Risk governance

In developing and executing Stedin Group's strategy, the Board of Management devotes extensive attention to the risks and opportunities associated with that strategy. The Board of Management has final responsibility for the execution of risk management, together with the management of the various business units. They are supported by support departments specialising in functional areas, such as Corporate Risk Management; Safety, Health, Environment and Quality (VGMK); Business Continuity Management; Security Office; Corporate Affairs and Compliance & Integrity. In addition, the Asset Management line department is tasked with preparing proposals for replacement investments based on a risk analysis, for which the ISO-NTA 8120 (ISO 55000) standard is applied. The operational asset risks are described in the Quality and Capacity Documents (2018-2020 investment plan) for Electricity, and Gas. The 2020 - 2022 investment plan is available from mid-June on www.stedin.net. Internal Audit performs audits and reports on the results to the Board of Management as well as the Supervisory Board's Audit Committee. A detailed description of risk governance is also available on our corporate website.

Risk management process

Stedin Group's Enterprise Risk Management (ERM) framework covers both long-term and short-term uncertainties. We based the design of this framework on the COSO-ERM framework and the ISO 31000 standard. The risk management process is a permanent part of the annual standard business planning and control cycle.

Long-term uncertainties

The risk management process regarding long-term uncertainties encompasses both risks and opportunities that constitute uncertainties in delivering the long-term strategy. Developments with regard to these uncertainties are covered by updates and reports once every quarter. These long-term uncertainties also serve as input in the selection of strategic initiatives, are part of the financial-strategic forecasts and are incorporated in the annual planning process. In this process, the long-term uncertainties are addressed as much as possible in the planning.

Short-term uncertainties

Risks and opportunities as well as the associated controls with regard to short-term uncertainties are identified. These are linked to the business and departmental objectives set out in the departmental plans for 2020. This information is gathered and updated at least once a year. We report on developments in these risks and the effectiveness of the controls applied to the Board of Management via monthly business unit reviews. The departmental management periodically reviews by means of self-assessment whether the controls applied to those risks are effective, in connection with the 'Jointly in Control process'. In addition, potential improvements are identified and actions are defined. The outcomes of these self-assessments are reported twice a year to the Board of Management in a Letter of Representation. They are one of the inputs that form the basis for the In-control statement of the Board of Management.

Risk tolerance

We have to incur a certain degree of risk in order to achieve our organisational objectives. The extent to which we are prepared to be exposed to risks (the risk tolerance) differs for each risk category:

With regard to both risks and opportunities, Stedin Group is continually seeking a balance between its role in society, the available (financial and other) resources and the environment.

  • Strategic – Neutral: Stedin Group is prepared to take moderate risks to achieve its mission, vision and strategic objectives.
  • Operational – Avoiding: Stedin Group is risk averse in connection with risks concerning supply security. In doing so, Stedin Group seeks a balance between supply security and (social) affordability.
  • Financial – Avoiding: Stedin Group is a capital-intensive enterprise. In order to ensure that our service provision to customers remains both reliable and affordable, we aim for an A- rating from Standard & Poor’s. We do not accept any risks that may endanger that rating. The reliability of our financial reporting is one of the preconditions for retaining this rating.
  • Compliance – Averse: We perform a regulated task in the energy world. We therefore seek to comply with all applicable laws and regulations.
  • Safety – Averse: The electricity and gas infrastructure is potentially dangerous (and can pose a threat to lives). We have the lowest possible risk tolerance in connection with the safety of our employees and our environment.