Energy companies are used to weathering disruption of all kinds. And during this incredibly challenging time, we are now more than ever relying on them for the safe access and delivery of power, gas, water and other essential services.
As governments around the world enact drastic measures to slow down transmission of the COVID-19 outbreak, energy companies are facing multiple challenges: from the health and well-being of employees to disruption in the supply chain and from working capital shortages to complete closure of operations. They have also been squeezed by a big drop in demand for both oil and natural gas, which has led to lockdowns, a collapse in industrial activity and travel bans all over the world. Oil prices have been sent crashing to their lowest level since 2001, while gas demand has fallen by as much as 20% in some cases.
How energy companies respond to COVID-19 is critical not only for their business, but for the wider economy and communities. With actions already in place to deal with the immediate effects of the crisis, energy companies are now looking at how quickly restrictions will be lifted, what shape economies will be in, and how to plan for recovery – with many going further and looking at how they can reshape themselves to thrive in the future.
Five ways to reshape and plan for recovery
Based on perspectives and experiences from China, Europe, India, Latin America and the US, EY has identified five priorities that business leaders need to consider, both now and for the longer term:
1. Prioritize people safety and continuous engagement
Continuing to ensure the safety and wellbeing of employees is essential, so follow government advice regarding cleaning and social distancing. In particular, employees critical to maintaining critical assets and services need to be kept safe through sequestering, access to personal protective equipment and regular health screening, and must also follow social distancing guidelines by working in smaller and segregated teams or by being moved to offsite locations. Employee well-being and mental health are equally important considerations.
2. Reshape strategy for business continuity
During operational disruption, continue to assess the financial and operational risks and evaluate short-term liquidity. Work with governments to identify vital infrastructure – power stations, substations, distribution networks etc – and identify and postpone noncritical maintenance, whilst prioritizing emergencies. Consider how work back-logs can be reprioritized as restrictions are lifted or how digital channels can be used to improve customer access. Review the resilience of your tier one suppliers, prepare a list of alternatives and plan for possible delays of raw materials. And identify required skill sets from within the existing or recently retired workforce to cover critical operations.
3. Communicate with relevant stakeholders
Clear, transparent and timely communications are critical as you plan for recovery, whilst also securing ongoing support from customers, employees, unions, regulators, governments and investors. Designate single points of contact to facilitate seamless engagement with regulators, local and national authorities, as well as other key internal and external stakeholders. Reassure impacted business and residential customers that service disconnections will be suspended for non-payment and late fees will be waived and look into restoring services to previously disconnected households. Work with unions to align safety protocols and works schedules to ease employee anxieties.
4. Maximize the use of government support policies
Many governments have introduced fiscal stimulus and assistance programs. Monitor these opportunities for support, consider how they may best serve individual circumstances and hold proactive dialogue with debt and finance providers. With energy bill payments being deferred to ensure continuous business operations, you may also need to consider capital raising, debt financing or additional credit options.
5. Build resilience in preparation for the new normal
As new strategies are solidified, you should review and renew business continuity plans. Planning for future contingencies based on risk intelligence scenario planning and modeling is critical given the unknown duration and impact of the crisis. And establishing lessons learnt relating to an increased proportion of the workforce working from home might also create opportunities and increase future resilience.
Opportunities to make positive changes
The current situation highlights the importance of continually reviewing crisis preparedness, but also reveals areas where organisations can build resilience and reshape themselves for a post-crisis world. For energy companies, it can offer opportunities to make broader improvements in the way they work and the services they provide.
Energy companies can play a vital role in mitigating some of the disruption on industry and lessen the burden on citizens and customers. Those that act with compassion and speak the truth can build trust with communities. Those that develop creative solutions to difficult situations can lay the groundwork for a culture of innovation. And when the crisis is over, it will be clear which companies have the resilience and agility to reshape their business strategy to thrive in the future.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms