Turning risk into results: Americas power & utilities snapshot
How leading utilities turn risk into results
Utilities that succeed create competitive advantage by more efficiently deploying scarce resources, making better decisions and reducing their exposure to negative events.
Regardless of which lever, or combination of levers, a utility pursues to manage risk for better performance, a multifaceted approach is required.
The strategic choices need to be evaluated through a risk lens. Specifically:
Enhance risk strategy
Effective risk management starts at the top with effective strategy and governance. It is critical that the proper oversight and accountability exist at the board and senior executive levels.
Of equal importance is the need for ownership of risk throughout the organization. At the management level, executives need to play a crucial role in assessing and managing risk.
Embed risk management
Risk is inherent in every business, but utilities that embed risk management practices into business planning and performance management are more likely to achieve strategic and operational objectives.
Optimize risk monitoring functions
By aligning and coordinating risk activities across all risk and compliance functions, organizations can reduce their risk burden (overlap and redundancy), lower their total costs, expand coverage and drive efficiency.
Improve controls and processes
By optimizing controls around key business processes, harnessing automated versus manual controls and continuously monitoring critical controls and KPIs, organizations can improve performance and reduce the cost of controls spend.
Enable risk management, communicate risk coverage
Moving from being compliance-centric to risk-centric will require an executive champion to lead the effort, as well as tone-from-the-top support and executives who lead by example. Utilities will want to communicate openly and often with all stakeholders and leverage technology for maximum benefit.
As stakeholder scrutiny of the sector continues to escalate, so too does the need for utilities to adopt a “super model” for governance, risk and controls. Utilities need to continue to excel at the basics: keeping the lights on and delivering the gas or electricity, safely and efficiently.
But to achieve competitive advantage, utilities will have to strive for more. It will require a fundamental shift in corporate culture — one that moves beyond compliance and toward initiatives that are risk-informed, innovative and customer focused to accelerate business performance.
There is no better time for utilities to find a balance among managing risk, reducing costs and creating sustainable value for all stakeholders.