Why oil and gas risk management needs a connected approach

Your oil and gas company may face a critical challenge: having an abundance of risk data but not enough access to valuable insights that you could take action on right now. Different teams track potential areas for risk in various ways and systems.

For instance, the operations team tracks equipment failures and safety metrics using one platform, and compliance teams need the same information to meet regulatory demands. But they use a different platform altogether.

This fragmentation is a huge vulnerability because it leads to three things:

• You don’t get a full overview of potential risks.
• You don’t get real-time insights into risks.
• You only account for one kind of risk at a time.

When risk managers can’t connect the dots between disparate threats, executive decision-making suffers. As a result, you’re navigating a volatile landscape with incomplete, and often stale, information.

This fragmented approach to risk management is no longer working. Let’s explore how the oil and gas sector manages risks by adopting a more holistic approach to risk management.

What is risk management?

Risk management is a systematic approach to identifying, assessing, prioritizing, and responding to the full spectrum of threats that could impact your organization.

For oil and gas companies, this requires three critical capabilities:

1. Comprehensive risk identification: Instead of treating risks as isolated events, assess risk from multiple perspectives, such as operational failures, regulatory changes, digital vulnerabilities, and third-party dependencies.
2. Cross-functional risk assessment: Traditional risk management segmented risk assessment by department — HSE, operations, compliance, and IT. Progressive enterprises are breaking down these siloes so they can connect operational, safety, compliance, and IT risks effectively. Regulatory requirements still require some aspects to be done in silos, such as SOX (financial diligence) versus OSHA (occupational safety).
3. Coordinated risk response: You need to be able to access risk controls for every asset in one place. This connected approach makes sure you can mitigate potential hazards without impacting another activity or parameter.

Why does risk management matter in the oil and gas industry?

If you’re in the oil and gas industry, you’re probably already aware of the high and visible risk you deal with. Let’s look at the common reasons why it’s important to mitigate (or completely circumvent) that risk:

Your financial risk is high

Oil and gas projects typically require billions in investment and decades of operation time. A single critical failure could cost the company millions each day. For instance, the Amplify Energy offshore spill in 2021 resulted in a $50 million settlement to commercial fishermen, local businesses, and property owners on the coastline. This is barring the additional $5 million fine they had to pay for violating The Clean Water Act.

Your operational structure creates cascading risk

Your operational infrastructure is usually made up of intricate networks of:

• Physical assets
• Digital systems and software
• Human-led processes

This spans multiple geographies, regulatory areas, and business units. In short: none of your risks exist in isolation, so you should measure them collectively.

You have to adapt to new regulatory requirements

Oil and gas companies operate in one of the most heavily regulated industries globally. It also means you have to comply with dozens of regulatory requirements at any given point in time — across domains like environmental, safety, and data protection. If you don’t take a connected risk management approach, you can end up scrambling at the last minute to check off the boxes.

You need to maintain your reputation

These days, your oil and gas companies may face heavy scrutiny from different stakeholders:

• Investors
• Insurers
• Customers
• Prospects
• Regulatory bodies

Even rating agencies tend to evaluate enterprise risk management (ERM) maturity, and investors use risk governance in their environmental, social, and governance (ESG) assessments. Your end-to-end operation is always under constant review.

New digital initiatives introduce vulnerabilities

More vulnerabilities are being introduced as more companies combine operational technology (OT) with information technology (IT) systems. And the worst part? They can’t be managed through the traditional way of siloing cybersecurity to just one team.

The Colonial Pipeline Attack that happened in 2021 is just one example. In this case, a ransomware organization entered the infrastructure through an outdated VPN account, so they were eventually paid $4.4 million in ransom to restore its systems.

What are the key risk categories in the oil and gas industry?

You might find it hard to manage risks within your business if you don’t fully understand the key risk domains that impact your business. It’s the first step to building a more effective enterprise-wide risk management strategy.

Here are the most important risk categories:

Operational risk

Operational risks are one of the most apparent risks in the business. The potential for loss comes from inadequate or failed internal processes, people, and systems or external events affecting operations. That’s why asset integrity and equipment reliability are key.

For example, you’re tracking thousands of potential points of failure across wells, pipelines, processing facilities, and transportation assets. Breakdowns in these points can result in serious safety incidents, environmental damage, and regulatory violations.

You also have to consider the human factor — especially workforce safety and competency — impacting operational continuity.

Environmental and ESG risk

Environmental and ESG risks usually deal with issues associated with air emissions, water discharge, waste management, and land use. The environmental risk is massive, considering that many oil spills have impacted a region’s ecosystem, the brand’s reputation, and billions in damages.

The ITOPF reported 10 major oil spill incidents in 2024 alone, which created huge environmental risks. All these issues trigger immediate shutdowns, cleanup costs, and long-term remediation plans. So, if you see ESG as a standalone activity, it won’t capture the risks and their domino effect on your operations.

