"Back-to-basics" strategies challenge enterprise-risk philosophies.
Nearly a year ago, cover story announced the rise of the chief risk officer (CRO). "Utility...
Energy Risk Management: Rise of the Chief Risk Officer
and other problems, the CCRO organized itself into four working groups, focused on the following areas:
- Valuation & Metrics: What should be measured, and how should it be valued?
- Credit Risk Management: How can credit and liquidity be ensured through bilateral agreements? What are the characteristics of an effective multilateral clearing platform?
- Governance & Controls: How should companies be organized to ensure senior executives are aware of risk positions? How should policies be developed and enforced?
- Disclosure: How can companies ensure that their reporting processes are accurate, useful, and comparable to other companies in their sector?
Given the pressure the industry is facing, a sweeping change in risk-management practices is inevitable, according to Osborne. "The question is whether it will be built on a best-practices template that is developed by those who understand it, or by regulators who reluctantly conclude that the industry can't answer these questions for itself."
So far, the CCRO seems to be overcoming the fight-or-flight instinct. "Never before have I seen as much devotion to getting something right as I've seen on this committee," says TXU CRO Patrich Simpkins. "The work that's being done is tremendous."
At press time, the committee's first best-practices document was expected in September 2002. -M.T.B.
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