Saving Energy Step 1 ? Implementing a Management System

There has been much hype down the years regarding whether management is art or science. Thankfully, where people are concerned the pendulum has swung away from standard times in sweatshops in the west. However, when it comes to measuring physical things like harvest per square meter and the amount of energy consumed there is no substitute for scientific measurement, and this implies a system.

Managing energy cost and consumption down is like any other strategy. American engineer / statistician / management consultant W. Edwards Demming may have passed on in 1993. However he was as right as ever when he said:

  1. When people and organizations focus primarily on quality, this tends to increase and costs fall over time.
  1. However, when people and organizations focus primarily on costs, costs tend to rise and quality declines over time.

Demming believed that 90% of organizational problems arise from systems we put in place ourselves. This can be because we are so accustomed to them that we fail to notice when they are no longer relevant. The currently prevailing laissez faire towards energy is a case in point. What is managed improves and what is not, deteriorates. We know this. Let us take a look at how to apply this principle to energy management.

First, you need to get the subject out the closet and talk about it. How often do you do this is your boardroom, and how does energy rank against other priorities? Good governance is about taking up a position and following through on it. Here is a handy checklist you may like to use.

  • Do we use a consistent language when we talk about energy? Is it electricity, or carbon emitted (or are we merely fretting over cost).
  • How well engaged are we as a company? Looking up and down and across the organization are there points where responsibility stops.
  • How well have we defined accountability? Do we agree on key performance areas and how to report on them.
  • Are we measuring energy use at each point of the business? When did we last challenge the assumption that ?we’re doing okay?.
  • Have we articulated our belief that quality is endless improvement, or are we simply chasing targets because someone says we should.

A management system is a program of policies, processes and methods to ensure achievement of goals. The next blog focuses on tools and techniques that support this effort.

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Key Steps to Complying with ESOS

Energy Savings Opportunity Scheme has already been launched. In fact, it is by now in its initial phase. However, many businesses are still not aware of the new scheme, especially those who are covered by the qualifications for ESOS. To help them understand what they need to do in compliance to the energy efficiency strategy, here are key steps they can follow along the way.

Measure Overall Energy Consumption

The first step to complying with ESOS is to make an initial estimate of the business? energy consumption. This includes measuring the use of electricity, renewable energy, combustible fuels and all other forms of energy consumed whether in buildings, transports and industrial processes.

Three important factors to consider are the measurement units used, the reference period and quality of data. Energy units, such as MWh and GJ, or energy expenditure costs should be applied. Business enterprises should also do the initial measurement within a reference period of 12 months. Moreover, data collected should be verifiable at hand.

Identify Areas of Significant Energy Consumption

When the total energy consumption for all the activities and assets has already been estimated, it’s then time to identify what areas in the organisation comprise the significant portion of the overall energy usage. The areas recognised should cover at least 90% of the overall consumption. Meaning to say, ESOS participants have the chance to omit 10% of the energy consumption and instead focus on the 90%. This would ensure that subsequent energy audits will be cost-effective and proportionate.

Consider and Choose Compliance Routes

In order to comply with ESOS, qualified businesses should consider what compliance routes to take. These routes include taking series of energy audits, operating and implementing a certified ISO 50001 energy management system, acquiring Display Energy Certificates (DECs) and working with Green Deal assessments. Whichever route the business takes, one should maintain credible evidences, along with helpful documents, to certify their compliance.

Report the Compliance

Except when the large enterprise covers all the significant areas of energy consumption by means of ISO 50001 certification, one should appoint a lead assessor to supervise, conduct and review the organisation’s chosen ESOS compliance route. In this case, the approved assessments should then be signed off at board level to ensure that the conclusions and recommendations for energy savings are properly carried. To confirm their compliance, the business should submit a formal notification to the Environment Agency.

Because ESOS is not just an opportunity but also an obligation, it designated compliance bodies and gave them the authority to file civil penalties towards those who fail to comply with the scheme. Not only that, these appropriate authorities have the right to publish information about non-compliant enterprises including their name, details of non-compliance and corresponding penalty amount. Among these UK compliance bodies are Natural Resources Wales, Environment Agency in England, The Scottish Environment Protection Agency (SEPA) and Northern Ireland Environment Agency.

