Top Risks Facing Natural Resources Organizations

November 28, 2023 17 mins

Top Risks Facing Natural Resources Organizations

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Natural Resources industry respondents to our Global Risk Management Survey (GRMS) ranked business interruption and regulatory or legislative changes as their two most critical risks.

As the global population continues to grow, there is a corresponding rise in the demand for natural resources to meet the needs of communities and help economies to grow. Balancing the ever-increasing demand for raw materials with the limitations of Earth’s finite resources is a complex challenge.

Natural resources companies — such as those in the oil, gas and petrochemicals, power generation and distribution, renewables and mining industries — are facing many challenges. The threat of materials scarcity, supply chain issues and varying exchange rates can cause commodity prices to fluctuate, which can have serious knock-on effects worldwide. And geopolitical and societal pressure to tackle climate change is mounting, weighing heavily on the industry and affecting all areas of decision making. Related risks, such as environmental risk, weather and natural disasters, property damage and environmental social and governance (ESG) or corporate social responsibility (CSR), are also top of mind.

As such, organizations are seeking technical advances to support the transition to carbon neutrality, while competing fiercely to attract and retain the talent required to make these breakthroughs possible. Today, there are 12.7 million global energy jobs; by 2030, advances in the energy transition will generate an additional 25.5 million jobs. Meanwhile, traditional enterprise risks, including cyber, remain as important as ever.

Current Risks

The natural resources industry is facing a complex, volatile and constantly shifting range of challenges. Our 2023 survey revealed the most pivotal risks concerning the industry today: with business interruption, regulatory or legislative changes and commodity price risk or scarcity of materials ranked as the top three. These highly interconnected challenges are the same top three noted in our 2021 survey, highlighting the persistence and seriousness of these risks for the industry.

Top 10 Current Risks
  1. Business Interruption
  2. Regulatory or Legislative Changes
  3. Commodity Price Risk or Scarcity of Materials
  4. Property Damage
  5. Cyber Attack or Data Breach
  6. Environmental Risk
  7. Political Risk
  8. Weather and Natural Disasters
  9. Climate Change
  10. Environmental Social Governance (ESG) or Corporate Social Responsibility (CSR)

Business interruption (ranked number one) remains an ever-present concern, made worse by inflation across the globe, which has pushed up asset values. It is also driven by interconnected factors such as weather and natural disasters, supply chain failure and climate change. Indeed, the industry is one of only three that listed climate change in its top 10 risks. And perhaps most closely tied to business interruption, cyber attack or data breach remains a top 10 risk, moving up one spot to number five from its 2021 ranking. Cyber attacks on critical energy infrastructure — a perennial threat — were on the rise before the start of the conflict in Ukraine in 2022, when they totaled 1,101, a third more than the 736 attacks in 2021. Further, the average cost of a data breach in the energy sector reached an all-time high of $4.72 million in 2022. Cyber risk is also evolving as natural resources companies digitalize their operations and adopt new and emerging technologies to manage renewable-energy supply chains, materials processing and infrastructure. Compounding cyber risk for the industry is a shortage of cyber security and other specialized tech talent.

The business interruption challenge is underscored by the sector’s pronounced exposure to regulatory or legislative changes (ranked number two). This can be attributed to the industry’s current environmental impact, the global impetus toward sustainability and evolving stakeholder expectations. These regulations have an impact on funding or capital, compliance, risk mitigation, brand or reputation and financial standing. Therefore, organizations in this sector must constantly monitor and adapt to an evolving array of new policies and regulations.

Commodity price risk or scarcity of materials (ranked number three) affects various subsectors within the natural resources industry, especially because commodity prices are set by global markets and thus are profoundly affected by geopolitical volatility and regulatory or legislative changes. Scarcity of materials, which could also lead to business interruption, is a growing concern amid a surge in renewable energy propelling an unparalleled expansion in the critical minerals market. The sector stands at the forefront of this energy transition, evident in the dominance of critical minerals investment in 2022: the market for energy transition minerals doubled from 2017 to 2022, when it totaled $320 billion.

Underrated Risks

Weather and natural disasters and climate change significantly threaten natural resources companies. While survey respondents put them in the top 10 risks, at number eight and number nine, respectively, the risks may warrant being higher on the list. Hurricanes, wildfires and other events such as secondary perils can disrupt operations, because natural resources assets are in areas highly exposed to natural catastrophes. Such events can also damage infrastructure and lead to resource shortages, highlighting the need for companies to have strategies in place to mitigate and recover from property damage.

Meanwhile, the transition to more sustainable sources of energy is transforming the entire industry. Because of its substantial contribution to emissions and energy consumption, the natural resources industry plays a crucial role in achieving net-zero objectives. Transitioning to cleaner technologies (especially for power companies with mixed generating portfolios), embracing renewable energy and adopting sustainable practices that align with environmental goals are therefore imperative.

Other risks that we would expect to be higher in the ranking as the sector continues to leverage technology to shift toward cleaner, more efficient and sustainable operations include workforce shortage, failure to attract or retain top talent, cyber attack or data breach, intellectual property risks and third-party liability. There is a critical shortage of technology and engineering talent required to deliver the increased number of development projects, especially in the offshore wind subindustry and the adoption of emerging technologies (e.g., green hydrogen and battery storage). Mining, which provides the supply of critical minerals to support the building of energy transition infrastructure, has many project sites that are in remote areas with difficult work environments. Some innovative programs and approaches to attract and retain the right talent have been deployed, but the challenge is ongoing.

Losses and preparedness

A third of respondents in the Natural Resources industry suffered a loss due to the risks in the top ten, while nearly two thirds have plans in place to respond to them.

