Case Study - A Major Energy Company strengthen its risk management process with MetricStream enterprise risk management solutions

1. CASE STUDY
MetricStream A MAJOR ENERGY COMPANY EMBRACES A HOLISTIC, STRA-
TEGIC APPROACH TO RISK MANAGEMENT
Customer
The customer is one of the largest energy companies in the Unites States. It is home to a diverse mix
of businesses that generate, supply and manage energy products and services for a broad spectrum
of customers nationwide.
Overview
Risks are not new to the energy industry. Most companies have strategies in place to cope with
cyber-attacks, natural disasters, downgrades in credit ratings and other risks. However, recent events,
such as the financial crisis, have questioned the adequacy and effectiveness of these strategies. Risks
are only becoming more complex and interdependent. At the same time, networks are expanding,
Customer making it more difficult to manage enterprise-wide risks. Added pressure comes in the form of intense
ONE OF THE WORLD’S LARGEST ENERGY regulatory scrutiny, as well as the demand for renewable energy sources.
ORGANIZATIONS
In lieu of such developments, the energy company’s goal was to foster a culture of proactive risk
management across its employees and contractors. The company also wanted to make risk assess-
Benefits ments an integral part of management decision-making.
Elimination of redundant systems and activities The key to achieving this goal was an integrated risk and control management framework. It would
With MetricStream’s centralized platform, the energy help break down individual silos, establish common risk management processes, and improve visibil-
company has eliminatedfive redundant risk systems,
ity and transparency into these processes. At the same time, it would allow business and functional
over 300 complex spread sheets, and over 10 content
management sites. As a result, costs and resources areas to independently manage and monitor their own risks and controls. However, this goal was
have been saved. hindered by a number of organizational challenges:
Mitigated threat of silos
Across business units, MetricStream has streamlined
Challenges
risk and compliance workflows including SOX 404 Multiple risk and control terminologies
testing, risk management, legal regulatory compli- Each department in the company had its own risk and control terminologies. There were no common
ance, NERC compliance, Enterprise Risk Manage-
risk standards, definitions and risk rating methodologies. In addition, risks were classified based on
ment, disaster recovery, corporate audits and IT
infrastructure. Training process efficiencies have business units rather than corporate impact. This resulted in inconsistent risk evaluation, as well as
also been improved by tracking training statuses data discrepancies. Moreover, it was difficult for management to gain a clear understanding of the
through the common GRC system rather than through impact of risks and controls, as well as the status of risk mitigation across the enterprise.
separate initiatives.
Redundant risk management activities
Unification of risks The company employed multiple independent systems to manage its risks. Therefore, Enterprise risks
MetricStream solution has helped the company were managed on one system, SOX risks and controls on another, and SOX control testing on a third.
establish a unified rating scale to measure the prob-
The lack of collaboration between thesesystemsresulted in the duplication of controls and risk mitiga-
ability and severity of risks across the enterprise.
This enables mangersto prioritize risks more sharply, tion activities which, in turn, increased costs.
and determine which ones need more concentrated
mitigation plans, as well as regular monitoring. Manual Inefficiencies
The company used multiple complexspread sheets, email channels and content management sitesto
Standardized risk-control self-assessments record their assessments of risks and controls. The task of manually entering details and updates on
MetricStream Solution enables the company to cre- these systems proved laborious and time-consuming. In addition, the process was vulnerable to errors
ate a common risk vocabulary and evaluation criteria.
and subsequent data discrepancies.
As a result, risk-control assessments and monitoring
can be standardized and streamlined across business
units. In turn, the evaluation and reporting of risks Insufficient visibility into reports
can be improved. Managers can confidently decide The lack of a unified reporting system resulted in the production of multiple risk management reports
whether to enhance controls or accept risk levels as from each business unit. Consolidating these reports into actionable strategy at the enterprise level
they are. was both complex and time-consuming. It required merging large sets of data at various levels of
granularity to provide value-added information. Gaining quick access to the desired reports in the
Seamless collaboration and information sharing desired format was not often possible.
MetricStream solution breaks down organizational
barriers by providing a single point of reference to
share information and coordinate risk management
Change management threat
processes. The centralized information repository As the company migrated to an integrated risk management model, the threat of disruptions to busi-
enables policies, risk and control assessments and ness stability and sustainability were ever-present. Information could be lost, processes slowed down,
other critical information to be accessed quickly and and procedural or human errors incurred. What was required was collaboration and coordination
safely. It also establishes a single version of facts across departments, units and organizations. This was possible only though a centralized technology
which, in turn, improves transparency, and helps framework.
embed a strong risk culture across the enterprise.