So, if you are covered with the ESOS qualifications, make sure to be informed. As the famous saying goes, ?Ignorance of the law excuses no one.? Likewise, awareness of ESOS is a responsibility every large business in UK should give importance to.

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Spreadsheet Risks in Banks

No other industry perhaps handles such large volumes of critical financial data more than the banking industry. For decades now, spreadsheets have become permanent fixtures in the front-line reporting tool sets of banks, providing organised information when and where needed.

But as banks enter into a period of heightened credit risks, elevated levels of fraud, and greater regulatory scrutiny, many are wondering if continued reliance on spreadsheets is a wise decision for banks today.

The downfall of Lehman Brothers which eventually led to its filing for Chapter 11 bankruptcy protection on September 15, 2008, served as a wake up call for many institutions across the globe to make a serious examination of their own risk management practices. But would these reforms include evaluating the security of user developed applications (UDAs), the most common of which are spreadsheets, and putting specific guidelines as to when they can – or cannot be – used?

Banks and Spreadsheet Use

Banks have been known to utilise spreadsheets systems for many critical functions because most personnel are well-acquainted with them, and the freedom of being able to develop customised reports without needing to consult with the IT department offers flexibility and convenience. In fact, more than having a way to do financial budgeting and analysing customer profitability, even loan officers and trade managers have become reliant on spreadsheets for risk management reporting and for making underwriting decisions.

But there are more than a few drawbacks to using spreadsheets for these tasks, and the sooner bank executives realise these, the sooner they can adopt better solutions.

General Limitations

Spreadsheets are far from being data base systems and yet more often than not, they are expected to act as such, with figures constantly added and formulas edited to produce the presumably right set of reports.

In addition, data integrity is always a cause for concern as most values in spreadsheets are entered as manual inputs. Even the mere misplacement of a comma or a negative sign, or an inadvertent ?edit? to a formula can also be a source of significant changes in the outcome.

Confidentiality risk is also another drawback of the use of spreadsheets in banks as these tools do not have adequate?access controls to limit access to only authorised individuals. Pertinent financial information that fall into the wrong hands can lead to a whole new set of problems including the possibility of fraud.

Risks in Trading

For trading transactions, spreadsheets can prove to be of immense use – but only for small market volumes. As trade volumes increase and the types vary, spreadsheets are no longer a viable solution and may likely become more of a hindrance, with calculations taking longer in the face of bigger transaction amounts and growing transaction data.

And in trading, there is always the need for rigorous computational functions. Computing for the Value at Risk (VaR) for large portfolios for instance, is simply way beyond the capabilities of spreadsheets. Banks that persist in using them are increasing the risk of loss on those portfolios. Or, they can be opening up?opportunities for fraud?as Allied Irish Bank (in the case of John Rusnak – $690 million) learned the hard way.

Risks in Underwriting

Bankers who use spreadsheets as their main source of information for underwriting procedures also face certain limitations. Loan transactions require that borrowers? financial data be centralised and easily accessible to risk officers and lending officers involved in making decisions. With spreadsheets, there is no simple and secure way of doing that. Information can be pulled from different sources – individual tax returns, corporate tax documents, partnership documents, audited financial statements – hence there is difficulty in verifying that these reports adhere to underwriting policies.

Spreadsheet control and monitoring

Financial institutions which are having difficulty weaning themselves from the convenience and simplicity that spreadsheets offer are looking for possible control solutions. Essentially, they want to find ways that allow them to continue using these UDAs and yet somehow eliminate the?spreadsheet risks?and limitations involved.

Still, the debate goes back and forth on whether adequate control measures can be implemented on spreadsheets so that that the risks are mitigated. Many services have come forward to herald innovative solutions for better spreadsheet management. But at the end of the day, there really is no guarantee that such solutions would suffice.

