Energy firms are increasingly exposed to risk including:

• Market risk from excess generation or retail obligations
• Credit risk due to unworthy counterparties
• Operational risk from unenforced or inappropriate policies and procedures
• Transmission risk due to congestion fees on transmission lines
• Regulatory risk resulting from cost-recovery uncertainty
• Environmental risk due to existing or future emissions directives

The methods used to manage this risk can not only impact the health of the firm, but also impact access to capital and investor views. Risks must be managed with sound business processes and a strong risk policy. We help companies design policies and procedures to fit their unique activities.

The risk policy must focus on limiting financial exposure and is only as effective as the methods used to measure and control risk. Energy firms must measure their risk exposure using methods and models designed specifically for the energy industry, not superficially adapted financial models. We have developed and applied detailed energy models for risk management and continue to update them for various players in different markets across Europe and North America.

Our experience in risk identification, measurement and management includes:

• Assessed risks and developed a risk policy for a joint venture of three of the top 15 utilities in Germany. Quantified the risks by comprehensively modeling their asset portfolio.
• Organized an RFP for a regional utility for a risk management system. Analyzed responses to identify the cost-benefit trade-off of various systems.
• Evaluated the retail and trading operations of a national utility to identify the risks of existing activities. Designed a risk policy to guide and control future activities. Created models to measure risks and developed tools to report risks on an on-going basis.