Enterprise Risk Management at Hydro One Case Study

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Enterprise Risk Management at Hydro One Case Study

Strategic Objective * Be the best transmission and distribution business in North America; * Implement Enterprise Risk Management by a risk-based investment planning system * 90% customer satisfaction

Risk * Loss of competitiveness and volatility of financial markets; * Employee safety issues * Uncertainty in government * Equipment failure * Environment issues

Strength

The risk assessment process fully involves every aspect of the business. Meanwhile, instead of using a probability test to identify the potential outcomes and associated probabilities, Hydro One chose to focus on “worst credible” outcome within a given time frame and its associated probability of occurrence. It helped the group to assess the magnitude of a given risk, its probabilities and the strength of existing controls. This simple, qualitative approach has proven to be a practical and efficient way to focus on major risks while avoiding excessive detail and complex calculations. Besides, the risks are identified in a 2 to 3 year time frame. This forward looking way gets mangers to think over a 2 to 3 year horizon.

Once risks and controls are assessed, a manager will be assigned to be the “risk owner” to develop specific plans to mitigate the risk, that is, a rank-ordered list of “residual risks” is assembled. Also, risk management staff do not attend internal audit meetings and the information from a risk management meeting is not available to internal audit staff without written authorization from a VP. This ensures the complete separation between risk management and internal audit.

The ERM process stressed the importance of six month monitoring and review of risks because risk did not stay static. By review corporate risk profile on a regular basis, the company could…...

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