in the regions the organization is present in
- A call centre or a media hub to collect all critical information during a crisis
Business-focused risk management
While useful, the common risk management services may not take into account the key strategic market intelligence topics that are specific to energy, resources and environment related businesses. The challenges in business-focused risk management can be seen among various oil, mining, chemical and forestry related disputes as well as among utility EPC companies and operators:
- The Gulf of Mexico oil spill in 2010 still impacts the BP share price negatively one year after the disaster.
- The French energy concern Areva has faced challenges with the management of end-of-life uranium mines in France, the local project management of a nuclear power plant in Finland, various waste handling disputes as well as the occupational health at the African uranium mines.
- Past chemical disasters such as the ones in Seveso, Italy and Bhopal, India continue to smudge the corporate brands of Roche and Eveready Industries.
- Forestry and paper companies are also taking calculated risks when concentrating production in Latin America and Asia: political and environmental risks are linked and a change in either one may cause disruptions to the global supply.
- The EPC companies in the energy business are again facing challenges in predicting local disruptions’ global implications in various capital investments and government subsidies.
From a business perspective, the spectrum of strategic market intelligence services that concern natural and political hazards is far broader than the offerings of a single security or a risk management consultant. The following services can be provided to alert a business from the global market level implications of potential natural and political hazards:
1. Trend Analysis
Which are the commercial, social, political and economic implications of themes such as demographic change, global warming or rising crude material prices?
2. Competitive Benchmarking and Risk Strategy Analysis
How is the competition prepared for disruptions in terms of stock, fleet locations and alternative suppliers?
3. Scenario Analysis
Which are the potential hazard scenarios emerging from a direct impact as well as indirect market cause?
4. Market Entry, Business Expansion and Due Diligence Analysis
How can a company include a risk assessment in a commercial study?
5. Value Chain Analysis
How can a company include a 360 degree risk assessment of suppliers, competition, buyers as well as new entrants and substitute products?
6. Continuous market, company and region intelligence
What are the implications of potential, current or past natural or political hazards to a market, company or a region?
To limit the impact of various hazards, working with a partner with a global presence, the right industry know-how and access to timely information is essential. With the right market information at hand, it is possible for a company to avoid most of the high risks and in the case of a disaster, act quickly.
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