Xcel Energy 2013 Annual Report Download - page 53

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Oversight of Risk and Related Processes
The goal of Xcel Energy’s risk management process is to understand, manage and, when possible, mitigate material risk. Management
is responsible for identifying and managing risks, while the Board of Directors oversees and holds management accountable. Xcel
Energy is faced with a number of different types of risk. Many of these risks are cross-cutting risks such that these risks are discussed
and managed across business areas and coordinated by Xcel Energy’s senior management. Our risk management process has three
parts: identification and analysis, management and mitigation and communication and disclosure.
Management identifies and analyzes risks to determine materiality and other attributes such as timing, probability and controllability.
Management broadly considers our business, the utility industry, the domestic and global economy and the environment to identify
risks. Identification and analysis occurs formally through a key risk assessment process conducted by senior management, the
financial disclosure process, the hazard risk management process and internal auditing and compliance with financial and operational
controls. Management also identifies and analyzes risk through its business planning process and development of goals and key
performance indicators, which include risk identification to determine barriers to implementing Xcel Energy’s strategy. At the same
time, the business planning process identifies areas in which there is a potential for a business area to take inappropriate risk to meet
goals and determines how to prevent inappropriate risk-taking.
Management seeks to mitigate the risks inherent in the implementation of Xcel Energy’s strategy. The process for risk mitigation
includes adherence to our code of conduct and other compliance policies, operation of formal risk management structures and groups,
and overall business management. At a threshold level, Xcel Energy has developed a robust compliance program and promotes a
culture of compliance, including tone at the top, which mitigates risk. Building on this culture of compliance, Xcel Energy manages
and further mitigates risks through operation of formal risk management structures and groups, including management councils, risk
committees and the services of corporate areas such as internal audit, the corporate controller and legal services. While Xcel Energy
has developed a number of formal structures for risk management, many material risks affect the business as a whole and are managed
across business areas.
Management communicates regularly with the Board and key stakeholders regarding risk. Senior management presents a periodic
assessment of key risks to the Board. The presentation of the key risks and the discussion provides the Board with information on the
risks management believes are material, including the earnings impact, timing, likelihood and controllability. Management also
provides information to the Board in presentations and communications over the course of the year.
The guidelines on corporate governance and Board committee charters define the scope of review and inquiry for the Board and its
committees. Each Board committee has responsibility for overseeing aspects of risk and Xcel Energy’s management and mitigation of
the risk. The Board of Directors has overall responsibility for risk oversight and with the committees periodically undertakes the
review of the charters to ensure that oversight of key risks are appropriately considered by the various Board committees. The Board
also reviews risks at an enterprise level and annually conducts a full day strategy session where it considers risks and confirms that
Xcel Energy’s strategy appropriately addresses risk management and mitigation and reviews the performance and annual goals of each
business area.
As described above, the Board reviews senior management’s key risk assessment that analyzes the most likely areas of future risk to
Xcel Energy. This review, when combined with the oversight of specific risks by the committees, allows the Board to confirm risk is
considered in the development of goals and that risk has been adequately considered and mitigated in the execution of corporate
strategy. The presentation of the assessment of key risks also provides the basis for the discussion of risk in our public filings and
securities disclosures.