Home – Why the Energy Sector Needs Better Due Diligence & Risk Monitoring

Why the Energy Sector Needs Better Due Diligence & Risk Monitoring

Posted on 08-23-2018 by Lisa Thompson

 No industry is impervious to bribery and corruption risk, but companies linked to energy industries, in particular, face elevated risks in order to reap the equally-high rewards. It’s a topic we’ve touched on in blog posts on Unaoil and Petrobras. But anti-bribery and corruption regulations are not the only risk consideration for these organizations. Why is the energy sector so vulnerable and how can you mitigate risk more effectively?  Find out in our free eBook, A Pipeline to Corruption: Why Energy Industries Need Enhanced Due Diligence.

Tap into the Power of Energy Sector Risk Assessments

The U.S. Department of Homeland Security has said that “Without a stable energy supply, health and welfare and threatened, and the U.S. economy cannot function.” And the same could be said about energy infrastructures around the globe. Clearly, there’s a lot at stake.

Beyond the energy sector’s crucial role keeping the lights on, transportation running and data streaming, you also have to contend with other risk factors:

  • Political—Government stability, policies and more. In many countries, the government may even have a partial stake in energy businesses, elevating the risk of FCPA violations. But politics can have an impact beyond regulatory requirements. Take the recent headlines about possible changes in fuel economy standards. According to The Brookings Institute, “The federal government is considering freezing the emissions standards and challenging California’s authority to maintain its own stricter standards under the Clean Air Act.” While it may prove advantageous for companies in the Energy Sector, others—like the Automotive Industry—could actually be hurt by a shift in standards due to reduced profitability of the innovative fuel-efficient products in their development pipeline. And if the Automotive Industry takes a hit, the Energy Sector is likely to feel it over time.
  • Economic—As demand rises and falls, the value potential of energy shifts in response, as it has in the area of oil and gas in recent years. When the potential profits are high, you can be sure that some corrupt players will want to get in on the game. So, while demand could go up if fuel economy standards soften, conducting risk assessments and ongoing risk monitoring—after due diligence is complete—ensures companies can stay alert to potential red flags.
  • Socio-cultural—Attitudes and customs vary by country. Particularly in countries with emerging economies, fees paid to cut through red tape may be par for the course, but such payments fall into bribery and corruption.
  • Technological—The rate of technological development—and the temptation to circumvent traditional channels to get the job done quicker—can also increase corruption risk.
  • Legal—Energy industries must manage compliance globally, with different laws for each country in which they operate. As the regulatory landscape evolves, the complexities of monitoring and managing legal risks only increases. If you want to help your company stay out of the headlines, make sure your due diligence and ongoing risk monitoring drills deep enough. Otherwise, you could face unforeseen risks that seriously harm your reputation and your bottom line.
  • Environmental—In addition to challenges of a particular region’s climate or topography, energy industries face an ever-increasing array of environmental protection regulations. Moreover, consumers are much more vocal about their expectations that companies address environmental sustainability. As a result, the Energy Sector is more vulnerable than ever to reputational risk due to poor environmental practices.

3 Ways to Apply This Information Now

  1. See how meeting ISO 37001 standards can help companies address anti-bribery & corruption requirements.
  2. Learn how Lexis Diligence® and LexisNexis® Entity Insight can help companies conduct enhanced due diligence and risk monitoring to address these challenges.
  3. Share this blog on LinkedIn to keep the dialogue going with your colleagues and contacts.

 Updated on 08-23-2018

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