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Enron Mail |
Rick: =20
Thanks for the information on the task at hand regarding operational risk. = We will certainly name an appropriate person from Operations to be involve= d in this project, and will work with you to help in achieving your objecti= ves. There doesn't appear to be anyone from ETS on your distribution list.= Operational risk is broad and would seem to be present in all of Enron's = businesses. Is the initial focus simply on the "wholesale businesses", or = is there an intent to make this enterprise-wide? =20 I suspect that it would be helpful for all of us on the distribution list t= o have a context for the way in which you see this RAC initiative complemen= ting, replacing, overlapping, or perhaps duplicating the work of EAS, AA's = internal audit engagement, the critical self assessment process being pilot= ed in London this year by the operations team in conjuction with the AA aud= its, Doorstep reviews, current operational risk reporting done by the vario= us operations teams, and our major initiatives for EES tracked every other = Thursday with you and Rick Causey. Before we each choose our appropriate = representatives from our respective areas, it might be constructive to cove= r this in a kick-off meeting with the addressees on your memo. =20 I might also suggest that we work to clearly define roles and responsibilit= ies at the beginning of this project. The creation of a framework for quan= tifying enterprise-wide operational risk is perhaps different from the impl= ementation of daily processes or systems that are used at the business unit= levels. As on other policies devised by RAC, it would seem that implement= ation of anything new to meet reporting requirements against the to-be-deve= loped operational risk policy should rest with the appropriate business uni= t/functional area outside RAC. The cross-functional team that will be form= ed is probably best used to give input to RAC in creating the policy, but m= ay not necessarily be the right body for implementation of specific initiat= ives. =20 Finally, the second bullet point in Wanda's list below is already being add= ressed through the project that you and I agreed upon in August to insure t= hat information from all source systems to RisktRAC is complete, accurate a= nd efficiently handled. As you and I discussed, this is a global effort spa= nning all commodities/all locations/all source systems. We have formed a = steering committee with appropriate project managers and have worked closel= y with Debbie Brackett in defining the scope, approach, key milestones, res= ource requirements and projected timeline (Project Greenlight). A team of = stakeholders from Operations, IT and Debbie Brackett will meet tomorrow in = order to review the project plan with David Port and Bill Bradford for fina= l input. My assistant is working with yours to set up a meeting then for D= ebbie and me to review the work done to date and to review the proposed pla= n and timeline. Assuming that you are comfortable with Project Greenlight= when we review the details with you, I think that it would be appropriate= to take this item off of the Wanda's list. We can certainly update the cr= oss-functional team on efforts underway, but there is no need for a new tea= m to focus on this bullet point. =20 Sally=20 -----Original Message----- From: =09Heathman, Karen K. On Behalf Of Buy, Rick Sent:=09Tuesday, October 2, 2001 11:26 AM To:=09Causey, Richard; Beck, Sally; Pickering, Mark; Gorte, David; Dyson, F= ernley; Jordan, Mike; Colwell, Wes; Kaminski, Vince J; 'thomas.h.bauer@us.a= ndersen.com' Cc:=09Kilchrist, Shawn; Bharati, Rakesh; Walker, Mark A.; 'john.e.sorrells@= us.andersen.com' Subject:=09Operational Risk Management As you are all aware, the latest Risk Management Policy specifically addres= ses Operational Risk, and more specifically commits Enron to develop system= s and processes that enable Enron to better evaluate its operational risk. = To that end, I have asked Wanda Curry to lead a cross-functional team (the= "Operational Risk Committee"), which will be jointly accountable for meeti= ng this commitment. I would like to have representatives from Enron Assuran= ce Services, RAC, Research, Information Technology, GRMO and Arthur Anderso= n. =20 Enron's primary objective for monitoring its exposure to operational risk i= s to (a) identify the derivation of operational risk exposures and (b) impr= ove the Company's systems and processes to mitigate such risk. The guidelin= es for operational risk assessment are essentially undeveloped. It will be= our challenge to identify, assess, categorize, quantify and mitigate expos= ure to operational risk. =20 The risk capital allocation process includes the consideration of operation= al risk. Initially, this assessment will be based on a qualitative view of= the business unit's internal processes, people and systems. The initial go= al, for completion prior to year-end 2001, is to establish a baseline and/o= r report card to convey a sense for where we are now. It is Enron's object= ive, as reflected in the Risk Management Policy, to increase the sophistica= tion of risk measurement for operational risks through documented qualitati= ve assessments and quantitative measurements. =20 A list of additional objectives to be addressed by the cross functional tea= m has been prepared by Wanda. These include: =09 Develop a qualitative operational risk assessment approach and implement. = This approach should enable a quick review of key functions and standards t= o identify weaknesses, monitor progress over time, and provide management w= ith a representation of operational risk. Assess and improve integrity of daily risk reports, i.e. require confirmati= on that all books are captured, aggregated and processed through RisktRAC, = CreditAg, and Infinity applications Ascertain the extent of spreadsheet usage across Enron and develop the abil= ity to monitor NOP, V@R, and MTM for spreadsheets separately, i.e. a Spread= sheet DPR. Work with GRMO to develop "rules of use" for financial valuatio= n models and spreadsheet "books" Utilize the existing RMS database and develop the ability to monitor interc= ompany - interbook activity (initially for forward positions only) and repo= rt variances=20 Recommend metrics for quantitative measurement of operational risk Access need for additional or improved risk databases Wanda will be contacting each of you to identify your designated operationa= l risk contact that will participate on this cross-functional team. =20 Thanks, Rick Buy
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