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Risk appetite / Risk team structure [59]

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Bullet points include: Examples of ERM benefits Achieve lower cost of debt Focus capital expenditures process on managing/allocating capital for greatest mitigation of risk per $ spent Avoid surprises Reassure stakeholders that business well managed (includes investors, ratings agencies, regulators, press) Improve corporate governance via best practice guidelines Implement formalised system of risk management that includes ERM Identify which risks company can pursue better than its peers Hydro One experiences Realised higher debt rating and lower interest costs than expected on $1bn issue (first as a new company). Ratings analysts indicated ERM a significant factor Now allocated and prioritise based on risk-based structural approach, with an ‘optimal portfolio’ of capital investments achieved. Also ERM used in management of major projects, e.g. 88 corporate utility acquisitions during 2000 and potential building of underground cable to USA Several ‘land mines’ avoided or handed better, e.g. dismissal of Board Directors and reaction to a large oil spill During IPO road shows, Corporate Risk Management Group told that ERM workshops had greatly assisted Executive team in articulating risks faced and what was being done about them Board Committee no longer asks why risk summaries are being brought to them but now routinely expect information. Ahead of other firms Formalised system drives periodic assessment, documentation and reporting of all risks Although not solely attributable to ERM process, subsidiary involved in marketing electricity sold due to high commodity costs, several processing and administrative functions outsourced to transfer labour union/cost risks

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