BHEL is India’s largest engineering and manufacturing enterprise in the energy and infrastructure

sectors. Established in 1964, we are a leading power equipment manufacturer globally and one of the
earliest and leading contributors towards building an Aatmanirbhar Bharat. We serve our customers
with a comprehensive portfolio of products, systems and services to its customers in the areas of power-
thermal, hydro, gas, nuclear & solar PV, transmission, transportation, defence & aerospace, oil & gas,
and water. Right from developing country’s power generation capacity to creating multiple capabilities
in country’s core industrial & strategic sectors, BHEL is deeply aligned to the vision of a self-reliant India.
Consistent expenditure of more than 2.5% of its revenue on R&D and innovation; establishment of
world-class assets, development and absorption of new technologies; and creating sustainable business
solutions and contribution to the society at large through initiatives in skilling youth, health & hygiene,
education, cleanliness and environment protection, stand a testimony to our commitment. A resilient
workforce, more than 32,000 strong is the driving force behind our journey over the years.

Business models must adapt to changing conditions – largely due to the

collapse in oil prices. Companies are reducing costs where possible by
reviewing strategies, slashing capital expenditure, and mothballing stranded
assets to protect future earnings. Mergers and acquisitions are taking place to
develop synergies and cost savings. Transferring risk in this environment
must be as efficient as possible, particularly with risk management budgets
also under pressure.

The industry increasingly operates in a globalised environment. The past

decade has seen companies expand from their regional comfort zones into
unfamiliar areas of the world with unfamiliar regulatory regimes. This requires
companies to understand an ever-growing list of responsibilities under
contract and carries heightened supply chain risk. The Japanese earthquake
of 2011, for example, showed the damage that disruption to the supply chain
can inflict. Added to physical loss or damage at the supplier’s site, other
causes of disruption include supplier insolvency, power outages, political
unrest, IT failures, labour disputes, transportation problems and pandemics.
All pose risk in a world where companies are searching the globe for lower-
cost supplies and operate “just-in-time” procurement strategies to keep
inventory costs low and stocks at minimum levels.
need to manage human capital. The oil price collapse has caused
thousands of redundancies, but if a company loses its most experienced
workers – often among the first to go because they are closer to retirement or
the most expensive – it can also lose the skills and knowledge needed to
sustain business and then build it when the economic cycle turns. Retention of
talent as profits fall, or at least measures to ensure that accumulated
knowledge passes to younger employees, is thus a priority. With the legal and
regulatory duty of care bar rising in recent years, companies must also ensure
that employees operate in as safe an environment as possible. Political
unrest, the remoteness of locations, infectious diseases, and workplace
accidents are among the risks they need to counter. The fatalities when
terrorists occupied the Armenas gas facility in Algeria in 2013 evidenced how
hard this can be.

Climate change and care of the environment – particularly when energy

companies are venturing into environmentally sensitive areas such as the
Arctic in search of resources. Failure to comply with legal and regulatory
environmental requirements for clean energy and lower hydrocarbon
emissions can hit a company’s balance sheet, share price, and reputation
hard, as witnessed by car manufacturer Volkswagen’s emissions scandal. Its
UK car sales in the UK alone have fallen by 20% since the exposure. The
consequences of an environmental catastrophe are seemingly limitless. To
date, the cost to BP of the Deepwater Horizon blowout and explosion stands
at over US$50bn, enough to ruin oil companies not in the super-major league.

Risk Management Strategies

Managing power market volatility requires a multifaceted approach
that involves planning, forecasting, and implementing strategies to
mitigate risks. Here are some strategies that stakeholders can employ:

1. Diversification of Fuel Sources: One of the primary drivers

of power market volatility in India is the dependence on
imported fossil fuels. By diversifying the energy mix to
include renewables like solar, wind, and hydro, discoms can
reduce their vulnerability to fluctuations in global fuel prices.

2. Long-Term Contracts: Power generators and discoms can

enter into long-term contracts to buy or sell electricity at
fixed prices. These contracts provide stability and
predictability, shielding them from short-term market
fluctuations. Although Long term contracts binds discoms to
fixed cost during low demand

3. Hedging and Derivatives: At present this option is not

available in Indian market. Financial instruments such as
futures and options can be used to hedge against price
volatility. Power companies can lock in prices for future
transactions without the added baggage of bearing the fixed
cost, reducing exposure to sudden price shocks.

4. Demand-Side Management: Consumers can play a role in

mitigating power market volatility by implementing demand-
side management strategies. This involves adjusting
consumption during peak hours/high price period or using
energy-efficient technologies to moderate demand
fluctuations. With implementation of ToD tariff some relief is
expected from demand side
 5. Flexible Generation: Power plants with flexible generation
capabilities can quickly adjust their output based on market
conditions. This enables them to capitalize on price surges or
avoid losses during low-demand periods.

6. Storage Solutions: Energy storage technologies, like

batteries, can store excess energy during low-demand
periods and release it when demand is high, effectively
capturing price differentials.

7. Market Intelligence and Data Analytics: Access to real-

time market data and advanced analytics can help
stakeholders make informed decisions. Predictive models can
forecast price trends based on historical data and market
developments.

8. Regulatory Compliance and Policy Advocacy: Staying

updated with regulatory changes and advocating for
favorable policies can help companies adapt to new market
conditions and reduce uncertainties.

In today's fast-paced and uncertain business environment, effective

risk management is essential for success.
By understanding and preventing key business risks, organizations can
stay ahead of the game and protect their assets, reputation, and
bottom line.
Through the systematic process of identifying, assessing, and
mitigating risks, businesses can make informed decisions, seize
opportunities, and navigate uncertainties effectively.
With the support of technology and a proactive risk management
approach, organizations can ensure long-term sustainability and
achieve their strategic objectives.
Implementing effective risk management practices is crucial for the
success and sustainability of any business.