Leadership nearing retirement, load shifts from traditional generation to renewable energy sources and financial staff turnover. These are just a few of the top concerns for utilities that may be invading your sleep – and with good reason:
Although there are no magic solutions, there’s a proven methodology known as enterprise risk management (ERM) your utility can infuse into its business practices to evaluate risks and develop mitigation plans.
A continuous process, ERM identifies, mitigates and monitors potential future events that create uncertainty, in a manner that reduces potential loss and increases potential gain. ERM helps a utility proactively prioritize limited resources, make decisions, protect assets and take advantage of new opportunities to increase the organization’s overall value.
The simple approach to ERM should consist of these steps:
Simple, right? If it were simple, every utility would have a program in place. Best practice organizations are good at developing processes to address the harder aspects of doing business and taking a long-term view of risk and risk mitigation strategies. So, if you’re not practicing ERM, how do you transform your utility into one where this is a part of process and strategy?
Step 1 – Obtain management and board oversight buy-in
Building awareness through education of management and board oversight bodies is key to a successful launch and implementation. You will need their buy-in to obtain funding, staff time and ongoing support for the ERM program’s sustainability.
Step 2 – Obtain department head buy-in
While upper management and board buy-in is important, department head buy-in is the most crucial. This level is where the work will get done and where the ERM program could be scuttled due to inaction or withholding of staff time for participation in discussions regarding organizational risk. Some key activities at this stage should include:
Step 3 – Introduce ERM at the business segment level
Another crucial step to ERM program success is to debut the program at the business segment level which provides a foundation for:
Step 4 – Introduce ERM at the organization enterprise level
Once success has been demonstrated through the ERM program at the business segment level — or at least the bugs have been worked out, the next step and ultimate goal is to introduce ERM at the company-wide or enterprise level. This developmental phase focuses on:
Step 5 – Report and monitor
Don’t hide your ERM success stories – let their light shine! Success stories will lead to support throughout the utility and from top management and oversight bodies. Also, as risk is not static, regular monitoring of risks facing the utility, reporting on those risks and maintaining contact with department heads to develop risk mitigation plans is important. Your utility’s ERM function must never rest although you can banish utility risks from your sweet dreams.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.