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Enterprise Risk Management In Pseg: An Overview

1470 words - 6 pages

The Public Service Enterprise Group, Inc. of today began its life as Public Service Corporation in 1903, by the amalgamation of more than 400 gas, electric and transportation companies in New Jersey. The then Attorney General of New Jersey Thomas McCarter was named the Corporation's first president (his brother Robert McCarter succeeded him as the Attorney General) and held he the position until 1939. The McCarter Highway in Downtown Newark is named after him.
In the course of business, Public Service consolidated its gas and electric interests into Public Service Electric and Gas, and its transportation interests into Public Service Coordinated Transport (later Transport of New Jersey), ...view middle of the document...

The RMP establishes a tolerance for risk at both the enterprise and business unit levels. It identifies risks included in, but not be limited to, the following categories: market, credit, operations, political/regulatory, legal, compliance, strategic, reputation, business interruption management, environmental and staffing. It quantifies the impact and likelihood of the above risks and manages the risks within established tolerance. The program monitors the management of risk against established tolerance; and ensures that financial integrity remains strong and risk of loss is effectively managed.
This policy will be implemented by establishing and maintaining:
a. Oversight by the PSEG Board of Directors over the establishment of corporate risk tolerance consistent with the achievement of current goals and strategic objectives of PSEG.
b. A Risk Management Committee (RMC) to provide oversight for the management of risk and adherence to specific limits as identified by PSEG’s internal guidelines
c. An Enterprise Risk Management functional organization to:
1. - Educate PSEG on the identification of risk and provide support of the development of risk management strategies to develop a culture of proactive management of risks by the owners of the risks;
2. Support the risk assessments performed by the business units to identify and quantify the impact and likelihood of the above risks.
3. Quantify and model market and credit risks and, to the extent possible, diversification and/or concentration issues related to the market/credit risk tradeoff and the other identified risks
4. Document the methods used to identify and measure risk and to monitor risk management;
The Vice President of Risk Management and Chief Risk Officer maintains the ownership of the process and has overall responsibility for implementation, interpretation and maintenance of this policy. The Officers and managers of PSEG and its affiliates also administer and monitor this Policy within their areas of responsibility.

Risk Management Program by categories:
As part of the Risk Management program, PSEG requires the evaluation of risks by various categories. The categories are (primarily):
o Credit Risks:
The exposure to economic losses that would occur as a result of nonperformance by counterparty or counterparties, pursuant to the terms of their contractual obligations. PSEG has a threshold for the value of a contract that could potentially be a credit risk i.e. monitors are set into place for the financial health of counterparties that are in a contractual obligation with PSEG over a certain dollar limit.
A few factors that the RMC monitor to access the financial health of counterparties are:
1. Industry standard financial ratios
2. Liquidity
3. Pending material litigations
4. Agency ratings
PSEG exercises various mitigants against Credit Risks; they are:
1. Counterparty diversification
2. Tenor of contract
3. Security enhancements such as parental guarantees, letter of...

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