How important is the risk function at your company?
Clay A. Jackson is a consultant in the Houston office of Spencer Stuart. Contact him at CAJackson@SpencerStuart.com.
How, in the post-Enron environment, can some utilities continue to ignore the benefits of, or downgrade the importance of, the chief risk officer (CRO)? As many utilities retrenched and divested themselves of risk-creating businesses such as energy trading and merchant-power development, they were lulled into the belief that they simultaneously had divested themselves of all risk.
To an outside observer, it would appear that the risk-management function within utilities is now less critical or even wholly unnecessary. Despite this false sense of “security,” volatility is extreme, assets are being run more aggressively with less room for forgiveness, and the regulatory environment is unpredictable at best. With these and other factors taken into account, it is safe to say that the CRO function, and its associated infrastructure, risk culture, and staffing requirements has become more important than ever, and investment analysts are taking note and keeping score.