Enterprise Risk Management

CHAPTER 28The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One

TOM AABO

Associate Professor, Aarhus School of Business (Denmark)

JOHN R.S. FRASER

Chief Risk Officer, Hydro One, Inc.

BETTY J. SIMKINS

Professor of Finance, Oklahoma State University

The Chinese symbols for risk shown here capture a key aspect of enterprise risk management. The first symbol represents “danger” and the second “opportunity.” Taken together, they suggest that risk is a strategic combination of vulnerability and opportunity. Viewed in this light, enterprise risk management represents a tool for managing risk in a way that enables the corporation to take advantage of value-enhancing opportunities. A missed strategic opportunity can result in a greater loss of (potential) value than an unfortunate incident or adverse change in prices or markets.

As in the past, many organizations continue to address risk in “silos,” with the management of insurance, foreign exchange risk, operational risk, credit risk, and commodity risks each conducted as narrowly focused and fragmented activities. Under the new enterprise risk management (ERM) approach, all would function as parts of an integrated, strategic, and enterprise-wide system.¹ And while risk management is coordinated with senior-level oversight, employees at all levels of the organization are encouraged to view risk management ...