How Risk and Risikomanagement

is Innovating at Hydro One

Steve R. H. Fraser

Elderly Vice President, Internal Audit & Chief Risk Officer

Hydro One Systems Inc.

Pertaining to the Mearie Group Risikomanagement Conference

June 24, 2011

Summary of Presentation

1 )

Hydro One particular Background (1 – 2)

2 .

ERM Concepts and Clarifications (3 - 5)

3.

Insurance plan and Structure (6)

5.

Risk Conditions (Tolerances) (7 – 10)

5.

Corporate and business Risk Profile (11 – 15)

6.

Risk Training courses (16 – 21)

six.

Business Organizing (22 – 25)

eight.

Conclusion (26 – 30)

Background on Hydro 1

• Ontario's primary electric power

transmission & distribution business

• One of the largest Texas companies in

N. A.

• $15. 8 B of resources

• $4. 7 B of annual revenue

• $1. five B gross annual capital and maintenance

spend

• your five, 400 personnel

Background about Hydro One particular

1

The Changing Electricity Marketplace in 2000

• Unprecedented change within the market (Re-regulation, Commercialization,

Reorganizations)

• Ontario Hydro broken up in April 99

• Industrial Board of Directors hired

• Property Management Style introduced

• Retirement of 20% of workforce in 2000

• Purchased 88 municipal electric utilities in 2000

• For 2002, an GOING PUBLIC and Marketplace Opening (unbundled bills)

Qualifications on Hydro One

2a

History of ERM at Hydro One

• Previous attempts that would not engage

• Organizational modification with CFO led to rethink

• Can the Head of Audit become the CRO?

• January 2000 - New Origins

• 2150 – 2003: Full Heavy steam Ahead

• 2004 – Present: Sustainment

• 2011 - Reconstruction

Background on Hydro 1

2b

Do they offer a need inside your organization?

•

Amount of change in the corporation and/or market

•

Amount of difference in senior supervision

•

Urge for food for:

– governance (actual and optics)

– clearness of making decisions

ERM Concepts and Clarifications

3

See - What our ERM is not really about

• Sarbanes Oxley

• Conformity

• Audits

• Regulations

• Overall performance Measurement

• Credit, industry or detailed risk in isolation

Notice - The earth does not need more bureaucracy

ERM Concepts and Clarifications

some

Notice - What the ERM is all about

• Great Governance

• Good Management

– Decided objectives and risk strategies

– Foreseeable future outlook

– Prioritization of objectives and risks and mitigants

– Resource share based on dangers to targets

ERM Concepts and Annotations

5

ERM Policy and Framework

ERM Policy and Framework

• ERM Plan:

– " ERM provides uniform operations to identify, evaluate, treat and report in key risks. ”

– This is the umbrella policy under which all other risk guidelines fall. Essential principles consist of: portfolios of ALL types of risks, integrated with proper and business planning, total annual risk examination, everyone's responsibility.

– Crucial accountabilities: Audit & Financing Committee, the President, CFO, Management and CRO.

•

ERM Structure:

– Establishes the basic procedure for all risk assessments

6th

Risk Criteria (Tolerances)

Risk Tolerances

Make use of Risk Criteria (Tolerances)

•In order to run effective risk workshops

• In order to create a common understanding of risks by simply both the command team as well as the board

• Criteria for people who do buiness Planning/Resource Allowance prioritization

Risk Tolerances

7

A more complicated view

This is the

box we

play in

Risk

Capability

Risk

Appetite

Source: Net presentation by:

J. Frank Karow

E& Y

ERM Symposium

Risk

Tolerance

Risk

Target/Range

Ny

March twenty-eight, 2007

Risk Tolerances

Risk

Limits

8

Turning Approach into Risk Tolerances

Proper

Planning

How will we

assess success

for each and every Business

Aim?

Business

Objectives

Key

Functionality

Indicators

Exactly how are we goingWhat 6-10 aims

to achieve each of our

do we need to

overall Corporate

factor in to

aspires??

decision-making?

Precisely what is our

attitude toward

inability for

each KPI??

Risk Tolerances

Risk...

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