National Oil Companies (NOCs) must embrace risk management as a value creator within their organisations, to maximise their commercial potential and overcome the challenges associated with the next era of global hydrocarbon exploration and production.

According to a new report released today at Marsh’s National Oil Companies conference in Dubai, many NOCs have inconsistent and insufficient risk strategies arising from their approach to governance and controls. This presents an opportunity to increase value, and reduce volatility in performance, by applying best practice risk management methodologies and tools.

Oliver Wyman’s report, Creating value under pressure: Why National Oil Companies need risk management in a shifting environment, states that NOCs face an increasingly volatile risk landscape. By developing an incisive understanding of the risks they face, NOCs can avoid catastrophic errors and capitalise on new opportunities to contribute to their governments’ GDPs.

Mark Robson, Partner, Global Risk & Trading, and author of Oliver Wyman’s paper, commented: “While it is not unusual for successful companies to be challenged to manage risk when making critical decisions, for NOCs the stakes are even higher. Their actions can potentially change the futures of their countries. If NOCs wish to continue funding their governments’ visionary strategies in this new environment, they must develop sound risk governance practices.”

Oliver Wyman’s report recommends that NOCs undertake a four-step programme to create a more dynamic financial planning process, underpinned by risk management: define risk appetite; prioritise risks; aggregate risks; and link risks to strategic decision-making.

Jim Pierce, Chairman of Marsh’s Global Energy Practice, said: “NOCs have faced increasingly complex risks in recent years; and the pace and scale of events which introduce uncertainty into earnings is continuing to rise. Taking a more strategic approach to risk management is a vital step in the evolution of NOCs, if they are to maintain their competitiveness and contribute to their countries’ continued economic success.”

Marsh’s annual NOC conference takes place under the patronage of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai. Access more information about the conference and view special reports.

About Oliver Wyman

With offices in 50+ cities across 25 countries, Oliver Wyman is a leading global management consulting firm that combines deep industry knowledge with specialized expertise in strategy, operations, risk management, organizational transformation, and leadership development. The firm’s 3,000 professionals help clients optimize their businesses, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is part of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com.

About Oliver Wyman's Global Risk & Trading Practice

Oliver Wyman’s Global Risk & Trading Practice enables the world’s top industrial corporations and commodity trading organizations to gain competitive advantages by assisting them with managing risk across their businesses more effectively. By working with global leaders in a broad range of industries, our practice has developed unique capabilities that help industrial corporations and commodity trading organizations create value and maximize their performance by making risk-adjusted strategy, investment and capital allocation decisions.