March 2, 2024

Cooperative Adopts Enterprise Risk Management

Enterprise Risk Management

In its 2018 Annual Report, Southern Maryland Electric Cooperative took the opportunity to educate its customer-members on the co-op’s adoption of Enterprise Risk Management.

In the report, SMECO said that businesses always have risks to manage, from the everyday duties their employees perform to the rare crisis. To help the co-op manage risk across its entire organization, SMECO has adopted enterprise risk management as a strategic business discipline, monitoring the full spectrum of risks the cooperative must address.

SMECO started its ERM program by interviewing more than 40 stakeholders to discuss risks they deal with on a daily basis and to identify the biggest areas of concern. Because of the continual assessment, SMECO now has 81 risks being addressed through its risk management framework and each risk has been prioritized by its potential impact and likelihood of happening.

Every SMECO employee manages risk each day. Line workers meet to review work plans before they start a job, they wear safety gear, and they follow specific procedures when they work on power lines. Accounting personnel follow standardized business processes, use a system of checks and balances, and conduct an annual audit to make sure the co-op’s processes comply with regulations.

SMECO has a strong organization: its revenues are appropriate and expenses are under control; its excellent workforce and a solid foundation provide strength and stability. Through the ERM program, the cooperative is striving to consolidate monitoring of many different factors across the organization: from those related to interest rates and power costs, to system reliability and cyber security. By monitoring these factors, the cooperative is taking the measures that are necessary to understand and maintain its enterprise health.

Decisions in a risk management culture are based on a 360-degree view of risk at all levels. SMECO’s management team considers trends, industry best practices, impacts, effective controls, resources, and the likelihood that a given risk will occur.

The ERM offers a managed plan for risk, and therefore:

  • SMECO then actively monitors risk areas using quantitative metrics.
  • The cooperative takes a more managed approach to identifying, assessing, and controlling risk.
  • SMECO is ready to mitigate and respond to risks more uniformly.
  • The organization educates, trains, communicates, and engages employees in risk management initiatives to create a culture of risk awareness.

While SMECO has always practiced risk management to varying degrees, the ERM program formalizes its approach. Details on ERM and more can be found in the 2018 Annual Report.

To learn more about SMECO, visit its Leader member page.

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