More Spreadsheet Blogs


Spreadsheet Risks in Banks


Top 10 Disadvantages of Spreadsheets


Disadvantages of Spreadsheets – obstacles to compliance in the Healthcare Industry


How Internal Auditors can win the War against Spreadsheet Fraud


Spreadsheet Reporting – No Room in your company in an age of Business Intelligence


Still looking for a Way to Consolidate Excel Spreadsheets?


Disadvantages of Spreadsheets


Spreadsheet woes – ill equipped for an Agile Business Environment


Spreadsheet Fraud


Spreadsheet Woes – Limited features for easy adoption of a control framework


Spreadsheet woes – Burden in SOX Compliance and other Regulations


Spreadsheet Risk Issues


Server Application Solutions – Don’t let Spreadsheets hold your Business back


Why Spreadsheets can send the pillars of Solvency II crashing down

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Transformation to a process based organisation

Today’s global marketplace rewards nimble organisations that learn and reinvent themselves faster than their competition. Employees at all levels of these organisations see themselves as members of teams responsible for specific business processes, with performance measures tied to the success of the enterprise. As team members, they are “owners” of the process (or processes) to which they are assigned. They are responsible for both the day to day functioning of their process(s), and also for continuously seeking sustainable process improvements.

Transforming a traditionally designed “top down control” enterprise to a process-based organisation built around empowered teams actively engaged in business process re-engineering (BPR) has proven more difficult than many corporate leaders have expected. Poorly planned transformation efforts have resulted in both serious impacts to the bottom line, and even more serious damage to the organisation’s fabric of trust and confidence in leadership.

Tomislav Hernaus, in a publication titled “Generic Process Transformation Model: Transition to Process-based Organisation” has presented an overview of existing approaches to organisational transformation. From the sources reviewed, Heraus has synthesised a set of steps that collectively represent a framework for planning a successful organisational change effort. Key elements identified by Hernaus include:

Strategic Analysis:

The essential first step in any transformation effort must be development of a clear and practical vision of a future organisation that will be able to profitably compete under anticipated market conditions. That vision must be expected to flex and adjust as understanding of future market conditions change, but it must always be stated in terms that all organisational members can understand.

Identifying Core Business Processes:

With the strategic vision for the organisation in mind, the next step is to define the core business processes necessary for the future organisation to function. These processes may exist across the legacy organisation’s organisational structures.

Designing around Core Processes:

The next step is development of a schematic representation of the “end state” company, organised around the Core Business Processes defined in the previous step.

Transitional Organisational Forms/ Developing Support Systems:

In his transformation model, Hernaus recognises that information management systems designed for the legacy organisation may not be able to meet the needs of the process management teams in the new organisation. Interim management structures (that can function with currently available IT system outputs) may be required to allow IT professionals time to redesign the organisation’s information management system to be flexible enough to meet changing team needs.

Creating Awareness, Understanding, and Acceptance of the Process-based Organisation:

Starting immediately after the completion of the Strategic Analysis process described above, management must devote sufficient resources to assure that all organisation members, especially key managers, have a full understanding of how a process-based organisation functions. In addition, data based process management skills need to be provided to future process team members. It is not enough to schedule communication and training activities, and check them off the list as they are completed. It is critical that management set behavioural criteria for communication and training efforts that allow objective evaluation of the results of these efforts. Management must commit to continuing essential communication and training efforts until success criteria are achieved. During this effort, it may be determined that some members of the organisation are unlikely to ever accept the new roles they will be required to assume in a process-based organization. Replacement of these individuals should be seen as both an organisational necessity and a kindness to the employees affected.

Implementation of Process Teams:

After the completion of required training AND the completion of required IT system changes, process teams can be formally rolled out in a planned sequence. Providing new teams with part time support by qualified facilitators during the firsts weeks after start-up can pay valuable long term dividends.

Team Skill Development and Continuous Process Improvement:

Providing resources for on-going skill development and for providing timely and meaningful recognition of process team successes are two keys for success in a process-based organisation. Qualified individuals with responsibility for providing training and recognition must be clearly identified and provided with sufficient budgetary resources.

The Hernaus model for transformation to a process based organisation is both well thought out and clear. His paper provides an ample resource of references for further study.

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