5 Tips to Help Risk Managers Address the Sharp Drop in Oil Prices, from Insurance Journal.
Oil and gas companies, as well as service contractors, manufacturers, distributors, transportation companies and any entity that supports the energy complex including, local banks, construction firms and real estate markets in oil towns across the country, are in the midst of feeling the brunt of falling oil prices. As a result, CFOs are being asked to scrutinize costs including insurance spends and possible uninsured exposures.
Examples of how energy-related businesses are being affected by these falling prices include:
- Declining Revenue – Recently four oil and gas companies have filed for bankruptcy in Texas and Louisiana, and this trend is expected to worsen, given there are 20,000 U.S. small and midsize firms that collectively produce 75 percent of the oil and gas output, according to the Manhattan Institute for Policy Research. Most of these companies are coping with oil prices that are 50 percent below their height a year ago.
- Layoffs – Massive industrywide layoffs are likely to continue as a result of falling revenues, reducing cash flows and declining market capitalization.
