Scenario Applications: Stress Testing Companies in the Energy Value Chain

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The energy value chain is a vital component of the global economy, an industry whose outputs underpin the growth and productivity of all other sectors of the global economy. The energy value chain spans the gamut from fossil fuel production to high intensity energy consumers. The future business prospects of the companies that are part of this value chain range widely and depend on both internal and external forces. In this case study, we present the application of scenario stress tests to energy value chain companies as a systematic approach for highlighting potential futures and assessing risks which may impact an organisation, sectors, or economies and for managing emerging risks.

The report, written in collaboration with IRM, analyses the impacts to all members of the energy value chain across three diverse risk scenarios. These scenarios – a geopolitical conflict in the Middle East, a major hurricane in the Gulf of Mexico, and an aggressive class action suit against energy producers – distil shocks from major thematic challenges currently facing the sector, chiefly climate change and geopolitical tension. These scenarios are diverse enough to capture a huge amount of insight into the risks facing the sector.