Turning risk into results: Americas power & utilities snapshot
Aging infrastructure, environmental compliance and smart grid technology will require significant capital investment.
But energy efficiency programs and a sluggish economy mean limited prospects for meaningful growth in energy usage. Combined with curtailed or denied requested rate increases, utilities have to take an enterprise approach to cost reduction that is both actionable and sustainable.
Utilities are facing significant cost challenges in the years ahead.
Opportunities to achieve sustainable cost savings include:
Coordinating and optimizing risk monitoring functions and lines of defense
Over the last 10 years, utilities have established numerous assurance functions (multiple compliance functions, internal controls and internal audit). In our experience:
- These functions are often insufficiently linked
- Activities overlap
- Different terminologies, risk catalogs, rating scales and reporting formats are used creating a lack of transparency.
The functions interact with each other independently and directly with line management, which creates an extraordinary burden on line management.
Utilities face increasing regulations around governance, risk management and internal controls. It is increasingly necessary for businesses to improve and enhance risk monitoring activities and systematically set up an efficient internal control system.
Reducing cost of control spend by automating controls
All utilities are looking at ways to reduce costs. Many of these programs fall short of expectations, as there is a failure to recognize controls as foundational to all business processes and as a key contributor to process cost.
Often, the most significant driver is the ineffective use of existing information systems. Failure to leverage the automation capabilities of the ERP system is the biggest culprit.
People continue to perform manual controls, either due to mistrust in the system or a lack of understanding of the functional capabilities now afforded to them.