Proactive risk management is fundamental to our ability to meet both our short and long-term strategic objectives. We manage, monitor and report on the principal risks and uncertainties that could impact our ability to deliver our strategic ambitions. Our system of risk management and policy is well established and is consistently operated across the organisation. Our priority is to understand the risk environment, identify the specific risks and assess the potential exposure.
From a risk perspective, 2020 has been a challenging year for most businesses, Gas Networks Ireland included. However, we have met this challenge head on, activating our Business Continuity and Crisis Management plans in March. The COVID-19 pandemic has significantly influenced our risk profile and has been a key consideration for managing the risks outlined below. In addition, we have effectively planned for risks associated with other external factors/drivers such as Brexit.
Risk management framework
Our Board has overall responsibility for risk management and the systems of internal control. A proactive risk management culture supports the overall organisational culture, values and expected behaviours for the organisation and a clear programme of work to reinforce and enhance this continues. Appropriate governance structures have been further enhanced and integrated to ensure that there is clarity of ownership and responsibility for risk management.
The risk appetite is set annually by the Board by determining the nature and extent of the risks we are willing to accept. Authority is delegated to the Audit and Risk Committee to support the Board with these obligations. They are supported in maintaining an effective risk management environment by functional and executive governance fora. We are continuously enhancing risk governance by integrating and automating our activities across our systems of risk management, internal control and internal audit.
Clarity of reporting on the risk profile and ensuring greater integration with both organisational objective reporting and operational, financial and performance reporting, has been a priority for the Risk Management teams during 2020. As part of Ervia’s Risk Strategy, this and other risk culture and continuous improvement initiatives, including taking learnings from risk management during the ongoing COVID-19 pandemic, will continue to be a focus in 2021.
The nature of our business operations is long-term, resulting in many of our risks being enduring in nature. These risks can develop and evolve over time, as their potential impact or likelihood changes in response to internal and external events. At the same time new risks are constantly emerging and the risk strategy and framework is continuously evolving. Therefore, an effective and integrated risk management framework and strong risk culture is essential to support the delivery of our strategic and operational objectives. Proactive risk management allows us to create added value for our shareholders, customers and the wider community. The risk strategy and framework is continuously evolving.
Our risk management activities
Day to day
Identify, manage, challenge and report risks.
Integrating with strategy & process
Risk assessment is integral to strategic planning, investment prioritisation and project appraisal.
Functional and Executive Risk Committees support the Audit and Risk Committee.
A major health and safety or environmental incident resulting in significant impact and harm to an employee, contractor or the general public.
All health, safety and environmental legislation and arrangements must be adhered to in order to protect staff, contractors, and the public from injury or fatality and avoid potential prosecutions, financial loss and reputational damage.
- The Central Safety Committee (which is an Executive Committee) oversees Health & Safety performance.
- Certified to ISO45001 Safety Management Systems and the ISO14001 Environmental Management System.
- Internal and external assurance activity, audits, emergency exercises and reviews.
Significant employee health risk or business disruption due to the impact of COVID-19.
Large scale employee illness due to an epidemic or pandemic (e.g. COVID-19) that affects Ireland’s population, potentially impacting employee health and wellbeing, operations, service delivery and supply chain.
- Revised pandemic plan preparedness in place since 2018.
- Crisis management team operating for the duration of the crisis.
- Ervia and Gas Networks Ireland COVID-19 response plan in place.
- Business continuity contingency arrangements activated.
- Engagement with key stakeholders (HSE, HSA, CRU, Government Departments etc.) and peer utility benchmarking.
- Clear communications plan including co-ordinated employee messaging.
- Working arrangements in place - majority of employees working from home with essential workers identified for office/field/site work with supporting COVID-19 controls in place as per response plans.
- Additional health and wellbeing supports in place.
An event resulting in Gas Networks Ireland not being able to maintain sufficient gas supply to meet existing and future demand could result in reputational and financial damage.
Gas Networks Ireland is responsible for operating the natural gas pipeline network to ensure gas supply to the Republic of Ireland.
- Compliance with (EU) 2017/1938 (gas Security of Supply) Regulation and key stakeholder engagement as part of the Energy Security of Supply review at Government level.
- Twining of the onshore gas pipeline in Scotland reinforces security of supply for Ireland and the UK which was completed in 2018.
