Risk Management

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Risk Management the CRO

• Note selected slides borrowed from other sources
  with attribution

2
Risk Management Dort, Holland April 17, 1421
Disney Hans Brinker or the Silver Skates, by
by Mary Mapes Dodge
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(No Transcript)
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Enterprise Risk Management and the Role of
theChief Risk Officer

• Scott Smith
• Senior Vice President
• Chief Risk Officer

RIMS REGIONAL CONFERENCE COLUMBUS, OHIO
borrowed from 2003 RIMS conference
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Enterprise Risk Management and the Role of
theRisk Insurance Department
Leo A. McCann Director, Risk Insurance
Management
RIMS REGIONAL CONFERENCE COLUMBUS, OHIO
borrowed from 2003 RIMS conference
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Key Risk Management Trends

• Unforgiving stock market

• New regulatory/accounting requirements

• Case studies of the good, the bad, and the ugly

• Global initiatives on corporate governance

• Enterprise risk management under the CRO

• Convergence of financial/insurance markets

Source ERISK
borrowed from 2003 RIMS conference
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Evolution of energy industry risk practices
borrowed from 2003 RIMS conference
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A Company Can Create An ERM Framework In Six
Months Or Less
Gap Analysis (Practices)
Practice Assessment
Foundation Setting
Metrics and Data Assessment
Gap Analysis (Metrics and Data)
borrowed from 2003 RIMS conference
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Yin and yang of risk management
Source ERISK
borrowed from 2003 RIMS conference
10
Risk Management Chronology

• Historically risk management limited to hazard
  and liability insurance
• With the initiation of marketing trading
  activity in 1997, implemented more formal risk
  management procedures and organization
• Independent Risk Oversight to monitor and control
  trading market risk
• Independent Credit Oversight to monitor and
  control trading counterparty risk
• In 2000, expanded credit oversight to open-access
  transmission business and third-party engineering
  activity and structured marketing transactions
• In 2001,
• Established position of Chief Risk Officer
• Initiated Enterprise Risk Management Process

borrowed from 2003 RIMS conference
11
Enterprise Risk Management Approach
Enterprise Risk Management Chief Risk
Officer/Chief Financial Officer
Benefits
Source ERISK
borrowed from 2003 RIMS conference
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Organization Chart
AUDIT COMMITTEE
CFO
CRO
Operational Risk Management
Risk Insurance Management.
Information Security
Credit Risk
Market Risk
Insurance Coverage Claim Reserves
Counterparty Settlement, Reserves
Market, Interest, Rate Risk, Fx Liquidity
Safeguarding Information
Disaster Recovery Bus. Cont. Planning
borrowed from 2003 RIMS conference
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Key Risk Terms

• Strategic/Franchise Risk
• Legal/Compliance Risk
• Staffing/Organization Risk
• Credit Risk
• Market Risk
• Operational/Systems/Technology Risk
• Environmental Risk
• Sovereign Risk
• Financial/Documentation Reporting Risk
• Liquidity Risk

borrowed from 2003 RIMS conference
14
Key Implementation Requirements
1. Provide leadership and set the tone from
the top
2. Allocate resources for enterprise risk
management
3. Establish vision and overall plan
4. Set milestones and individual
accountabilities
5. Establish risk measures and early warning
indicators
6. Integrate ERM into business planning and
operations
borrowed from 2003 RIMS conference
15
Where are the CROs?
borrowed from 2003 RIMS conference
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Risk Management and Insurance the CRO
borrowed from 2003 RIMS conference