Why energy procurement risk is no longer just a procurement issue

These are not isolated events. They are evidence of a new market reality, that energy prices are increasingly driven by geopolitical risk, not just supply and demand fundamentals.

The Russia–Ukraine war demonstrated how quickly wholesale gas prices can escalate when supply is disrupted.

The current tensions in the Middle East are reinforcing the same principle, markets move not only on physical shortages, but on perceived risk to global supply chains.

This matters because UK businesses are price-takers in a globally influenced market. Which means that your energy costs are now directly exposed to geopolitical volatility. Yet, procurement decisions are still often made as if this volatility is temporary:

This isn’t just a procurement issue, it’s a commercial risk management problem.

At its core, aligning procurement with business reality means answering one critical question: How much energy price risk can the business absorb and over what timeframe?

This is a board-level decision because it directly impacts:

And yet, for many businesses, this question is never formally defined. Instead, procurement becomes reactive, something that is driven by market movements, supplier narratives, or internal pressure to ‘do something’.

But in a volatile, geopolitically exposed market, this approach is no longer viable.

Energy procurement should be treated as a structured financial strategy and not a series of buying decisions.

Over-fixing in volatile markets: Locking in high prices to remove short-term uncertainty, at the expense of long-term competitiveness.

Unmanaged exposure: Remaining fully indexed without governance, effectively speculating on the market.

Reactive decision-making: Acting on headlines (e.g. geopolitical events) without a defined framework.

While procuring your energy contracts is a commercial-layer decision, it must reflect how your business actually consumes and manages energy.

From a technical perspective, procurement decisions must be grounded in a clear understanding of your underlying energy profile and exposure:

From an operational perspective, procurement strategy must align with your organisation’s ability to act on market signals and execute decisions effectively:

In today’s market, shaped by events like the Russia–Ukraine war and ongoing Middle East tensions, the question is no longer “Where is the market going?” because the honest answer is that it depends on factors outside your control. Instead, the questions become:

This is a fundamentally different mindset.

Senior leaders who align procurement decisions with business risk and market reality achieve greater budget stability, even in periods of sustained volatility. That’s because they reduce exposure to extreme price events by structuring their approach to risk, rather than reacting to it.

This alignment also improves confidence in forecasting and planning, as energy costs become more predictable and better understood within a defined framework. At the same time, it strengthens alignment between finance, procurement, and operations, ensuring decisions are consistent and commercially grounded.

But most importantly, these businesses shift from reacting to geopolitical events to operating with a defined and deliberate commercial strategy.

Energy markets have changed and volatility is no longer an exception, it’s become the baseline.

From COVID, to the Russia–Ukraine war, to ongoing instability in the Middle East, the pattern is clear: external shocks will continue to drive energy price risk.
The role of the senior decision-makers isn’t to predict these events, but to ensure that their business is structured to withstand them. And that starts with aligning procurement decisions to risk, not to the market.