Enterprise Risk Management at Hydro One

Topics: Risk management, Management, Risk assessment Pages: 5 (1317 words) Published: October 9, 2014


Hydro One (A) was re-established from former Ontario Hydro who generated electric power and had previously been in business supplying it to several utilities in the Niagara Falls regions in 1998 (Mikes, page 1). Hydro one held 5 coal-fried, 68 hydro-electronic and 5 unclear power stations, and reached power generation and transmission capacity to 30,000 megawatts. Eventually Hydro one supplied electricity to out side of regions and even other countries (Mikes, page 1). In 1906, Ontario Hydro was founded and formed an organization that contained multiple electric divisions until the Ontario government deregulated the province’s electric power industry in 1998. Therefore, Ontario Hydro was forced to reconstruct into Hydro One and the other organizations (Mikes, page 1). The Hydro One management team shifted a strategy focusing on “ consumer-focused service” attitude contained cost cutting, enterprise risk management, performance management, and strategic planning (Mikes, page 2). As a result of new “customer –focused service” strategy, Hydro one acquired customer satisfaction from 42% in 2002 to 86% in 2006 (Mikes, page 3). Additionally, the company’s maintenance team was awarded for providing quick urgent services during severe weather (Mikes, page 3). Chief Executive Laura Formusa was committed to progress to the best safety record in the world and become one of the best transmission and distribution business in the North America (Mikes, page 3). However, transforming to “customer- focus” service attitudes caused some issues that included “ reputational risk” to the company. Their operating costs continued to be high, 18-weeks strikes, and lost essential expertise due to former CEO’s reduction plans. Formusa desired to be in the top quartile for the transmission and distribution reliability for which she developed customer satisfaction rank overall, and top quartile employee productivity, operating efficiency, and an “A” credit rating (Mikes, page 3). Hydro one lost 20% of the long-term employees due to an early retirement scam in 2000; therefore, Hydro One faced finding substitution for new workforce recourses. Hydro one spend C$4.4 million annually for hiring only 126 expertise from out sources and it affected their operational cost (Mikes, page 2). In only 2 years, more than 20 % of employees would be retired and a higher demand for service and provided power would amount to overwhelming work with lack of hands (Mikes, page 8). Safety was the priority matter for the employees and a factor to continue offering customers demand of energy. The question was that their equipment and all tolls were secure enough to reduce any safety risks? Formusa seriously reconsidered the risk level for maximum capability of the transmission network because of failed premature equipment and tools the previous year. Moreover, meeting the expectations of the Provincial Auditor General, the spending control issue had to be solved (Mikes, page 9). The other risks also increasing, included “government uncertainty” caused by different and confusing rules of government electricity agencies (Mikes, page 9). The environmental risks got bigger attention not only from Hydro one, but the entire industry. Time of use/rate of energy had to be reviewed and needed progress solutions. Lastly, it risked increasing tremendously due to applying of SPA (Mikes, page 9). Even though Hydro One adopted an aging system, the most important process was to compare the result of strategy improvement before they tried to offer IPO stocks to the investors. According to the Chief financial officer, Beth Summers Hydro One couldn’t help changing their business direction to more environmental friendly energy sources using wind power due to closed down coal/fire power stations by governmental decision. Although this brought a new concern; the fact that there was not always substantial wind made it unreliable source of energy (Mikes, page 21). Hydro One designed...

Bibliography: Mikes, Anette. "Enterprise Risk Management at Hydro One (A)." Harvard Business School Publishing, 18 Jan. 2012. Web. 30 Sept. 2014.
"Key Elements of the Risk Management Process." Corporatecomplianceinsight. Ed. Jim Deloach. Corporate Compliance Insights, 10 Jan. 2012. Web. 3 Oct. 2014.
< http://www.corporatecomplianceinsights.com/key-elements-of-the-risk-management-process/>.
Rouse, Margaret. "Enterprise Risk Management (ERM)." TechTarget. TechTarget, 1 May 2010. Web. 3 Oct. 2014. .
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