CCRO Committee of Chief Risk Officers

1.0) Risk Jumble: Price Model Risk and Value Model Risk

Topics Hosts: Robert Stibolt, Jim Allison,

Mark to model could theoretically cover all the aspects of risk created by uncertainly in valuation of energy transactions. In practice, such can be true for those instruments for which valuation is very well understood and we have robust prices to feed the model. However, when prices are not very well understood for whatever reason, a price model must be used to set prices. This introduces “price model risk”. Layer on top of that an uncertain relationship between prices and value which we call value model risk and you have the jumble.

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1.2) Building & Using Scenarios & Stress Tests; Best Practices for the Tail of the Distribution

Topics Hosts: Brenda Boultwood, Jim Allison, Lloyd Komori, Ken Robinson,

An in-depth look at some of the most insightful scenarios for energy companies to consider, the models used to run them, and how to “operationalize” their use.

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1.1) Risk Models and Model Risks

Topics Hosts: Brenda Boultwood, Robert Stibolt, Vijay Singh,

Back to basics: Taking a decision-focused approach to analysis and modeling. Assertion: Models should be continuously questioned.

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1.4) A Best Practice, "Successful Risk Management Function" Role? What's it look like? How to measure its Success?

Topics Hosts: Glen Mackey, Tom Blaney, Ken Robinson,

Members are sometimes challenged by management to in some way document the value that they add to their organization. At a past CCRO meeting, an S&P executive note that that the lesson about RM from Hurricane Katrina is that no company with successful ERM would completely avoid all unexpected loss situations, but that compared with those without RM, they were much more prepared and able to RESPOND QUICKLY and effectively to the unexpected event.

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1.5) The Practitioner's Perspective on Risk Capital Pricing

Topics Hosts: Brenda Boultwood,

EVA, RAROC, and other risk metrics are a critical part of the best practice processes for capital allocation post audits of projects. This discussion will review best practices for these processes and explore some that are emerging for energy companies.

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2.1) What does your Board want from RM?

Topics Hosts: Glen Mackey, Brenda Boultwood, Vijay Singh,

A discussion about interactions between the RM function and the Board.

• What are the experiences and lessons learned of Chief Risk Officers that have been reporting RM insights to their Board of Directors?
• What have been the expectations versus what should be the expectations of Boards at energy companies?

• Going forward, what might a menu of best practices for RM and Board expectations look like ?

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3.0) Debt Equivalency, Rating Agencies and the CCRO's newest White Paper

Topics Hosts: Morgan Davies, Bob Long, Mike Beck,

The CCRO’s Debt Equivalency white paper working group will provide a look into their soon-to-be published paper. This major paper addresses the inconsistencies and ‘gaps’ seen in the application of “debt equivalency” to ratings. we will go through their specific recommendations and discuss open issues that remain…

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3.4) Breakdown in energy fundamentals - risk consequences?

Topics Hosts: Brenda Boultwood, Tom Blaney, Lloyd Komori, Cassandra Schultz,

For many years, we’ve all come to rely on commodity relationships behaving a certain way. We believe these different commodities are somehow linked. In some cases, we’ve cemented these relationships in risk models, scenarios, and stress tests.

Some relationships do appear now to be broken. Could they have changed ‘for good’ ?

• What does it mean to our risk management resources that have become so dependent on our understanding of these relationships as they’ve been known?
• Do we have to completely re-engineer our risk models?
• What about the metrics and consequences to their insightfulness?

• Are CRO’s “heads-up” about all this in their models?

3.2) Regulatory changes on the horizon: Understanding what they mean to the RM function

Topics Hosts: Gary Germeroth, Michael Prokop, Mike Gill, Brad Radimer,

Congress has been proposing (and CFTC must consider implementing) major regulatory overhauls that could be a sea change for over-the-counter energy markets.

Energy risk leaders will discuss how they are working internally and with regulators. What they are doing to prepare to deal with the diversity of impacts…what should you have “ready to go” in your risk management function?

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3.5) Making markets and managing risk at the node

Topics Hosts: Morgan Davies, Phil Gootee,

From short- and long-term power to transmission and generation capacity, more and more power trading and hedging opportunities are available within regional markets operated by the eight Regional Transmission Organizations.

This session will address key energy risk scenarios and considerations for companies that participate in regional power markets.

3.3) Reporting & Compliance: Understanding the capital impacts of proposed market regulations?

Topics Hosts: Jim Allison, Mike Gill,

The CCRO has for some time been discussing the broader perspective of the potential financial impact of proposed market regulations on energy companies as an industry. We would like to also consider the individual company’s perspective – particularly given the new SEC reporting requirement around the capital impacts of these proposed regulation changes…

A discussion about assessing the potential impact of current market regulation proposals and how to quantify them.

2.4) Linking Business Process Management, Risk Management, and Compliance

Topics Hosts: Glen Mackey, Brenda Boultwood, Jana Utter,

We’ll be discussing the convergence of Strategic Risk Management with Controls-Based Risk Management. Here we are thinking of using the Strategic Planning Process and Business Process Maps to ensure most effective risk management.

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2.3) Current Best Practices for Risk Governance & Compliance

Topics Hosts: Glen Mackey, Jana Utter,

A discussion delving into the best practices for corporate governance that assures effective compliance practices across the firm. Can we produce a single best practice perspective into this broad corporate issue which has taken past direction from the CCRO, COSO, Premia, and the GRC framework?
The goal is to enable the business to more effectively quantify corporate strategic risk tolerance and to manage risk accordingly.

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2.2) Risk Appetite, Risk Capacity, and the Board

Topics Hosts: Glen Mackey, Brenda Boultwood, Tom Blaney,

To ensure financial health, management must confidently manage risks in their current businesses operations as well as in their growth businesses – all within the expectation of the Board and stakeholders. Therefore, understanding and measuring ‘risk appetite’ and ‘risk capacity’ are at the heart of financial health for any corporation .
However, it is not entirely clear what best practices are for an energy company trying to understand and manage its risk appetite and risk capacity. We will be discussing here the practices and frameworks found in companies today as well as new perspectives on emerging approaches…

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2.5) Integrating risk management into strategic planning

Topics Hosts: Brenda Boultwood, Robert Stibolt, Lloyd Komori,

It is a truism that strategic planning process for most organizations invariably involves the traditional strengths, weaknesses, opportunities and threats or SWOT analysis. Forming a part of the annual brainstorming session the previous year’s SWOT is rolled out and revised to reflect management’s current assessment of each element. But how much of this discussion focuses on identifying and carefully considering the risks that underlie all of the strengths, weaknesses, opportunities and threats?

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