1 / 17

Enterprise Risk Management (ERM) Program PNM Resources, Inc.

Enterprise Risk Management (ERM) Program PNM Resources, Inc. March 29, 2007. Presentation to American Public Power Association March 2007 Austin, Texas. How we got started Definition of ERM. Depends on Risk Focus

pravat
Télécharger la présentation

Enterprise Risk Management (ERM) Program PNM Resources, Inc.

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Enterprise Risk Management (ERM) Program PNM Resources, Inc. March 29, 2007 Presentation to American Public Power Association March 2007 Austin, Texas 1

  2. How we got started Definition of ERM • Depends on Risk Focus • Committee of Chief Risk Officers: ERM is a program that works to manage all risks faced by an enterprise in an integrated fashion. Risks are identified, measured, and prioritized uniformly throughout business units. ERM then works to manage these risks based on their overall impact to the entity by allocating mitigation resources on a consolidated basis. • AON: ERM is the proactive execution of a senior management sponsored entity-wide strategic process of assessing and responding to the collective risks that impact an organization’s ability to maximize shareholder value. 2

  3. Program GoalsERM Value Drivers • Aligning Corporate Tolerance & Strategy • Coordinating Disparate Risk Management Functions • Quantifying Risks & Risk Adjusted Returns • Improving The Deployment of Capital • Enhancing Risk Response Decision-Making • Identifying & Managing Cross-Enterprise Risks • Providing Integrated Responses to Multiple Risks 3

  4. Risk Management Corporate Structure Enterprise- Wide Risk Management Board of Directors Executive Policy Committee Board Risk Liaison Chief Financial Officer • Set Risk Tolerance • Develop Strategic Risk Focus • Prioritize Mitigations • Risk Map • Coordination with Strategic Plan and Capital Allocation • Management of Mitigations Risk Management Committee Audit Committee Finance Committee Oversee Adequacy of Risk Policies and Procedures Oversee Financial Risk Tolerance and Insurance Coverage Establish Financial Risk Policies and Procedures 4

  5. Steps to ImplementationERM Program Board Governance Executive Policy Committee Determines “if”, “what” & “who” of risk planning. Start here • Integrated Strategic • Planning Process: • Incorporates Sr. Mgmt. Decision Making Into: • Corporate Strategic Plan • Long Range Plan • Annual Operating Plan • Performance Plans & • Incentive Plans • ERM Process Roadmap • Identifies, measures, prioritizes risk • Reports risk to Sr. Management • Provides mitigation management & monitoring In a cyclical process, ERM provides decision support to Executive Policy Council (EPC). Then, the EPC sets strategic focus for risk action planning which later is followed by ERM monitoring of strategic plans. 5

  6. ERM Process Roadmap Execute Risk Action Plan and Monitor Effectiveness Begin Each Year Identify Risk • Data Collection • Interviews with PNM Experts • Due Diligence • Financial Statements • Internal Reports • External Databases • Research • Compare to Industry Data Mitigation Decision Making & Allocation of Risk Measure Risk • Decisions & Mitigations • Hedge • Insure Risk • Allocate Mitigation Resources • Optimize Risk Appetite • Determine Risk Tolerances Risk Database 2001-2007 Data Prioritize Risk • Risk Map & Risk Reports • Top 20 Risks • Effects Short & Long Range Plans • Effect on EPS • Risk Analytics • Probabilities • Impacts • Expected losses 6

  7. Identifying Risks Operational Commodity Capital and Investment Strategic Risk 1 X Risk 2 X Risk 3 X X Risk 4 Risk 5 X Risk 6 X Risk 7 X X Risk 8 X Risk 9 X X X Risk 10 X 7

  8. Measure Risks When risks are segmented by function a clearer picture begins to develop. 8

  9. Prioritize Risks Traditional Risk Maps assist in bringing perspective to the relationships between the various risk issues. 9

  10. Prioritize Risks The Executive Policy Committee chooses key risks for strategic focus—ones that are actionable and provide the highest mitigation value. 10

  11. Analyze Risks….examples Monte Carlo simulation has proven a powerful analytic tool in measuring the probabilities associated with key exposures. Monte Carlo simulation is used to adjust earnings projections for outage exposures. 11

  12. Strategic FocusRisk Action Planning Each Business Unit is charged with creating strategic action plans that align with corporate strategy and mitigate known exposures. 12

  13. Strategic FocusDecision Making, Mitigation Planning & Allocation Each strategic action plan is measured for cost and effectiveness…….all plans are compared to one another to determine those offering the greatest value. 13

  14. Strategic FocusBudgeting Mitigation budgeting is part of the yearly budget process. Management knows what kinds and size of exposures to anticipate and how much it will cost. 14

  15. ERM Value As A Strategic Tool ERM is a long journey but its value as a strategic tool is bearing fruit. Better risk decision-making results in better deployment of capital and a better compliance structure in an atmosphere of greater risk awareness. 15

  16. Lessons Learned • Buy-Off on ERM Should First Come from Executive Management • Buy-Off on ERM Should First Come from Executive Management • Buy-Off on ERM Should First Come from Executive Management 16

  17. 17

More Related