The world's national oil companies (NOCs) are taking center stage in terms of their dominance of world oil reserves and production. At the same time, they are becoming more sophisticated in the way they identify and manage risks.

They must now contend with political unrest or terrorist attacks, natural disasters, opposition from environmental groups, and even the risk that governments will mandate more non-petroleum fuel use, thereby changing the dynamics of global energy markets.

"The world's desire for environmentally friendly energy sources appears to be rising faster than global temperatures. This is a growing risk to all energy producers-one that goes well beyond a fire at a plant, or a tanker that runs aground," said Brian Storms, chairman and chief executive of Marsh Inc., at the opening of the firm's first NOC conference in Dubai recently.

"What's important for you as large producers of hydrocarbons is to view this risk honestly and address it strategically.

"Finding opportunity in risk is less likely to happen if risk is managed purely as a tactical function, rather than incorporated into your overall strategic planning," Storms told delegates from some 30 countries such as Nigeria, Azerbaijan and Brazil.

Marsh has had a presence in Dubai for seven years.

NOCs can use risk in a more strategic way.

"The normal tendency would be a bias for action, where you might jump to a tactical, defensive position," Storms said. "But there is a 'new world' view of risk-specifically, how to find opportunity in the kind of global changes we're seeing...where risks and potential liabilities can be turned into a competitive advantage over those companies that don't move to address them."

Storms said insurable risks are complex, yet can be handled, while uninsurable risks such as climate change will require more creative solutions.

He cited the example of a client with significant assets in the far north that found the potential impact of climate change could be a huge risk. Thawing of the permafrost could endanger its facilities and opportunities.

As the NOCs grow, risks will have to be managed as part of their overall organizational strategy, Jim Pierce, managing director and practice leader, global marine and energy, told delegates.

"Risk management is now an essential element of basic business planning along with other disciplines, such as finance and human resources. Today, it's being addressed not only by risk managers, but increasingly by CEOs and CFOs."

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