Energy is no longer just a line item on the P&L. For many UK businesses, it is now one of the top three operational costs, and volatile prices have made it a genuine strategic risk.
From supply chain disruption to reputational concerns around sustainability, energy risk touches every corner of the business.
Boards that treat energy as a governance issue, not just a procurement decision, are better placed to protect margins, reassure investors, and keep long-term strategy on track.
The 3 dimensions of energy risk
Energy risk management for boards can be broken down into three interlinked areas:
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Price risk – Exposure to market volatility, contract timing, and wholesale costs.
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Supply risk – Reliability of energy infrastructure, grid stability, and geopolitical factors.
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Reputation and compliance risk – ESG reporting, carbon reduction targets, and stakeholder expectations.
Each of these dimensions requires different tools and responses, but they are best handled as part of one joined-up strategy.
Price risk: Beyond chasing the lowest tariff
Boards often assume energy procurement is about ‘getting the best price.’
In reality, the risk lies in when and how contracts are agreed. A well-timed strategy can save thousands; a poorly timed one can lock businesses into uncompetitive rates for years. Rather than reacting to market movements, businesses should treat energy buying as a structured risk management process.
Even as wholesale markerts stabilise non commodity costs - such as network and standing charges - continue to rise. Ofgem and National Energy System Operator (NESO) recently forcast that TNUoS standing charges will increase sharply from April 2026 under the new RIIO - 3 framework, adding another layer of cost pressure for business energy bills.
Boards should be asking:
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Do we have a defined procurement strategy - or are we exposed to spot market price swings?
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Who has authority to sign energy contracts - and is that process governed by clear oversight?
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Do we stress-test energy costs in our financial models, to understand how volatility could affect cash flow and margins?
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Are we reviewing contract performance regularly – rather than waiting until renewal to assess options
Supply risk: Building resilience in an uncertain world
The UK may have strong energy infrastructure, but risks remain — from extreme weather to geopolitical tension. In 2022, gas supply shocks rippled across Europe despite the UK’s limited reliance on Russian imports.
Key board-level considerations:
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Onsite generation – Solar, CHP, or wind installations can reduce reliance on the grid.
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Diversification – Multiple suppliers, flexible contracts, and backup arrangements.
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Contingency planning – Ensuring business continuity plans cover energy disruption scenarios.
Reputation & compliance risk: ESG is no longer optional
Investors, regulators, and customers increasingly expect companies to demonstrate credible energy and carbon management. Poor performance here risks shareholder pressure, reduced access to finance, and reputational damage.
Boards should be asking:
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Are we on track for net zero commitments?
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Do we have robust, auditable data on emissions and energy use?
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Are we exposed to greenwashing accusations if our procurement doesn’t match our sustainability messaging?
The role of the board: What good oversight looks like
Energy risk is best managed when the board:
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Treats it as a standing agenda item alongside finance and operations.
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Assigns responsibility to a dedicated exec (often CFO, COO, or sustainability lead).
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Demands independent reporting and regular risk reviews from advisors and auditors.
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Links energy strategy to long-term corporate goals, not just short-term savings.
Questions every board should be asking
1. What is our current energy risk exposure?
2. How resilient are we to price shocks or supply disruptions?
3. Are our procurement decisions aligned with ESG and stakeholder expectations?
4. Do we have contingency plans for outages or extreme price spikes?
5. Are we communicating clearly with investors and employees about our approach?
Moving forward: Building a board-level energy risk framework
Boards that succeed in energy risk management do three things well:
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Proactive strategy – Not reacting to markets but anticipating and planning.
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Cross-functional alignment – Finance, operations, sustainability, and risk teams working together.
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Expert partnerships – Leveraging advisors who can provide data, market intelligence, and negotiation strength.
Energy markets will remain volatile through 2025–26.
Treating energy as a strategic boardroom issue, not just an operational concern, is the best way to safeguard business performance.
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