Moreover, it equips management with the right
information to make deliberate strategic decisions at
any time.

2. MetricStream
Automation Solution
MetricStream ERM Solution has enabled the com-
pany to automate end-to-end workflows such as risk To achieve its goal of an integrated risk management model, the companydrew up an extensive busi-
identification, monitoring and issue remediation. As ness plan beginning with the creation of a governance structure. This structure was to be based on
a result, the need for manual, paper-based processes a top-down and bottom-up approach to risk management. At the top, a risk committee wouldset the
has been eliminated, and the time and effort required tone,and at the bottom, employeeswould be educated and motivated to assess and mitigate risks.
for various risk related activities has been reduced.
Information wouldseamlessly flow up and down this channel, enabling the creation of a strong risk
The risk of manual errors has also been minimized.
culture.
Roles and responsibilitieswere identified for various stakeholders in the new risk management model.
Risk Framework Risk Definitions For instance, the Board of Directors would identify the risk appetite, while the business units would
Ability to generate or obtain
populate the risk register with regular risk and control self-assessments.
•Corporate Funding sufficient cash, in a timely
•Collateral Requirements manner, to meet demands as
Liquidity •Contingency Funding they arise (expected and
unexpected)
The foundation of this new risk management model would be an integrated GRC system. The system
had to enable enterprise-wide collaboration, eliminate redundancies and improve transparency into
•Market Factor Sensitivity
Potential loss arising from
risk management processes.
•Volume Risk
•Market Liquidity adverse movements in
Market external market variables
•Investment Performance
After considering several solution vendors, the company selected MetricStream. The selection was
Risk of loss inherent in
based on MetricStream’s advanced single platform approach to risk management, as well as its
•Settlement Risk
•Counterparty Performance
business segments, resulting
from counterparty failure,
successful track record in the energy industry. MetricStream also impressed with the flexibility of its
Credit •Supply Chain decreased creditworthiness,
and poor performance
platform to scale up to address future GRC requirements.
•People
•Process Risk of loss from inadequate The companypurchased MetricStream Integrated GRC platform with solutions for Enterprise Risk
or failed internal processes,
•Financial Reporting
•System people, financial reporting, Management, Corporate Compliance Management, Corporate Audit Management, Issue Management
Operational systems, or external events
•External and Policy/Document Management.
Risk of loss and
•Law Changes
•Non-Compliance
associated harm due to
the company’s For the purpose of this study, Enterprise Risk Management will be the focus.
•Environmental Impacts interaction with the
Environmental •Environmental Positioning
environment
Enterprise Risk Management
•Industry Changes
•Demand Changes
Risk of unsuccessful performance
due to potential threats, actions, MetricStream Enterprise Risk Management Solution helps the company identify, assess, quantify,
or events adversely affecting the
Business &
•Competition
•Political Risk
organization’s ability to achieve its monitor and manage its enterprise risks in an integrated manner. The solution is built on asingle
Strategic objectives
web-based platform that extends across the company’s departments, units, suppliers, branches and
Potential negative publicity locations. Itconsolidates risks and controls, identifying concentrations and interdependencies. As a
•Unethical Behavior regarding business
•Crisis Management practices, regardless of result, the companyis able to streamline risk management workflows and establish a closed-loop risk
•Association Risk validity
Reputational
management process across the enterprise.
MetricStream solution also integrates enterprise-wide risk assessments, the results of which can be
leveraged by multiple business units and functions including Risk, SOX, Corporate, Audit, Environ-
mental, IT and Business Continuity departments. This collaborative pattern of functioning helps the
companybreak down operational silos and eliminate redundancies.
The solution also enables risk and control assignments to be independently managed downstream,
while simultaneously rolling information back upstream to provide enterprise-wide visibility for manag-
ers. Top-down and bottom-up risk identification and managementare supported. Therefore, while risk
identification may occur in any area, it is automatically mapped back to each business process.
Issues that arise during risk or control tracking are automatically routed to an issue management
module. Here, a systematic mechanism of investigation and remediation is set off by the underlying
workflow and collaboration engine. Simultaneously, automatic alerts and notifications are sent to the
appropriate personnel for investigation and remedial action.
Central risk repository
MetricStream provides a centralized library and framework to collate all risks, controls,key risk
indicators, key performance indicators, regulations, policies and other vital information.A common
risk register brings together all risk management data including risk description, severity, impact,
consequences, risk ratings, mitigation plans and related emerging issues.
