Qualitative Analysis of Enterprise Risk Management Systems in the Largest European Electric Power Companies

Enterprise risk management (ERM) is an important element of an efficient and comprehensive corporate governance system. It represents a combination of activities that minimise the negative impacts of the risk exposures on the company’s value and long-term corporate sustainability. Recently, there has been a growing awareness on the role and importance of the risk management function. Such trends are partly driven by the consequences of the last economic and financial crisis on the one hand, and on the other by legal and regulatory requirements. The economic downturn caused by the COVID-19 pandemic, volatility in the energy markets and increased uncertainty expected in the upcoming period reiterate the importance of timely risk management practices, because organisations with developed risk management systems are more resilient in case of crisis. This paper analyses the organisation and level of development of ERM systems in the ten largest European electric power companies. The companies’ data on risk management practices are collected from annual reports and analysed by applying Content Analysis (CA), searching for 29 characteristics of a developed ERM system. Research results reveal that ERM in the largest EU electric power companies can be considered as advanced as it applies the five dimensions of the COSO 2017 framework. The analysis confirms the existence of 27 out of 29 characteristics of a developed ERM system, confirming that these characteristics are rooted not only in the relevant ERM theory, but also in the practice of large and successful electric power companies.