- The Corrib gas field provides an indigenous supply of gas and enhances security of supply for Ireland for the next number of years.
- Comprehensive asset inspection and maintenance programmes.
- Network Development Plan published annually.
- Network Capacity Management Plan.
- Capital investment plan and projects.
Failure to successfully implement and deliver Gas Networks Ireland’s long-term growth strategy, a loss of competitiveness, the potential negative impact of legislation, an inability to meet the required decarbonisation obligations or a failure for Gas Networks Ireland to become a leading sustainable Irish business.
Decarbonisation of energy remains one of the biggest challenges facing the world. EU and Irish energy and climate action policies are targeting the long term elimination of fossil fuels, including natural gas (which is the cleanest fossil fuel). Inability to decarbonise the gas network will result in a risk of continued energy emissions and under-utilisation of the gas network. This could lead to tariff increases and potentially stranded assets.
- Ensure that the role a decarbonised gas network can play (in partnership with renewable electricity) in Ireland’s future energy system is recognised, understood and appreciated by key stakeholders.
- Invest in sustainability initiatives and long-term strategies including Compressed Natural Gas, renewable gas and ensure the network is ready to transport and store hydrogen.
- Sustainability performance and strategy with clear governance and monitoring.
An inability to fully deliver current or future Capital Investment Plans due to limited supply chain capacity within the construction industry or a failure of a key supplier which could result in a failure to meet network capacity or sustain asset health through planned maintenance activities.
Large capital programme agreed with the Commission for Regulation of Utilities (2017-2022). Similar programme being planned for period (2022-2027). Gas Networks Ireland’s strategy to decarbonise the network requires significant investment.
- Engagement with Commission for Regulation of Utilities on future spend and targets.
- Relationship management model in place.
- Corporate plans in place with gas demand planning and business planning.
- Internal supply chain expertise and proactive supply chain interactions.
- New construction and engineering contracts in procurement will ensure partners are right-sized for Gas Networks Ireland’s workload.
- Broad recognition across Government, regulators and energy industry that the growth of renewables is complemented and supported by natural gas today and renewable gas in the future.
A cyber-attack causing serious loss of service, data leakage or restriction to information and/or operational technology would impact service delivery and infrastructure.
An incident could result in potential business delivery disruption, safety issues, reputational damage or potential regulatory fines - likelihood potentially increased in current remote working environment (due to COVID-19).
- Ongoing investment in prevention and pro-active controls across all critical systems,
- Contingency plans developed and Ervia-wide data and cyber security awareness training.
- Security Operations Centre (24*7 monitoring) being established.
- Ongoing risk assessment, IT expertise procured and external independent assurances reviews.
Potential for significant business disruption as a result of negative impacts arising from UK’s exit from the European Union.
Potentially impacted areas are supply chain, procurement, regulation, finance, data protection, European Affairs and EU funding, all of which could result in a potential risk to operational delivery.
- Brexit Steering and Working Group in place.
- Proactive engagement with key stakeholders including Government Departments, suppliers, partner utilities, regulators, shippers, Irish Revenue and HMRC.
- Key exposures identified and contingencies put in place where required e.g. supply chain, procurement, tax, custom returns, data protection and regulation.
- Proactive engagement at EU level to build new alliances and highlight Brexit impact on Ireland.
- Ongoing facilitation of dialogue between Revenue and gas shippers (who use the network) in relation to meeting customs obligations.
- Tax and customs arrangements in place including a customs agent.
Significant organisational transformation increases the risk of organisational stress.
Significant organisational transformation must be managed appropriately to reduce the risk of organisational instability.
- Organisation Design Steering Group and work force planning process are in place to plan, manage and support any organisational transformations.
- Engagement and culture approaches including regular surveys alongside ongoing continuous improvement processes in place.
- Significant health and wellbeing programme in place to support staff.
- HR strategy is being implemented which includes initiatives such as an ibelong diversity and inclusion programmes, agile working and employee development programmes.
Our activities expose us to a number of global macroeconomic and financial risks - credit risk, funding and operational allowance model risk, liquidity risk, currency risk and interest rate risk.
Business Plans set out the funding and allowance requirements for the business.
- Defined risk limits, delegations of authority and exposure monitoring in place.
- Ongoing engagement and relationships with Government, institutional and potential investors.
- Close monitoring and impact assessment for any macro-economic events e.g. Brexit, COVID-19.