Implementing a Risk
Management Program
Scott Jones
MEAG Power
APPA Business & Finance Conference - 2009
About MEAG Power
• Created by Georgia Legislature in 1975
• Provide wholesale electricity to 49
communities in Georgia
• Total Assets - $4.6 billion
• Total Revenues - $770 million
• Nine generating units at four plant
locations with about 2,100 MW
• 120 employees
What is EWRM?
• “Methods and processes used by
organizations to manage risks and seize
opportunities to the achievement of their
objectives”
• Most agree it to be some version of a
comprehensive risk management program
• Ideally include a centralized approach to
evaluation and/or monitoring
Is the Ideal . . Ideal?
• Difficulties with EWRM implementation:
– Most can not devote numerous resources
– “Academically ideal” program is expensive,
system driven, sometimes not needed
• What does your entity need? Seriously.
– Must balance value of risk management with
company size, complexity, resources
– Something short of “ideal” might be
appropriate
MEAG – Pre EWRM
• Reasonable risk management and
analysis
• A “silo” approach – each department
handled their own process
• No company-wide culture of risk
management
• No formal communication lines or
company-wide oversight
MEAG – EWRM Phase One
• EWRM Policy
– Board approved
– Established Board committee, Executive
committee, RM Department, single Executive
over RM / Internal Audit
– Defined roles of each authority level
MEAG – EWRM Phase One
• Created more formal communication
• Required risk assessment process
• RM Department reported to committees
regularly, submitted work plan
• Some analysis by RM, some by individual
departments
MEAG – EWRM Phase One
• We combined RM and Internal Audit
– Saw similarities in philosophy of both
– Internal audit had moved toward more riskbased approach, less small-dollar audits
– Moved to project-based approach with both
audit and RM work being done in concert
Phase One - Lessons Learned
• Reasonable approach, worked well
• Having single Executive was ideal, but
perhaps not necessary with our size
• Recognized importance, but size and staff
limitations made us think
• Made progress in creating a RM culture
• Good sign: People came to RM for
advise, review of ssues
MEAG – EWRM Phase Two
• Reorganization in April
• RM / Internal Audit remain combined
• Manager of RM / Audit reports to
Controller (under Chief Accounting Officer)
• Manager has dotted line to CEO and RM
Committee of Board
• RM remains an important area with high
exposure and heavy involvement
What makes a good program?
• Not a clue . . .
– Each company is unique, solution is unique
– Experimentation is alright, don’t be afraid to
try different structures
– Communication and Analysis are key
– Empowerment of groups needed
– Make policies that memorialize your intent
Bottom Line:
Good Communication
• Good programs need focus on
communication
• Set a structure that makes sense, put
analysis where it makes the most sense
(centralized or departments), but force
areas to communicate
• Better communication of issues, analysis,
and decisions has been the primary
benefit of our program