Is our risk management organizational structure adequate to control the firms risks?
Effective risk management demands the respect and cooperation of traders and commercial managers. Organizations may be designed to aid that process. An effective structure ensures the independence of the risk function while at the same time keeping it involved in day-to-day activities. Most utilities have an insufficient level of communication among risk management, senior management and the board. The most effective way to remedy this problem is to appoint an independent, empowered chief risk officer (CRO) who reports directly to the CEO and to the board. The CRO’s responsibilities would include the following: • Proactive Analysis-Analyze and assess the risks of significant transaction activity, including capital structure and M&A decisions, long-term structured transactions (tolling deals, PPAs, etc.), and hedging policy prior to execution. • Risk Reporting-Ensure timely, complete, and consistent risk reports from the different business units (regulated, unregulated, trading). • Comm
