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The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One
Author(s) -
Aabo Tom,
Fraser John R. S.,
Simkins Betty J.
Publication year - 2005
Publication title -
journal of applied corporate finance
Language(s) - English
Resource type - Journals
eISSN - 1745-6622
pISSN - 1078-1196
DOI - 10.1111/j.1745-6622.2005.00045.x
Subject(s) - risk management , subsidiary , business , enterprise risk management , officer , position (finance) , delphi method , economic capital , finance , market risk , accounting , economics , market economy , human capital , computer science , law , artificial intelligence , multinational corporation , political science
This article describes the five‐year implementation of enterprise risk management at Hydro One, a Canadian electric utility in a newly deregulated market. Starting with the creation of the position of Chief Risk Officer and the implementation of a pilot risk study involving one of the firm's subsidiaries, the ERM process has made use of a variety of tools and techniques, including the “Delphi Method,” risk trends, risk tolerances, and risk rankings. Among the most tangible benefits of ERM at Hydro One are (1) a better coordinated and more effective process for allocating capital and (2) a favorable reaction to the program by Moody's and Standard & Poor's, which has arguably improved the company's credit rating and lowered its cost of capital. But perhaps equally important is the company's progress in realizing the first principle of its ERM policy—namely, that “risk management is everyone's responsibility, from the Board of Directors to individual employees.” As a result, Hydro One's management feels that the company is much better positioned today to respond to new business developments than it was five years ago.