Centrica Risk Forum

How does Risk Management fit together within

Centrica?

14 December 2010

2

Introduction

• How do all the moving parts of the risk organisation fit together?

3

Centrica’s Governance, Risk and Control Framework

Governance Framework

Bu

sin

es

s Pe

rform

an

ce

Re

po

rting

(Info

rma

tion

a

nd

Mo

nito

ring

)

Control Environment

Strategic Operational Compliance

Board & Sub Committees

Control Activities

Riskappetite

Policies & Procedures

Delegated Authority

People & Values

Risk Management

Str

ate

gic

Pla

nn

ing

Internal Audit

4

Centrica’s Governance Structure

Board

CEC

Audit Committee

NominationCommittee

CRCommittee

DisclosureCommittee

Remun.Committee

Group Risk Management Committee

Controls Board

ISLeadership

Team

Group Regulatory Compliance

Centrica Policy Group

Group Financial Risk Management Committee

CSL Board

European Financial Risk Management Committee

DE Financial Risk

Management Committee

European Energy Margin

Committee

DE Downstream

Margin Committee /

Upstream Hedge

Committee

QPR

Info RiskControls Group

Investment Sub

Committee

Group Storage Fin. Risk

Management Committee

D MP D M P M

P M

D

M

P M

M P M P M

P D M

P D M

P M

M

P M

P M

P D M P D M

P D M

HRLeadership

Team

P M

GP&SM Governance

Group

P M

HSE Committee

P M

Controls Steering Group

M

CSL BRMC

M

DE Audit (1) Committee

M

CC / CE / OBG

BRMC’s

M

CCLT CELT BGX

DE Exec

P D M

DE BRMC

Key:P Policy Setting role

D Decision making / escalation role

M Monitoring role

1. Currently being established following Audit Committee request 2. Separate arrangements exist for the oversight of regulated entities

M

5

Governance Arrangements for Risk & Control

Board

CEC

Audit Committee

Group Risk Management Committee

Group Financial Risk Management Committee

CSL Fin. Risk Management Committee CSL BRMCBUSINESS

RISK

DE BRMC

FINANCIAL RISK

CE BRMC

BG BRMC

CCC BRMC

DE FRMC

Centrica Controls

Board

Controls Steering Group

Information Risk Steering

Group

CRC

HSE

European FRMC

6

Risk Registers – How the Information Flows Up

CentricaGRMC / Group Risk register

British Gas BGX / risk

register

Direct Energy BRMC / risk

register

Centrica Storage BRMC

Power risk register

Midstream risk register

Upstream risk register

DE Business risk register

DE Residential risk register

DE Upstream risk register

DE Services risk register

BG Insurance risk register

BGS risk register

BGB risk register

Functional areas (Legal, HR, IS,

Finance)risk registers

Group HSE

Group IS

GroupProcurement

Corporate Centre

Centrica Energy BRMC / risk

register

DE Financerisk register

IS risk register

Legal / Regulatory dashboard

BG P&Ls

7

Risk Management Process

OBJECTIVES ANALYSIS CONTROL REPORTING, MONITOR & CHALLENGE

Centrica Executive

Committee / Board

Business Management

Business Management

Business Management

Business Risk Mangement

Committee BRMC / Management Teams (DE Risk Committee)

Group Risk Management Committee

(GRMC)

Definition of strategy

including Risk Appetite and

Risk Tolerance

Strategy translated in to BU / Function

Objectives

Risks identified

Risks described

Risks assessed

Risk tolerance

determined

Controls identified and

mitigating actions

determined

Risks & associated

controls reviewed

Group risk register

(priority risks)

Executive Challenge

To ensure that all significant Group

risks are identified, assessed and that

stable management strategies and

related actions are put in place

Business as Usual ProcessesRisk Management Policies to be embedded in

the day to day activities of the BUs and Functions

Review and challenge of Group risks

Audit Committee

Non Executive ChallengeTo review &

challenge the effectiveness of

internal controls to safeguard

shareholders, investment and

company assets

BU / Function risk

registers

Risks and associated

controls reviewed

Business PlanningTo develop

Operational plans aligned to specific

strategic imperatives for that BU /

Function

Strategic Direction Setting of Centrica’s core objectives and the level of risk to be

accepted to meet these objectives.

Ensuring corporate governance practices are

adopted

Leadership and Team ReviewTo ensure an effective risk Management

processes in place at BU / Function level. i.e. key risks have been identified and

are effectively controlled and

regulated

8

Group Business Risk Organisational Chart

Head of Audit& Risk

David Jardine

Group Head of Risk

Kevin Thomas

Internal Audit, EMEA & Direct

Energy

Group Risk Manager

Gus Carroll

VP Risk & Controls

Mark Linzenbold

Direct Energy Business Risk

Business Risk

Fraser MclarenRisk Manager

Erica BrittanAdministrative

Assistant

Matthew HignettRisk Manager

Peter StapletonBusiness Risk

Analyst

BU Risk Champions

BG, CE, CSL Business Risk