  • 33%

    average percentage of respondents who indicated risks in the top ten contributed to a loss for their organization in the 12 months prior to the survey.

    Source: Aon's 2023 Global Risk Management Survey

  • 62%

    average percentage of respondents who stated their organizations have set up a plan to respond to risks in the top ten.

    Source: Aon's 2023 Global Risk Management Survey

Future Risks

Survey respondents in the natural resources industry saw climate change as an increasing concern, ranking number three among future risks, behind regulatory or legislative changes and business interruption. As noted above, climate-related risks pose a massive challenge for natural resources companies, and the necessity to act will only become more urgent for these companies to remain relevant as well as provide the returns demanded by their shareholders.

Top 10 Future Risks
  1. Regulatory or Legislative Changes
  2. Business Interruption
  3. Climate Change
  4. Political Risk
  5. Commodity Price Risk or Scarcity of Materials
  6. Cyber Attack or Data Breach
  7. Weather and Natural Disasters
  8. Property Damage
  9. Geopolitical Volatility
  10. Environmental Risk

New technology is driving the shift toward cleaner, more efficient and sustainable operations. It will also drive continued evolution in cyber security, reflected in cyber attack or data breach’s number six ranking in the future top 10. In the natural resources sector, organizations are exploring new technologies and using recent advances in AI to improve the efficiency and consistency of existing operations. These emerging technologies are reshaping the natural resources sector by driving innovation that will help support the energy transition. Some examples include smart grids that optimize renewable distribution and grid connectivity, innovative solutions for energy storage (e.g., hydrogen and pumped hydro) and carbon capture and storage to reduce emissions. Hydrogen fuel cells offer clean power generation and transportation, while advanced materials elevate the efficiency of solar panels and wind turbines.

The continued increase in scale and use of new technology will drive cyber, business interruption and property damage risks. On top of that, companies will have to contend with risks posed by climate change, weather and natural disasters, environmental risk and geopolitical volatility. Certainly, many of the risks today are expected to still be risks in the future, though of differing importance or urgency. Political risk takes fourth position in the future compared with seventh today, reflecting the expectation that political pressure will increase in step with the need to adapt to climate change. It can also signal concern over regulatory changes that may result from changes in government. Meanwhile, commodity price risk or scarcity of materials moves down two positions to number five, perhaps indicating an expectation that economies of scale will lower prices for the technologies and materials needed for the energy transition.

However, the business interruption and commodity price risks associated with the energy transition to net zero may be underappreciated. As utilities increase the amount of renewable energy in their fuel supply mixes, it could lead to oversupply that would increase power price volatility and grid reliability costs, as recently reported by Moody’s Investors Service. Because wind and solar power generation depend on weather conditions, utilities will need to build in a cushion of supply to enhance reliability and compensate for renewable-resource volatility. Requiring that cushion to be “clean energy” will be challenging and likely costly. Otherwise, the wholesale electricity market could be susceptible to unreliable supply and highly volatile pricing.

It's also worth noting that geopolitical volatility, which is not on the list of current risks, comes in at number nine on the future top 10 risk list. As natural resources become increasingly finite and tensions rise, as we have seen in the Ukraine and the Middle East conflicts, geopolitical events can threaten the availability of resources.

Other risks the industry should plan for include access to stable and substantial capital to navigate the challenges and risks associated with projects. Securing funding at various stages of the project life cycle is critical to ensuring project continuity and success.


Despite being a key concern for the industry, only 13 percent of natural resources respondents stated they had quantified their exposure to regulatory or legislative changes.

Source: Aon's 2023 Global Risk Management Survey

How Can Natural Resources Organizations Mitigate These Risks Effectively?

Just more than a third, 39 percent, of natural resources respondents reported their organizations had assessed top risks, while 32 percent indicated they have developed risk management plans. This is a drop from 2021, when 45 percent of industry respondents reported risk assessment and 39 percent reported risk management plans in place. It signals the challenges inherent in addressing the volatility of the economy and the uncertainty surrounding the energy transition and geopolitical risks. Nevertheless, overall readiness in the industry is reportedly slightly greater in 2023 (62 percent) than in 2021 (60 percent), and reported losses have dropped very slightly over the same period, from 34 percent to 33 percent.

Natural resources companies must work to maintain effective, whole-enterprise risk management practices and workforce frameworks that consider expanding ESG expectations and reflect the industry’s rapidly rising insurance needs. These include conducting insurable risk profiling and gap analysis and regularly evaluating both existing and emerging risks while determining a strategy for risk retention or transfer.

By thinking ahead, managing the rising cost of reconstruction and building materials and optimizing coverage, natural resources companies may be able to manage the challenges posed by climate-related risks, remain adaptable in the face of evolving threats and contribute positively to global sustainability programs. In addition, developing workforce agility and resilience is crucial for a successful energy transition and must be integrated into the fabric of an organization. The industry must focus on attracting a broad range of high-potential candidates to address the shortage of key cyber security, tech and engineering talent. Meanwhile, the risk of material scarcity demonstrates the need for strategic diversification of supply sources, sustainable extraction practices, investment in infrastructure and effective risk management to ensure the stable production of essential products and technologies.

On a project-specific level, close attention should be paid to monitoring valuations, especially due to the significant rise in reconstruction costs and building material expenses. It’s essential to understand the operational dynamics of project sites, which involves conducting annual risk engineering surveys to assess risks, along with implementing robust management practices to prevent, control and mitigate potential risk exposures.

All that said, companies cannot mitigate these risks while balancing the needs of a growing population and the limitations of Earth’s finite resources on their own. This complex challenge requires collaboration among governments, industries, communities and individuals to ensure a sustainable future.

General Disclaimer
This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent, or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss caused by reliance on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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