A surprisingly timid effort for an industry on the brink.
David Anthony is an energy risk manager and a frequent contributor to Fortnightly.
The purpose for the Committee of Chief Risk Officers (CCRO) recommendations, as stated in the introduction to their 198-page opus, is "to provide guidance on new methods and tools to establish a strong foundation for future growth in this (merchant energy) industry." But the reality is that the recommendations, almost without exception, fail to provide strong leadership in the areas of past and potential future abuse.
Even a cursory walk through the CCRO's four areas of recommendations-governance, valuation, credit, and disclosure-makes this clear.
Inadequate governance, perhaps more than any other issue, has been cited for the excesses and financial chicanery perpetuated by some in the energy merchant industry. The CCRO states that its governance recommendations are "patterned after that of the banking industry."1 The major points of the CCRO's governance recommendations are: