Enterprise Risk Management (ERM) Program PNM Resources, Inc. March 29, 2007. Presentation to American Public Power Association March 2007 Austin, Texas. How we got started Definition of ERM. Depends on Risk Focus
Enterprise Risk Management (ERM) Program
PNM Resources, Inc.
March 29, 2007
Presentation to American Public Power Association
Oversee Adequacy of Risk Policies and Procedures
Oversee Financial Risk Tolerance and
Establish Financial Risk Policies and Procedures
Executive Policy Committee
“if”, “what” & “who”
of risk planning.
In a cyclical process, ERM provides decision support to Executive Policy Council (EPC). Then, the EPC sets strategic focus for risk action planning which later is followed by ERM monitoring of strategic plans.
ERM Process Roadmap
Execute Risk Action Plan
Begin Each Year
Allocation of Risk
When risks are segmented by function a clearer picture begins to develop.
Traditional Risk Maps assist in bringing perspective to the relationships between the various risk issues.
The Executive Policy Committee chooses key risks for strategic focus—ones that are actionable and provide the highest mitigation value.
Monte Carlo simulation has proven a powerful analytic tool in measuring the probabilities associated with key exposures.
Monte Carlo simulation is used to adjust earnings projections for outage exposures.
Each Business Unit is charged with creating strategic action plans that align with corporate strategy and mitigate known exposures.
Each strategic action plan is measured for cost and effectiveness…….all plans are compared to one another to determine those offering the greatest value.
Mitigation budgeting is part of the yearly budget process. Management knows what kinds and size of exposures to anticipate and how much it will cost.
ERM is a long journey but its value as a strategic tool is bearing fruit. Better risk decision-making results in better deployment of capital and a better compliance structure in an atmosphere of greater risk awareness.