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7 Risk Management Strategies for Utility Companies

utility provider

Utility providers face significant risks, both in high-level management and on the front line of operations. Managers and executives must balance increasing government regulations, complex cost structures, and consumer expectations and concerns. Risk managers and other employees face high-risk tasks, fleet incidents, and more in their daily work. How should utility companies combat these challenges?

7 Risk Management Strategies for Utility Companies

1. Use trend analysis

One of the most meaningful ways to manage risk is to use trend analysis.Trends of past incidents and claims are particularly valuable as incidents are the number one predictor of future claims. Trends identify problem areas and illuminate their root cause, allowing risk managers to implement corrective actions, mitigate future occurrences, and address the source.

For example, if a utility risk manager realizes there is an increased frequency of fleet incidents in one area of a city, this is an indication of an issue that needs attention. By recognizing the specific problem, the risk manager can work with the employees in this area to determine whether training, the type of vehicle, an ongoing project, or some other issue is causing the high frequency. They can then strategize a solution to reduce frequency and/or severity.

Trend analysis can be difficult without an effective claims and incident system in place. Fortunately, there are many software programs available that make it incredibly easy. ClearRisk’s Claim, Incident, and Risk Management software allows field employees to enter a claim into the system immediately, including any photos and related documentation. This can be done from a mobile app or from any Internet-enabled device. Risk managers are immediately notified, can quickly access the data, and highlight areas with a high  frequency.

2. Reporting

Reporting is important for individuals at all levels of an organization. Utility risk managers may often be asked to build reports on claim and incident costs, frequency, mitigation strategies, and the impact and performance of the risk management program.

When risk managers spend hours manually building and modifying reports, they’re using valuable time that could be spent on high ROI tasks and activities. This is just one of the reasons an effective reporting system that allows automated generation and sharing is crucial. Without one, risk managers are typically overloaded with manual tasks, spreadsheets, and paper.

With better reports, risk managers will be able to make more effective decisions about which risks to tackle and what strategies to consider. This will lead to benefits in time-savings, cost-savings, and reduced claim and incident frequency.

3. Build a safety culture

One of the most crucial aspects of an organization is its safety culture. This is particularly true in utilities, where the type of work creates a high incident and injury rate. A safety culture involves the general mindset of employees about risks and how to prevent them through reporting unsafe actions, taking proper precautions, and so on.

As an intangible aspect of an organization, culture is notoriously hard to change. Yet the Occupational Safety and Health Administration says that creating a safety culture has the most significant impact on reducing the number of incidents and injuries in the workplace.

To build a safety culture, consider the following steps:

  • Show support from the top management levels
  • Emphasize that everyone has a part to play
  • Formalize and communicate the culture
  • Provide training
  • Build an effective reporting process
  • Celebrate success
  • Build and maintain relationships

For more information, take a look at our blog “Reduce Incidents Now by Creating a Safety Culture”.

4. Create crisis and reputation plans

Any public service provider is constantly subjected to intense scrutiny from its stakeholders, customers, and society in general. This is even more true in times of crisis — when things go wrong, reputation is very much at stake.

Preparing crisis and reputation management plans in advance is essential. In a crisis, every passing moment can cause severe damage to an organization and its reputation. Risk managers should continuously monitor any potential crisis factors and be able to recognize when a situation is about to become more serious. To ensure the organization is ready for any event, formalize and practice the crisis response regularly. This will reduce reputational harm, penalties, and recovery time.

In addition, consider the following factors:

  • Have an assigned crisis team
  • Acknowledge the problem but don’t apologize until it’s known who is at fault
  • Speak carefully, especially on social media
  • Focus on quick and effective recovery
  • Use the crisis as a learning opportunity

More information on reputation management can be found in our blogs Reputation Management in a Crisis and 6 Ways to Manage Reputational Risk.  

5. Manage supply chain risks

Utility companies are subject to high price volatility and procurement risks. As a provider of essential services, it is absolutely crucial to minimize supply chain risks such as these. Otherwise, the company faces the risk of reputational damage or even failure.

Supply chains can be managed in four simple steps:

  • Analyze. It’s important to understand each link in the supply chain and how goods and resources flow from one point to the next. Consider and prioritize the risks associated with each area or supplier.

  • Plan. After deciding what areas require attention, it’s time to take action. For all crucial areas of the supply chain, think of likely scenarios that could impact the ability to deliver. Determine a plan of attack for each scenario so all team members will be prepared.

  • Strengthen. One of the most effective ways to reduce supply chain risks is to lessen dependence on any one link. Diversifying the links of the supply chain ensures a disruption in one supplier won’t have an extreme impact. Risk managers should also consider alternate modes of transport, technology, and best practice communication methods.

  • Monitor. To ensure continued success, set up a monitoring system that will enable visibility of the entire chain and its process. If any kind of disruption occurs, it’s important to discover it quickly.

We covered these topics in more detail in our blog post, 4 Ways to Manage Supply Chain Risks.

6. Stay on top of compliance issues

Government regulations are constantly changing in the utility industry, with environmental impact and customer relations being only some of the key concerns. It’s important that providers are aware of any upcoming changes that may require a change in regular operations.

Best practices for risk managers in this area would include regularly conducting research on the external environment and making changes proactively rather than reactively. This is especially true in areas with multiple competing utility providers: by striving to do better than the minimum level of compliance, utilities create a competitive advantage.

7. Innovate

As mentioned above, aiming to achieve more than compliance creates a competitive advantage for utility companies, reducing market risk. Innovation is usually crucial for this kind of success: for example, utility companies could consider investigating renewable energy.

Beyond innovation in their high-level operations, risk managers can use innovative technology and techniques to reduce risk across the organization and create a safer work environment.

With the many high-risk activities in the utility industry, it is essential that risk managers use multiple strategies to combat and reduce their risks. The above are just some of the best practices that can reduce overall frequency, severity, and cost.

ClearRisk’s Claims, Incident, and Risk Management System brings all the benefits described above and more. We understand the complexity of utility organizations and can adapt our product and services to your unique needs. Would you like more information on what we can do for you and your organization?

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Topics: claims software risk automation claims automation risk management for utilities utility risk management