The impact of risk management effectiveness on Power Utility performance - 5th International Conference on the European Electricity Market

A risk management is very important; it enables company to react in early stage of change in environment and avoiding possible crises. Risk management is a factor of business performance. In order to prove the existence of a relationship between Risk management effectiveness and company performance we defined a Risk management index (RMI) and compare it with three company performance indicators. RMI is determined by ten factors that could be grouped into four categories: risk management system, institutional, instrumental and functional aspect of risk management. The Thesis is: there is a correlation between the existence of an effective risk management system in place and company performance. We used three performance indicators: Return on fixed asset, Return on sale and Operating profit margin to measure the company performance. Results of empirical research shows positive Pearson factor of correlation between RMI and company performance indicators and that the Thesis was proven to be true.