Interview: Michel Dennery, GDF Suez

The risk manager of the French energy giant EDF Suez discusses the current risk landscape with StrategicRISK reporter James Bray.

Are pensions and benefits a key emerging risk?

This risk is related to the division and distribution of wealth. When you are in a time of strong economic growth, the cost of looking after society is relatively low so you can afford to increase funds going to social welfare. When the economy plateaus, which the case now in Western countries, you no longer have the economic growth to finance social welfare. If this social cost is impeding economic growth, you have to find a new balance in society without having huge reductions in the public sector.

Is the volatility of key commodity prices a worry for risk managers?

There are certain mechanisms in the market which cover this volatility and limit the impact of price variations on companies. Either you want to take the risks and opportunities that come with price variation or you transfer this volatility to the market by hedge buying. This is a choice for the business and in my opinion it’s not really a problem as it’s a well known issue.

The other factor is the trend of increasing prices in the long term; we’ve seen the prices of metals almost double in 10 years and the price of crops such as wheat and corn have increased significantly. In China there are 300m people who have a standard of living that is comparable to that of western economies, 300m is the equivalent of the European population. This standard of living increases the demand for energy, for water, for metal and for food. In the long term, there is a real question around price level and the profitability of business activities which are dependent on these primary resources.

How is risk management evolving?

The question today is to go further and ask companies to be more explicit about their risk appetite. Moreover, this is the goal of the green paper published by the European Union, the 9th Directive on corporate governance. When we talk about risk appetite, we are talking about the development of the business, the appetite for business growth. We still have work to do but I think that the future of risk management is to become aligned with the business strategy of the company as well as working more at an operational level. This must all take place by interacting with business ethics, internal control and audit.

Do you often communicate with other risk managers outside France?

This is Ferma’s objective, to allow risk managers around Europe to communicate and to form a community. As professionals, it’s very important to be able to exchange ideas so we can improve risk management in our organisations and have new ideas. Ferma has developed a number of communication tools with social networks: there is a facebook community, there is a LinkedIn community, there are videos on Youtube relating to risk management. I really have been pleasantly surprised by the appetite that risk mangers have to communicate with their peers.

What is your opinion on cyber risk?

Companies have faced bigger risks in the past so cyber isn’t more of a worry than other risks, but it is a new problem. From my point of view, cyber is often highlighted as a negative thing and there is the real threat of hacking and of data loss but there are also a lot of opportunities. There is a whole new industry that is establishing itself around these new media that technology has provided. The question for businesses is to know how to anticipate this new business and harness it, protect their brand image and their market share by using these new media to engage with clients and stakeholders. For me there is also a generational or a cultural issue, it’s not a question of age; there are people who quickly familiarise themselves with new technology and there are those who switch off. I really have the impression that things are changing very quickly and that companies need to manage this change so they don’t leave people behind.

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