Cybersecurity and IT risk

As many oil and gas companies are implementing digital transformation initiatives, many risks come with it too. This is especially true as these networks create new attack vectors (vulnerability points) for cyber threats. In typical IT environments, only your digital systems are affected, but in energy companies, these systems are connected to your OT systems. So, your physical processes are connected — creating huge risks for your organization.

Third-party and supply chain risk

When installing third-party systems, you must be careful about how secure they are and how often they pass compliance requirements. In addition to your extended digital network, you also have to think about your network of suppliers, contractors, and partners. Your business’s continuity depends on thousands of external parties, and any disruption in the supply chain directly impacts:

• Production targets
• Maintenance schedules
• Project timelines

Regulatory and compliance risk

At a minimum, you’ll have to comply with at least a dozen compliance requirements that span categories like:

• Health and safety
• Environmental protection
• Trade controls
• Anti-corruption
• Data privacy
• Exploration and production
• Taxation/finance laws

It's important to follow these regulations closely to avoid any penalties or operational disruptions, especially if your business is spread across the globe because this issue will be magnified tenfold.

Why fragmented risk visibility is a challenge for energy companies

It’s clear your risk domains are interconnected with each other. But what’s even more evident is the need for a collective risk management process. It’s not about the complexity of managing the administrative side of things but rather the business impact of mismanagement.

They negatively impact strategic decision-making, capital allocation, and operational resilience in the following ways:

• Lack of asset-level risk visibility: Traditional approaches struggle to provide asset-specific risk visibility that connects all relevant risk domains to physical infrastructure and operational processes. Without this granular mapping, organizations cannot understand how different risk types intersect at specific facilities, well sites, or pipeline segments — creating blind spots precisely where operational decisions are made.
• Invisible accumulation of risks: Without connected risk visibility, your organization can’t identify how seemingly moderate risks across multiple domains might combine to create severe aggregate exposure.
• Inefficient risk control activities: Fragmented visibility leads to duplicative or conflicting control activities as different functions implement overlapping risk approaches without coordinating.
• Reactive crisis response: When risk events occur, fragmented visibility slows your response as your organization struggles to understand cascading impacts across interconnected systems and processes.
• Misallocated risk resources: If your organization has fragmented visibility into your risk domains, you might not be able to effectively prioritize risk investments across domains. As a result, you might overinvest in visible risks while significant exposures remain unaddressed.

How AuditBoard enables technology-driven risk management

Energy companies ahead of the curve understand this challenge and have taken measures to solve it. A recent Deloitte report found that 50% of energy companies track their regulatory compliance controls using integrated tools or systems. As a result, they’re able to assess risks realistically and create a plan before the risk turns into an actual incident.

Here’s how AuditBoard helps you mitigate risks:

1. Real-time dashboards and alerts

You can use the configurable dashboard views to give executives and operational teams visibility across all risk domains without any data lag. You can either use the 25 pre-built dashboards or build your own — based on your risk management goals.

Traditional reporting requires manual data aggregation and analysis for every system. But with AuditBoard, that’s not the case. You can consolidate information across multiple systems and get insights into your risk level.

You can get notified as certain risks cross a preset threshold so you can take action in time. And if you need to send executive-level reports, you can drill down further based on the metrics that matter to them in minutes.

2. Automated risk scoring and reporting

AuditBoard accounts for reporting frameworks like GDPR, API RP 75 (safety/environment), IEC 62443 (OT security), and ISO 14224 (asset integrity). The risk management platform also supports quantitative risk scoring based on financial impact (profitability and financial losses), probability analyses, and qualitative assessments using customizable risk matrices. This flexibility ensures that all risk types can be evaluated as needed.

You can also automate your workflows and use AuditBoard AI to visualize all relationships and get intelligent recommendations to achieve your risk management objectives. Eric Wilson, Director of Internal Audit and Chief Audit Executive at Gulfport Energy notes:

3. Unified risk register for operational, environmental, and cyber domains

A core part of AuditBoard is our unified risk register consolidating threats, vulnerabilities, and control information from across the enterprise. This inventory creates a single source of truth for all risk information — removing silos and centralizing information.

You can also classify risks across dimensions like:

• Risk domain
• Affected assets
• Potential impacts
• Relevant regulations
• Responsible teams/business units

You can use this capability to highlight relationships between seemingly unrelated factors. And you can deploy risk mitigation measures with confidence.

It’s time to move from reactive to resilient risk management

Risk management is a complex process — and as time passes and your business expands, it could get harder to manage. If you’re still measuring or managing risks using a siloed approach, things may slip through the cracks over time, potentially causing financial and reputational damage.

Instead, move from a reactive to a connected risk management strategy that lets you monitor risks in real time and respond to disruptions before they become a problem.

Simplify risk management across your enterprise with AuditBoard’s platform purpose-built for high-risk, asset-heavy industries. Request a demo today!

About the authors

Sarah Goff, CPA, MBA, is a Manager of Product Solutions at AuditBoard. Prior to joining AuditBoard Sarah spent 5 years at Deloitte in their internal audit and risk consulting practice, and she started her career at ExxonMobil in their Finance function.Connect with Sarah on LinkedIn.