Emerging Practices for Capital Adequacy © Copyright 2003, CCRO. All rights reserved. 59 IX. CONCLUSION This white paper has laid out emerging practices for a risk-based capital adequacy framework that energy companies, industry analysts, and other stakeholders can use to analyze a company’s ability to meet both near-term and long-term obligations. The use of the phrase “emerging practices” is deliberate and reflects the fact that the capital adequacy framework is not yet established within the energy sector. Energy companies and other stakeholders need to understand the elements of capital adequacy and recognize its importance before the framework gains widespread acceptance. While the capital adequacy framework itself is a general, flexible, and useful paradigm for our industry, methodological and system limitations may prevent uniform implementation of all its components in a robust way. Thus, the practices described in this document should be viewed in terms of a continuum ranging from an accounting type of implementation to an economic-based adequacy calculation. Companies will initially find themselves on different parts of the continuum and will require time to gravitate toward more sophisticated implementations as required by their business model. With these in mind, the Committee has endeavored to provide as much guidance in this paper without being prescriptive. We expect energy companies and other stakeholders to read this document in the same spirit. Experienced companies outside our industry (notably the banking and insurance industries) point out that the discussion about and process for a capital adequacy framework are just as important as the actual numbers generated. The CCRO therefore encourages energy companies to adopt the framework even though specific implementation methods may still require further development. The Committee anticipates that as companies embrace the framework, they will find it worthwhile to invest in the technology infrastructure and human capital required to implement the framework in a meaningful way within their organizations.