Communicating with Risk

This may not pertain to everyone. However, in the interest of
over-communicating rather than under-communicating, please read the following.
---------------------- Forwarded by Tim Belden/HOU/ECT on 11/01/2000 08:48 AM
---------------------------
From: Tim Belden on 11/01/2000 09:41 AM
To: Mike Swerzbin/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT, Sean
Crandall/PDX/ECT@ECT, Tim Belden/HOU/ECT@ECT, Jeff Richter/HOU/ECT@ECT, Diana
Scholtes/HOU/ECT@ECT, Tom Alonso/PDX/ECT@ECT, Mark Fischer/PDX/ECT@ECT, John
M Forney/HOU/ECT@ECT, Paul Choi/SF/ECT@ECT, John Malowney/HOU/ECT@ECT, Holli
Krebs/HOU/ECT@ECT, Greg Wolfe/HOU/ECT@ECT, Chris H Foster/HOU/ECT@ECT,
Stewart Rosman/HOU/ECT@ECT, Kim Ward/HOU/ECT@ECT, Debra Davidson/PDX/ECT@ECT,
Tim Belden/HOU/ECT@ECT, Lester Rawson/PDX/ECT@ECT
cc: Monica Lande/PDX/ECT@ECT, Valarie Sabo/PDX/ECT@ECT, Fran
Chang/PDX/ECT@ECT
Subject: Communicating with Risk

A couple of things happened yesterday where communicating with our risk team
could have saved them a lot of time. I have asked the risk group to put
together a list of things they need to know from us each day; until we
distribute the definitive list, this e-mail should serve as a reminder that
more communication is much better than less.

First, you need to hear about how a simple little thing can cause our risk
systems to blow up. My goal is not to point a finger, but rather to
highlight the fact that we need to be thinking about the risk group any time
we change something in Enpower. Yesterday, somebody on the short term
california desk entered a 1 MW deal for 1 hour with the wrong delivery
point. The delivery point was somewhere in the eastern US. The deal was
promptly changed, but not before the east desk had "calced" their books.
When the west risk group attempted to "calc" our books, the system found a
deal (the same 1 MW deal) that had already been "calced" by the east. The
result was that the portcalc blew up and there was no way to know why. The
technology group in Houston worked through the night to figure it out. Our
risk group was here until about 11 PM trying to figure it out. Finally, the
problem was discovered this morning. The result was that we didn't publish a
preliminary P&L last night and we didn't have correct positions this
morning. On top of that, people who are already overworked had to put in
long hours. IN THE FUTURE, IT IS YOUR JOB TO COMMUNICATE INFORMATION --
LARGE OR SMALL -- TO THE RISK GROUP. It is impossible to know what types of
things may cause problems. Therefore, I can't prescribe exactly what has to
be communicated. Obviously, you don't need to tell them about every deal
that you have entered, but you need to tell them about any changes to deals.
Try to communicate too much. Let them tell you when it is too much
information.

Another area of communication that must be improved concerns long term
deals. The interest rate group needs to know about material changes in cash
flows in the future. Our risk group currently communicates this information
to the interest rate group. If we don't tell them, they can't tell the
interest rate group, and the interest rate group yells at our risk group.
Nobody likes to get yelled at. Yesterday, we did a couple of long term deals
with BPA in the 2002 to 2006 timeframe. Nobody on the desk communicated this
to the risk group. In the future, please communicate any deal that is longer
than a year to the risk group.

Again, my goal is not to chastise the people who caused the problems
yesterday. We had no idea that changing a small deal could blow up our
system. But going forward, I am going to be really mad if our lack of
internal communication leads to uneccessary work and/or headaches for others
on the floor. All of our lives will be much better if we communicate more.

Thanks for your attention to this matter,
Tim