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As discussed before John has asked us to send out this reminder of our standards - clearly as we gather the data for Shona's daily reporting we will discuss with the office of the chair Cheers Mike ---------------------- Forwarded by Mike Jordan/LON/ECT on 14/11/2000 14:30 --------------------------- Enron Europe General Announcement 14/11/2000 13:00 Please respond to Mike Jordan/LON/ECT To: ECT Europe, ECT Asia Pacific cc: Subject: Newsletter: GlobalFlash! John Sherriff writes....... Enron Trading is all about a unique combination of being "tight" and "loose". We give the managers of our trading books tremendous freedom ("loose") to make decisions on the spot and manage for profitability. We can do this because we have a standard way of controlling ("tight") that is consistent from trading book to trading book. Summarized below are the highlights of our fundamental risk management standards. These standards are an integral part of our trading discipline and culture and we expect all our employees both commercial and noncommercial to absolutely understand these control standards. These standards will evolve over time (especially as we move to new electronic trading methods) but the basics of separation of duties and accurate reporting are at the cornerstone of our business. So please ask plenty of questions about these standards, make sure you understand them and let us know when we are not living up to them. Questions and feedback should be directed to Mike Jordan on extension 34703. RISK MANAGEMENT CONTROLS IN A TRADING ENVIRONMENT To manage operational risk in a trading environment Enron has designed and implemented operational control standards. These standards, which are common for all businesses, aim to prevent errors and inaccuracies and ensure the timely recording of trading transactions. What standards does Enron have in place? Enron has six fundamental standards for risk management that cover: - Recording transactions - Reporting daily profit & loss and risk positions - Confirmation and execution of transactions - Settlements with counterparties - Risk management and settlement system information reflected in the general ledger - Implementation of business and control infrastructure What else is important when controls are implemented? Implementing segregation of duties within the trading environment ensures that no individual has control over all phases of a transaction. This allows incompatible functional responsibilities to be kept separate, specifically: - Authorization and execution of transactions - Recording and performance of transactions - Monitoring and review of trading activities Why do we need to standardised controls? To assimilate new or build existing commodity businesses Enron needs to be nimble and responsive. A robust and stable control process can be duplicated or flexed quickly and confidently, providing scalability and the capability to assess and manage operational risk. How do we measure successful control? By identifying and reporting metrics for all standards we build an understanding of compliance across all businesses and seek continual improvement. This compliments the qualitative cross-checking process facilitated by communication between Commercial, Risk Management Operations and RAC. The control measurement process will be part of a global initiative across all commodities and locations. Where can you find details of our fundamental standards? Mike Jordan - Head of Risk Management Operations for Enron Europe Fernley Dyson - Chief Accounting Officer for Enron Europe
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