Many power and utility companies view their control processes as cumbersome and of limited value. A smarter approach can improve efficiencies, keep the business safe and offer a real competitive advantage. Tony Martin reports.
Few power and utility (P&U) companies appropriately consider their control processes. Often thought of as a boring must-have, controls are viewed primarily as costly and as a hindrance to a company’s ability to be flexible and dynamic.
Smart P&U companies think differently. By streamlining their control process, they are:
- Reducing duplication
- Driving down costs
- Adding value to the business
Catching up with change
While many large companies have inefficient control processes in place, P&U companies may be at particular risk due to their long history and the industry’s heavy regulation. Common trends include:
- Spending more on controls without quantifying the gains
- Inheriting controls through acquisitions
- Accumulating layers of redundant and ineffective controls as regulations increase
- Adding extra controls that are disconnected from business operations
- Underutilizing enterprise resource planning systems and relying heavily on manual controls
- Failing to put in place the transparent controls needed to ensure stakeholders are confident that risks are properly mitigated
As organizations rapidly evolve through increased regulation, privatization and acquisitions, it can be difficult for the control environment to catch up. This can lead to a misalignment between the control processes and the company’s overall strategy.
The advantages of Smart Control
Many P&U companies fear that streamlining controls would reduce quality and increase exposure to risk. Others may recognize the need to improve their controls, but take a suboptimal approach that may not realize the full potential benefit. Many deploy monitoring tools on top of existing controls, rather than get to the root of the problem. Others attempt to retrofit, rather than integrate, controls.
A common pitfall is not considering the changes needed in organizational design, technical proficiencies and behavior to reduce risk.
Our Smart Control approach helps companies realize reductions in the cost of controls, enable growth and keep the business safe. Our approach can help companies:
- Reduce spend on controls by considering the key drivers for controlling spending, calculating the costs, and comparing financial outlay to risks and acceptable levels of risk exposure
- Improve accountability for risk by assigning major risk assessment and mitigation activities to key people throughout the organization and empowering employees to manage risk through ongoing communication, training and reporting
- Develop a faster process that eliminates duplicate or unnecessary activities and makes the most of automation
- Align with strategy so that risk management and controls are supporting the business objectives
Smart Control supports utilities to build an integrated, streamlined and dynamic control environment that provides the agility necessary to anticipate or respond to changes. By balancing value, cost and risk in their processes and controls, Smart Control helps companies create a competitive advantage.
Tools for transforming controls
We have developed a technology platform called the Risk and Controls Analysis Platform (RiCAPTM), which helps evaluate an organization’s control environment and identify opportunities for Smart Control.
This platform evaluates key inputs, such as enterprise objectives, risks, controls, cost drivers and acceptable risk levels. The results provide insight on areas that are over- and under-controlled and helps prioritize areas of improvement and guide future state design.
Another useful tool to help companies transform their controls is our Power and Utilities Maturity Model and Architecture (PUMMA). PUMMA is a pool of constantly updated data on the best practices of the world’s leading utilities.
PUMMA is especially useful to unwind control processes that have been built up over the years and recalibrate these to fit the company’s future vision.
Boost cost optimization
As P&U companies focus on cutting costs, many have overlooked the role that control processes can play in cost optimization programs.
Our Smart Control approach has helped companies realize 20% to 40% reductions in the cost of controls.
P&U companies that reconsider the value of controls can think beyond keeping the business safe, boost cost-saving programs and derive a competitive advantage in an increasingly tight market.
For more information
Read more about Smart Controls and RiCAPS
Read our previous Plug in article on PUMMA