Industrial Energy Efficiency as a Risk Management Strategy

Industry utilizes risk management as a tool in efforts to maximize the bottom line. Industry embraced risk management strategies in the 1960s and since then it has become a key component of a comprehensive business strategy. Peter Fusaro, author of Energy Risk Management explains, “The risk management process reduces financial exposure associated with price volatility by substituting a transaction made now for one that would be made at a later date.” Risk management aids companies in minimizing operational surprises or losses. In recent decades, energy has become a greater risk to profitability due to the volatility that exists in the oil and natural gas markets. Therefore, companies now consider energy as an element of their risk management portfolio. Traditional strategies to combat against unwanted exposure in this market include hedging and long term and futures contracts. However, the following explores the topic of considering energy efficiency as a risk management tool in reducing exposure to the volatility of the energy market