Data is made available to all of the company’sbusiness functions, and can be shared or aggregated to
enable more informed decision making. Communication is improved,while risk vocabularies and evalu-
ation criteria are standardized.

3. MetricStream
MetricStream ‘s information repository is equipped with an easy archival and search capability which
il enables users to quickly check if a risk related issue was resolved, or if a specific control was tested.
R eta This way, process repetition can be avoided, and data consistency maintained across the enterprise.
Business
Continuity
Ris
k
Cre ket
Le
dit
ga
l
r
na Risk Control Self-Assessments (RCSA)
Ma
Genera
l
io
at
Info er n MetricStream solution supports a repeatable RCSA process where each business unit identifies the
Op ma s
Techn
olo Libraries Hu ource risks impacting its process, and assigns probability and impact estimates. The risk assessments are
gy s
Hierarchy Re
tion
Business Corpo based on configurable methodologies and algorithms which provide an in-depth view of the organiza-
r
ntal Processes Secur ate tion’s risk profile, enabling managers to prioritize their risk mitigation plan for optimal returns.
o nme ity
Envir
R e mp
e
gu lia
dit rat
Co
SOX
Finance-
Once risk self-assessments are completed, MetricStream Solution aggregates the risk data, control
lat nc
Au rpo
or e
effectiveness monitoring and management reporting. At every stage, risks arelinked with the appropri-
Co
y
ale
ol
es ate mitigating controls, processes and policies. This simplifies information sharing and enables risk
W
h managers to monitor controls more effectively. Controls are defined and assessed based on predefined
criteria and checklists which support the scoring, tabulating and reporting of results.
‘MetricStream has played a critical role in our
quest to build a proactive, fully integrated risk
management framework. Their Enterprise Risk
Management solution has seamlessly aligned Processes
with our strategic vision, as well as our sys-
tems, processes and units. It has broken down
silos, streamlined risk processes and helped
us build a more collaborative, efficient and
sustainable risk management framework. We Metrics & Risks
are delighted with the results, and look forward Loss Data
to extending the platform to other critical GRC MetricStream
areas,” said a spokesperson from the company.
Risk
Controls
Assessments
With MetricStream solution, the energy company can track risk metrics, loss events and near misses,
along with their root causes and owners, as well as their remediation plans. The companycan also
monitor risk thresholds through Key Risk Indicators which provide automatic notifications whenever
these thresholds are breached. Executive dashboards provide further visibility into the risk analysis,
highlighting the severity and likelihood of risks along with their current positioning.

4. MetricStream
Risk reporting
Why MetricStream MetricStream solution categorizes riskson various levels and presents them through detailed risk heat
maps which can be accessed globally. These heat maps and related graphical chartsdisplay real-time
MetricStream’s solution provides a unified approach information, and can be drilled down to view the data at finer levels of detail.
and an integrated solution to meet strategic objec-
tives, as well as risk and compliance requirements. Operational risks, corporate risks and other high level risks are highlighted depending on their impact
on various functions and processes. This data then rolls up to the centralized core library and can
MetricStream Solution provides a centralized library
to hold policies, certifications, risk and control be used to create standard as well as customized reports for risk management activities across the
assessments and all other documentation for easy enterprise.
review and reference.
MetricStream Solution demonstrated the ability to
Sample Top Risks
Remote Moderate Likely Frequent
handle the company’s specific requirements for an
ERM framework, risk terminology, consistency, rank-
ing methodology and more. • Liquidity
MetricStream Solution ensures security of electronic
Probability
• Market
records, and provides time-stamped audit trails,
role-based access controls, electronic signatures and
• Credit
password management
• Operational
MetricStream has the ability to support large leading
organizations and meet their IT requirements in the
• Environmental
areas of integration, configurability, scalability and
security.
• Business & Strategic
Rare
MetricStream offers a broad set of solutions on a
• Reputational
Insignificant Minor Significant Major Critical
Web-based platform with capabilities to map its of-
fering to all governance, risk, compliance, and quality
Impact
processes within the company.
The reports offer risk metrics by a variety of parameters such as by process, business unit or status.
They also offer regular trending analyses which enable risk managers to stay updated on the progress
of risk management programs. Automated alerts, provided for exceptions and failures, eliminate
unpredictable events and stabilize risk management processes.
For more information, visit
www.metricstream.com
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