4/20/2020 Understanding Enterprise Risk Management for Utilities © Copyright 2007, CCRO. All rights reserved. 37 4. Conclusions & Recommendations The objective of this paper was to provide an understanding of ERM and assist executives in developing and applying an ERM framework unique to the business of a regulated utility. ERM is not a product, but rather a process by which utilities can iteratively improve upon their understanding, control and management of risks. An ERM framework for utilities should ultimately strive to first identify material risks and identify the level of risks that is acceptable for all stakeholders. Once these have been determined, the risk governance, policies, procedures, monitoring and controls should be established in a manner that is consistent with the level of risk being controlled and the current capabilities of the firm. Once the framework is in place, a continuous review of the risks, controls and metrics is essential to establishing a lasting and improving risk management function within a utility. To successfully implement an ERM framework, each utility must first consider where they are on the Risk Management Practices Continuum. Utilities should avoid the temptation to strive for ‘industry best practice’ in developing an ERM Framework and, instead, focus on practices that most effectively manage risks for the individual utility. The general structure of the ERM framework is complex, but the key starting point is not to just consider all components of ERM with equal sophistication, but to consider the complexity of the firm’s portfolio and the available risk management resources in determining the level of sophistication to apply to each of these components. In any risk management endeavor, there will be challenges that will be unique to the company’s portfolio, resources, management and regulatory environment. Nevertheless, the key ingredient to any successful framework is constant and clear communication and a culture of risk management throughout the company, lead by the tone at the top.