Simon Thompson, senior advisor and former CEO of Cairn Energy, has examined the state of the energy industry's preparedness against reputation risks in a new report from the risk and crisis consulting firm Alder. The report shows that only 6% of energy companies have a crisis communication plan, which is significantly lower than other sectors.
High Confidence but Low Preparedness
Despite this reality, 62% of respondents in the energy sector stated that they are "very confident" that their organization can effectively respond to a major reputation incident, such as a data breach or misinformation campaigns. Additionally, 28% of other respondents said they are "somewhat confident."
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Research conducted on 250 business leaders shows that energy companies pay more attention to reputation risk than other sectors. 72% of respondents in the energy sector said they consider reputation risk to be more significant than other strategic risks, while this figure is 58% in other sectors.
The Gap Between Awareness and Preparedness
However, preparedness to address these risks lags behind awareness of them. Less than a quarter (24%) of energy companies have crisis scaling processes at the board level. On average, energy sector respondents identified only 1.8 types of defensive mechanisms for reputation, while this figure is 2.1 for other sectors. Furthermore, only 44% of companies have an artificial intelligence governance framework, despite concerns about reputation risks arising from AI.
Thompson noted that the energy industry rigorously models, tests, and practices its response to operational failures and safety issues, but reputation risk requires more attention from the board. He said, "Identifying a risk is different from being prepared for it."
Thompson also pointed out the existence of a phenomenon called the "trust gap," where leaders distant from risk management processes are more confident about their organization's preparedness than others.
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