PA’s Olaf Remmler, energy risk expert, is quoted in the magazine Energy Risk. Olaf gives his view on how the market moving events of this year are causing risk managers to revisit the basics of stress testing.
Commenting on the process of stress testing, Olaf says that people usually "look backward and say the most extreme scenario we have seen is XYZ and that’s what we’ll employ in our stress test and we’ll do that either daily or weekly."
Olaf goes on to predict that the focus of stress tests for utilities is about to change: "Now what my clients are thinking about is ‘how do we treat events?’ The likelihood of a transformer blowing is around one in a million. How do you take account of that in your risk assessment? So far utilities have taken a very high-level and simplified approach, and I think some of them, depending on how asset heavy they are, are now thinking is there a better way of measuring and integrating the operational risk of such events?"
You can read the article in full here.
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