Increase your energy company’s agility through digital commercial compliance
The energy sector was among the hardest hit at the outset of the pandemic, and those challenges linger a year into the crisis. Softening and shifting demand, market uncertainty and the momentum behind decarbonized energy are among the top challenges impacting supply chains today.
Managing these issues while identifying opportunities to reduce costs and increase operational efficiencies is no small task. But without transformative – and timely – action, energy companies may find themselves left behind.
We’ve identified four areas industry players can focus on to deliver better business outcomes in 2021.
Enable resilience
Energy companies that develop and perform under an operational framework can enable a faster and more manageable recovery from future unpredictable disruptions. Many organizations, for example, have implemented an agile third-party risk management program that’s designed to execute commercial compliance by frequently assessing current spend.
The focus has shifted from evaluating past commercial behaviours to verifying ongoing transactions through use of digital automation. This approach has helped many companies make key enabling decisions rooted in real-time attestation of commercial transactions in significantly shorter timeframes. An organization’s leaders can reveal pivotal improvement opportunities in hours and days rather than years. Those who are fast and agile will capitalize by saving precious time.
A good starting point when approaching resilience is to simulate and understand a new set of disruption scenarios. By having prompt access to commercial compliance behaviour, businesses can quickly reassess and adapt. For instance, identifying expensive resources with low usage rates and forecasting how these costs could be further impacted with a sudden sharp decrease in demand can help you take the necessary measures to mitigate such running costs. The goal is to allow operations to efficiently perform under a new normal, in different business environments, and futureproof the system for the next disruptive event.
Develop commercial operational efficiencies
It’s no secret that technology can help organizations improve their agility. But not every company has the right tools to gain a competitive advantage. Accelerating operational metrics with technology will secure the industry’s shift to the digital future. Data analytics provides the ability to seamlessly run compliance tests as quickly as the source data can be accessed, producing valuable information for near real-time decision-making.
Companies are already making key business decisions based on reliable data around real-time resource usage, actual equipment usage, incident tracking and reporting, among many others. EY’s Global Third-Party Risk Management Survey found that 34% of the respondents acknowledged they’re planning to incorporate advanced analytics to support key business functions - an important accelerator towards operational excellence.
Seek cost saving opportunities
Unearthing costs savings starts by first understanding where spend is going and where any leakage may be occurring. Third-party contract spend is often one of the highest expenditures for companies and a good place to start assessing whether there are savings opportunities. Contract governance should be a key focal point. The EY survey showed that 41% of North American respondents plan to spend more on governance and oversight of third-party risk management in the next year.
Resilient, data-driven organizations with a high focus on cost optimization will be more prepared to confront the ongoing volatility in the energy sector.
Deliver greater value through transformation
Taking a strategic approach to third-party spend is critical to optimizing costs. Adopting and executing an automated commercial compliance program can help support the performance review of key indicators in the commercial strategy, particularly those specifically related to contract management, supply risk management and supplier strategy/relationship management. With supply chain and operations capabilities, an automated compliance program provides critical business insights for better evidence-based and real-time decision-making.
Prioritizing your organization’s contract governance methodology (execution, change management and compliance assurance) will help pave the way. Enforcing contract compliance to suppliers can improve value retainment, cashflow optimization and cost avoidance. And undertaking automated commercial compliance into your operations can help you continuously receive good value for your money.
Undoubtedly, there’s a need for innovation and technology integration. Integrated technology platforms enable high-speed decision-making, which allows you to respond quickly to value leakage. Advanced analytics can help you optimize resources and assurance of commercial terms and achieve your cost avoidance and reduction goals.
EY’s survey results suggest that 50% of respondents, including 10% from the oil and gas sector, will spend more on technology-enhanced reporting for third-party risk management in the coming years. Accurate, real-time identification of overcharges by third-party suppliers can help you retain optimal operating capital.
Commercial compliance management is a key strategy in building a resilient operating model, and digital enablers are one of the greatest aids. With today’s uncertain market fluctuations, there’s little time to make decisions based on past events and old data. Decisions must be made in real-time using real-time insights. To thrive, energy sector players should invest time and effort developing processes that will encourage value recognition and retention by actively monitoring supplier performance.
