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In-house Division

Risk protocol case study: Electricity North West

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Richard Somerville outlines Electricity North West’s approach to risk management.

Electricity North West is the local power network operator in North West England, one of 14 regional network in Great Britain. It’s our role to keep the lights on for millions of homes and businesses from Cheshire to Cumbria. With 1,600 employees, numerous contractors and many more stakeholders, managing risk is something we take very seriously.

We are proud of our strong commitment to having high ethical standards in the way we work and the way we manage our risks. Our vision is to be a company where risk management is embedded in our culture, protects our reputation, enhances our performance, and is complementary to us achieving our overall company vision of being ‘the leading energy delivery business’.

Our risk management policy

Key to achieving our vision is the belief that all our employees can play a role in identifying and managing risk. Our risk management policy statement is founded upon this belief and in partnership with our core values:

  • Performance: we are committed to improving our performance and the way we work, whilst seeking to protect our people, business and reputation.
  • People: those driving this improvement operate openly, honestly and professionally, adopting appropriate standards of practice and governance, and optimising the strengths of all.
  • Customer: we are vigilant in improving the management of risks affecting our customers, business associates, contractors, visitors, the members of the public, and our own people.
  • Safety: we are passionate about improving the way we work, seeking to protect our people, customers and the environment.
  • Innovation: we will continually challenge and seek improvements in the management of our risks.

Our approach

Our approach to risk is based on the fundamental belief that excellence in risk management needs:

  • Unequivocal, consistent, demonstrable commitment from all levels of line management.
  • A robust management system, fully implemented, which requires and drives continual improvement.
  • Relevant expertise, in support of line managers and their teams.
  • Appropriate behaviour of every person, at every level, within Electricity North West, individually and collectively in their teams.

Our strategy

Therefore, our strategy is built on the following 5 ‘steps’:

1. Promoting a culture of responsibility and risk awareness through:

  • Developing a risk appetite commensurate with Electricity North West’s vision and strategy.
  • Establishing clear accountabilities and responsibilities for managing risk.
  • Developing competence in our people through training and support.
  • Improving communications and engagement with our people.

2. Fully understanding the context within which we operate through:

  • Regular engagement with our internal stakeholders at all levels, including the audit committee.
  • Regular engagement with our key external stakeholders, including our regulators.

3. Embedding arrangements for the control and governance of risk through:

  • Maintaining a comprehensive internal control and governance framework.
  • Maintaining a robust and cost effective risk management strategy and supporting processes.
  • Developing key indicators to monitor our control arrangements and risk management performance.

4. Ensuring legal, statutory and regulatory compliance through:

  • Delivering a robust risk-based audit programme.
  • Developing resilience through a holistic and joined-up approach to assurance across the company.

5. Continually improving our approach to risk management through:

  • Sharing best practice within Electricity North West.
  • Sharing best practice from outside Electricity North West via proactive engagement with relevant organisations.
  • Periodically reviewing our risk management performance.
  • External validation of our risk management system.

Our risk management system

The effective delivery of Electricity North West’s risk management system (RMS) is a major contributor to achieving our vision of being ‘the leading energy delivery business’. The RMS is an effective and efficient way of managing the uncertainty that results from the multitude of factors that we face in pursuit of our business objectives.

It is an approach by which the company understands the level of exposure it is willing to take and considers risks across the business in a consistent way. In so doing, it contributes to optimising business performance, prompts continual improvement, helps reduce costs and improves visibility of exposures in the internal and external environments.

With a direct link to business objectives, the RMS includes the identification, assessment and management of current risks, controls that are currently in place to mitigate against these risks, and remedial actions to reduce risks to acceptable levels.

This approach brings consistency to the assessment, interpretation and evaluation of risk

This approach brings consistency to the assessment, interpretation and evaluation of risk. It aims to ensure that all reasonably foreseeable and material strategic, financial, operational and compliance risks are identified, in addition to safety, health and environmental hazards. The process adopted follows the main principles outlined in ISO 31000.

A multidisciplinary approach

Key to supporting delivery of the RMS is the competence of those involved. Our risk management requires a multidisciplinary approach and in many respects, is an amalgamation of existing disciplines. It embraces competences in engineering, financial management, operations, business management and people development. It takes a holistic approach and focuses on ensuring that risk is managed in an optimised and sustainable manner to deliver business objectives.

Employees’ role

A very general awareness of risk management is achieved for all employees through the Electricity North West induction process. Our approach to risk management competencies is based on five levels of competence to reflect the five broad areas of responsibilities within the way risk is managed within the company.

We believe that all employees can play their role in identifying and managing risk

A key principle of this approach is for each individual to not only understand their level of competence, but also the limits of their competency. We believe that all employees can play their role in identifying and managing risk. Those tasked with driving the improvements operate openly and professionally, seeking views of those involved in risk management. Periodic forums and workshops provide opportunities for seeking the active participation in managing risks and seeking improvements to the RMS.

Continual improvement

We strive to continually improve our RMS, and continual improvement of the RMS, the management systems aligned to it and its application is fundamental to the RMS’s ability to deliver value to all the company’s stakeholders. The RMS continually evolves as we seek to embed performance monitoring through three levels of assurance.

The RMS continually evolves as we seek to embed performance monitoring through three levels of assurance

Each level has robust internal audit processes to ensure performance and processes are monitored and those deviations from required standards are recorded, reported and resolved. Observed weaknesses or actual failures are good indicators regarding the effectiveness or otherwise of existing risk control measures. Any complaints or failures are investigated, understood and actions taken to prevent reoccurrence where appropriate.

As an organisation we firmly believe that a comprehensive understanding of the risks we encounter, and how best to manage those risks, will positively contribute to our goal of being the leading energy delivery business.

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