Enterprise Risk Management At Hydro One (A) Case Solution & Answer

Enterprise Risk Management At Hydro One (A) Case Solution


Hydro One is a vital energy transmission and distribution utility which has been servicing the Canadian province of Ontario for many years. The corporation provides electricity to millions of businesses, residences, and exports to other parts of North America. The company’s foremost priority is to satisfy the expectations of its customers, manage the risks involved in safety and environment and complete its responsibilities of agreement. The organization has a proven management team with demonstrated experience in driving performance, business transformation, and shareholder value creation.Due to the highest quality credit quality all around the America; the company is considered as an A- rated investment grade balance sheet. The company’s ultimate goal is to please its customers while also ensuring reliable distribution and transmission, ongoing innovation, environmental protection, and long-term viability.Hydro One’s distribution prices have been reduced by the Ontario Energy Board, thus restricting distribution income at around C$4 billion for coming five years. (Exhibit 1 shows synopsis of economic statement). Hydro One initiated an efficiency and cost-cutting programmed, which resulted in the departure of 140 employees and a recruiting freeze, in order to continue investing in the upkeep and improvement of its communication system in this limited context.

Hydro One, an energy behemoth the early practitioner of Enterprise Risk Management (ERM), has foreseen new opportunities and dangers in an industry grappling with carbon laws and climate change, renewable energy uptake, and power market deregulation. Laura Formusa, the CEO of Hydro One, is faced with the question of whether the company’s strategy is viable, given that the risk profile appears to have evolved.

Company’s background

Hydro One’s antecedent, at Niagara Falls in 1906 Ontario Hydro established and produced energy for delivery to public conveniences. With the passage of time, the firm erected 5 coal-fired power plants, 68 hydroelectric power plants, and five nuclear power plants, bringing its total generating and communication volume to 30,000 MW, developing Ontario an power supplier to other country side& the U.S. By the turn of the period, however, it was evident that Ontario’s ageing power system required a massive overhaul.

The government of Ontario privatized the rechargeable power business in 1998. It split Ontario Hydro into 2 companies: a control producing company and a combined conduction/delivery “poles-and-wires” company known as Hydro One.Hydro One, which had its headquarters in Toronto, had three divisions: transmission, distribution, and telecommunications, with the first two responsible for 99 percent of income.

However, Hydro One’s electricity transmission capacity remained constrained. The company’s aged assets saw record levels of electricity demand as a result of the summer heat waves. Hydro One chose to raise greater than six hundred million Canadian dollar in the upkeep and expansion of its skill base, more in twenty years. However, from China claim for conduction has raised, which was building another coal-fired energy plants at a degree of one every week, had weakened company’s negotiating position with producer and they were now charging higher lead times for critical assets.

Despite the government’s wildlife management, low-cost power encouraged Canadians to buy more plasma TVs, air conditioners, and other fuel consumer electronics. (Exhibit 2 shows Ontario’s electricity generation and usage).

Problem Statement

The firm’s vital viable benefit is that it has a ninety percent loyalty of customers and the finest service around the globe, along with top quartile production and delivery dependability, operational efficiencies, job performance and creditworthiness. The company used a risk based outlay regime to manage enterprise risk. Workers are the company’s most significant and appreciated assets because they are the company’s primary point of contact with its customers.

The organization has faced multiple risks, including: logistical, financial burden and worker risk.Meeting customer demand, adequate electricity supply (adequate capacity), equipment failures (faulty wires), outages, commercial viability, asset and network conditions, controllability, employee strikes, bad weather, for example: assure the weather reliability and landowner challenges, such as: aboriginal people, are all the examples of logistics or operational uncertainties and risks.

Employee accidents, on the other hand, as well as operating in adverse weather circumstances, pose a safety risk. The financial risk also includes a lack of capital to fund the infrastructure-building programmed and the failure of Initial Public Offerings (IPOs).

The corporation remains closely regulated, and the Ontario government has imposed pricing limitations on it. In addition, the firm’s method has been directly inclined by another energy legislation and the incumbent government’s maintenance labors. Even when the shrinkage has upgraded the firm’s credit ranking, improved productivity, and condensed costs, it has also created simple challenges, such as prolonged employee strikes, irritation, and dissatisfaction between workers…………………..

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