Risk management programs must be tailored to a company’s specific risks, and often those risks correlate to whatever industry that company is in.

Oil & gas companies are particularly challenged, because they are a critical infrastructure sector with little room for error and they operate in complex environments, which means plenty of risks that demand attention. Let’s take a look at what those risks are, and how oil & gas companies can begin to tame them.

Biggest Risks Facing Oil & Gas Companies

Cyber Risks

Oil and gas companies are rapidly digitizing systems and implementing new technologies to increase productivity and profitability. This exposes the companies to cyber attacks trying to disrupt operations, steal intellectual property, swipe personal data of employees, commit extortion, and the like.

The energy industry must develop cybersecurity risk management strategies to protect from cyber threats.

Financial Risks

Oil and gas are commodity products, with pricing much more volatile than other markets. Natural resource pricing is heavily influenced by the underlying costs of collecting and refining them, in addition to the actual price of the raw materials.

Oil & gas companies therefore need to hedge their risks by investing in options, futures, puts, and other financial instruments to reduce the threat that price volatility could leave the business operating at a loss for long periods.

Supply and Demand Risks

Supply and demand shocks are a risk for oil and gas companies, especially since operations in the energy industry require a lot of capital and time to bring to full capacity. The use of technology and artificial intelligence (AI) tools enable companies to increase their business effectiveness.

It’s also challenging to manage operations with a cycle of rising and falling prices. Other economic factors also play a role, as financial crises can drain capital regardless of the usual price risks.

Environmental Risks

Energy industry operations directly affect the environment, including greenhouse gas emissions, climate change, oil spills, and solid and hazardous waste.

For this reason, oil companies are under heavy pressure to protect the natural environment as much as possible. Energy companies need to seek ways to minimize harm to the environment, communities, and people generated by the processes that sustain our way of life.

Safety Risks

Oil & gas extraction can be dangerous. It requires long hours, difficult working conditions, and complex machinery that can break down and cause serious injury to nearby people. So the companies must implement robust safety management and monitoring processes.

See also

Best Practice Guide: Using Automation to Transform Risk Management

What Risks Do Operational Technologies Pose?

The oil and gas industry has embraced advanced operational technologies (OT) such as robotics, digitization, and the internet of things (IoT). The technologies can exist as either hardware or software – but they are expensive and deeply integrated into a company’s operations; and carry their own class of risks to address.

Industrial controllers, such as programmable logic controllers (PLC), distributed control systems (DCS), and supervisory control and data acquisition (SCADA) systems, come with a long lifecycle: 15 to 20 years, compared to three or five years typical of other enterprise IT.

This means oil & gas companies must be sure that new IT risks don’t overwhelm long-lived industrial control systems. They need to assess how emerging risks might affect their controllers, and assure that any new threats can be patched even with legacy software running the controller systems.

Risks from the Internet of Things

More companies within the oil and gas industry rely on the internet of things (IoT) to gather data to monitor OT. These sensors, cameras, and embedded analytics systems connect the OT environment with the IT environment.

For example, a natural gas company may need to monitor the pressure in the OT environment. First, the IoT monitors the SCADA system’s ability to control the pressure. Then the IoT informs business leadership or external parties who need to provide oversight.

Enterprise IT networks that interact with OT networks, however, can lead to cyber risk. Most companies struggle with securing their data environments, and those in the oil and gas industry are no different. Anywhere the IT networks interact with the OT network can be a significant security issue.

Risks From Employees

While all industries suffer from employee cyber awareness issues, oil and gas companies must be particularly attuned to the threat because they are critical infrastructure; even one careless act by one employee could cause widespread disruption in the physical world.

For instance, an employee may idly click to a website in a phishing email and enable access to his user ID and password. With this information, a cybercriminal can gain access to all networks, including segregated or secured ones that manage industrial control systems.

Risks From Lack of Cybersecurity Staff

All industries face a shortage of information security professionals. Oil & gas, however, have particular needs due to the overlap between OT and IT systems. Cybersecurity professionals with critical infrastructure experience are a niche within a niche in an already limited hiring pool. As a result, when oil and gas firms do find someone to handle their specific risks, they have to figure out how to make the most of that employee’s time.

Incorporating Cyber-Risk Oversight

Quite naturally, oil & gas businesses tend to people their boards of directors with executives who have experience in the energy sector. That’s fine, but to assure sufficient attention to cybersecurity, oil & gas companies should also look for board directors who understand cybersecurity and how to apply it to the unique, complex systems this sector enails.

Mitigating Cybersecurity Risks in the Oil and Gas Industry

Mitigating cybersecurity risk in the oil and gas industry begins the same way other risk management programs start: with conversations.

These cross-departmental discussions must identify the physical and data assets that are in danger. For example, software, network architecture, and devices essential for company operations are usually the focus of enterprise risk mitigation.

Additionally, the oil and gas industry adds a second layer of network infrastructure to assist OT monitoring. As a result, detecting all points of network danger becomes increasingly tricky. In many cases, the oil and gas companies need to segregate their OT networks and keep the IT infrastructure data from migrating to the OT infrastructure.

Finally, as critical infrastructure, companies also must align controls with increasingly burdensome regulatory requirements and industry standards.

ZenGRC Helps You Manage Risk in the Oil and Gas Industry

The ZenGRC is an intuitive, simple-to-use platform that keeps track of your processes and also identifies high-risk areas before they become severe issues.

Our risk management software generates heat maps to illustrate your organization’s high, low, and medium risk regions in a user-friendly, color-coded dashboard. These tools allow you to take action quickly and to share the results with your C-suite and board of directors.

Companies in the energy industry struggle to maintain appropriate risk management programs. They need an effective workflow tool to coordinate communication and task management among internal and external stakeholders. A cybersecurity specialist in the oil and gas industry may assign roles and tasks to the responsible employees using our workflow tagging, allowing for a more thorough examination of the activities involved in cyber risk management.

Worry-free risk management is the RiskOptics way! For more information on how ZenGRC can streamline your risk management process, contact us for a demo.

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