July 9, 2019
READING TIME ~
Running a large fuel portfolio is risky.
Health and safety, staff, supply, security, regulatory, and customer perception. There are lots of risks associated with fuel, but one that often doesn’t get talked about is knowledge.
Knowledge is the number one risk to a fuel business.
Weekly, millions of pounds across hundreds of thousands of transactions run through your portfolio. Often, this is being managed by a small team of highly competent people, using a mix of art and science to create a pricing strategy that aligns with the business.
This blend of skills is often unique to this sub-department, particularly in organisations whose main focus lies elsewhere, like supermarkets.The knowledge of how to implement these skills on a day-to-day basis is often locked away securely on their internal hard drives (in other words, in their brains).
Every business is different, and this leads to different levels of risk. A very simple way to calculate a rough commercial figure on knowledge risk is by understanding how much money is at stake per employee that has a certain amount of knowledge maintained in their head.
That is why we developed with this formula, which does require a subjective view of how much knowledge is maintained by your key staff:
£Annual fuel revenue x (percentage of knowledge / number of staff) = £Annual fuel risk
Let’s take an example:
Harriet is a Fuel Director at a large retailer. She runs 300 sites with volumes of approximately 2bn litres per year. She has Henry to support her efforts. 20% of the business knowledge sits with the two of them.
Using our equation, you have 2 staff x 20% knowledge across 2bn litres.
Thus, your fuel business risk sits at £200,000,000 per annum.
Whilst totally indicative, that is a big and scary number.
So, how does this formula work?
The obvious statement is that the larger your revenue from fuel, the higher your risk is. Not only is there more money on the line, but it is more likely something will go wrong due to the size of the operation. Often fuel businesses are drivers of other areas of the business such a store sales and cash flow, so actually this can be considered a conservative number.
Whilst subjective, the percentage of information stored within your key people’s own mind means that should something change that meant they were no longer able to perform their duties (work choices, injury/illness, personal life) your business is open to everything that brings. Knowledge they store internally is not accessible in their absence and represents a bottleneck in your business.
Finally, the formula accounts for the fact that the fewer people this information sits with, the more you are exposed to the risks of losing key staff. Losing that one key person that makes the fuel business run could slow you to a walking pace in a flash.
How can this risk be mitigated?
Well, one way of dealing with knowledge risks is by centralising the knowledge into a platform available to everyone in the business. We’ve done it ourselves at EdgePetrol by using Hubspot as our one source of truth. All our data including integrations, implementations, marketing, design and sales activities are logged and stored here. Furthermore, this data provides new knowledge that allows us to avert further risks, both internal and external.
Deloitte’s CEO and board risk management survey explains that technology is only part of an integrated approach to risk management:
Define the impact of technology on strategy, operating model, organisational culture, security, and reputation.
Align technology investments with overall risk strategy.
Integrate people, process and technology to drive risk management and governance.
In other words, using and embracing technology to reduce the reliance on key staff members is only part of the puzzle. Technology needs to fit in with strategy and be integrated across the business to make sure everyone is pulling in the same direction.