Understanding enterprise risk management for energy companies
Posted by Administrator on 12/29/2008
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A two day training example
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You and your energy company are probably wondering what went wrong with risk management after the credit crisis hit the financial players, and what lessons you could learn to better equip yourselves for the future. Now the lessons of the credit crisis become clear, this is the time to undertake a fairly rigorous examination.

A change in the way risk management methodologies and processes are executed will help you move from a position of vulnerability to a place where risk management is executed more holistically, and your company is not exposed to material unknown risks.

Enterprise risk management has taken on new importance as stockholders, boards of directors and regulators demand better, more timely analysis of risk and a deeper understanding of how your company is impacted by the dynamic risk environment of a global commodities industry. The risk management needs of energy companies must break down traditional risk silos to drive toward a firm-wide risk view.

In areas such as credit and market risk, an integrated approach can efficiently allocate capital and provide better loss containment; it also serves as a form of protection against a damaged reputation.

Course objective

The objective of this training is that Kasper Walet will provide an understanding of ERM and assist executives in developing and applying an ERM framework within your company.

Tailor made training

This is just an example of a possible training. However, it will be my pleasure to discuss with you your requirements. This will allow us to make a tailor made training course that will exactly meet your demand.

The Program

Introduction

• 10 golden rules Risk Management Framework
• Lessons credit crisis for need integrated risk management
  • Link market, credit and operational risk
• What is ERM
• Benefits of ERM
  • Integrated portfolio approach to risk management
  • Enhanced capital allocation
  • Integrated risk and planning processes

Identifying risks

• Market risk
• Credit risk
• Operative risk
• Business Risk

Scope of Framework

• Risk appetite
• Risk tolerance
• Corporate governance
• Risk metrics
• Risk policies
• Measurement and reporting

Building a risk management culture

• Crucial role board and senior management
• Risk governance structure
• Risk policies and risk control framework
• Monitoring and risk reporting
• Risk education program
• Establishing formal communication networks
• Alignment of strategic panning and risk management

Risk appetite and tolerance

• What is it and what are the benefits for energy companies
• Issues to consider
  • Where and when to apply risk appetite and tolerance concepts
  • Relationship between business strategy and risk appetite and tolerance

Risk management in organization

• Risk management - organizational structure
• Organizational risk management structure and other company functions
• Risk management policy components
  • Risk measurement.
  • Enterprise risk metrics
  • Risk limits and guidelines
  • Risk analysis and reporting
• Risk management and commercial decision making

Implementation of framework

• Identify and quantify risks
• Establish risk tolerance and policies
• Develop business unit strategies and metrics
• Implement controls and procedures..
• Execute strategies
• Monitor risk and reporting

Market risk

• Definition of market risks
• Elements of the framework
• Exposure mapping
  • Identify all market risks
  • Determine market risk factor volatilities and correlations
  • Define how market risks relate to earnings
• Scenario generation
• Best practice

Credit risk

• Components credit risk
• Credit risk management in the energy industry
• Credit risk measurement building blocks
  • Expected default probability (EDP)
  • Default rate volatilities and correlations
  • Recovery rate and recovery rate volatility
  • Rating migration
  • Current and potential future exposures
• Credit risk mitigation
• Best practice

Operative risk

• Building the framework for assessing operative risks
• Developing an appropriate risk management framework
• Operative risk management: identification, measurement, monitoring and control
  • Operational: identification internal risks from people, processes, and systems
  • Operations: identification of physical risks of production, delivery, and storage
  • Identification of external risks from legal, regulatory, political, and environmental exposures
• Operational: measurement of Internal risks from people, processes, and systems
• Operations: measurement of physical risks and external risks
• Monitoring and controlling operative risks

Risk capital and risk-adjusted return on capital

• Risk capital
  • How much risk capital is needed
• Upper and lower bound potential risk capital
  • Simple sum method
  • Modern portfolio theory
• RAROC
  • Calculation RAROC

Enterprise risk metrics

• Earnings-at-risk
• Cash flow and liquidity risk metrics
  • Cash flow at risk
• Capital allocation and ERM
  • Current trends in capital allocation energy industry
  • The capital allocation process.
  • ERM and the capital allocation process

Best practice for implementing corporate risk management

• Sophistication levels in
  • Exposure measurement
  • Risk mitigation
  • Risk philosophy
• 6 steps to achieve an effective risk management system

Last changed: 01/08/2009 at 10:50 pm

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