Business Revival: Next generation scenario planning and integrated risk management

Lance Mortlock: Warm welcome to everyone that's joined our latest in the Business Revival webcast. Good morning, good afternoon, depending on where you are in Canada. We've got a great lineup for you today. Why don't I start by just talking a little bit about our panels and firstly introducing myself? I'm Managing Partner of our Energy business, which at EY includes mining, oil and gas, and power and utilities. I've spent my career working primarily in the strategic space, helping companies and clients around the world and here in Canada solve some of their most complex issues. Today's webcast is all about planning for the future scenario, planning risk management and modelling in a very uncertain time. I'll set some context in a moment, but before we get into the content, I wanted to introduce a fantastic group of panel members. We've got John Gracie, who is the Vice President of Strategy and Innovation at Hydro One. John has over 15 years of international experience. He's worked in North America, Europe and Australia, and his focus at Hydro One is on delivering large-scale strategic transformation, redesign, cost optimization, innovation, strategy and planning. We also have with us today Pramod Bhatia. Pramod is the Vice President of Strategic Planning and Enterprise Risk Management at Badger Daylighting. Prior to joining Badger, Pramod was Assistant Vice President and Treasurer for CP Rail. We also have Dan Collins, who is the Director of Corporate Strategy and Downstream Strategy at Suncor Energy. In Dan's role, he works in all areas of strategic planning, foresight and strategy development. Prior to his current role, he was in the supply and trading organization at Suncor.

In addition to these great panel speakers, we also have from EY, Jas, who is our Canadian partner managing our Risk Management and Internal Audit business, and Jas is focused on how we drive risk management in the future and help our clients with enterprise risk management solutions. We also have Mauricio Zelaya or Dr. Mauricio, who has a PhD in Economics. Mauricio is, as an economist, bringing an extensive amount of experience in econometrics, statistical modelling, both in the private and the public sector. He specializes in economics of innovation, industrial organization, and more generally, on the application of economic theory to real business issues.

It’s a great panel this morning, and what I wanted to do to kick us off is start with a couple of context slides as it relates to business revival. At the end of the day, we can all recognize, depending on what sector or segment of the Canadian business community that we work in, that Canada is facing a very uncertain future. There are several major risks that executives need to stay attuned to, whether it's policy and regulation where we've got carbon pricing, travel restrictions, access to market limitations. But there's a changing dynamic in terms of regulation, but also workforce. The demographic shift and the new technologies that we've leveraged in the last two years means that the way people work and how we attract and retain talent is changing.

One statistic that you'll see there on the slide is we have a global shortage of 85 million people, and that's resulting in 8.5 trillion dollars in unrealized annual revenues. Energy transition is a big topic. Whether you're in the energy sector like Pramod, Dan and John are, but also in other sectors where we're seeing more extreme weather events, we're seeing the emergence of renewables becoming very important, and innovation, technology and policy, as well as consumer preferences, is very critical. Regarding cybersecurity, it is rare, I would say, these days that you don't pick up the paper and see something about a cyber threat, a cyber event, a cybercrime; the global economic costs of cybercrime are expected to reach 10.5 trillion dollars by 2025. That's huge. We would recognize that the pandemic has induced massive digitization across the world and here in Canada, and that has drastically increased the prevalence of phishing attacks that we see. Hence, this is another source of uncertainty.

The final one that I wanted to highlight today is commodity pricing. Particularly in energy, both in mining and oil and gas, supply constraints create uncertainty. Price increases in metals, particularly with the emergence of EVs, is something that we can expect to see increasing. At the end of the day, I've highlighted five uncertainties here, but there are many more, depending on which industry you operate in. Each of these uncertainties creates a set of questions that we need to think about as leaders and managers in different organizations across our country.

In terms of those uncertainties, the last framing slide that I wanted to share before we get into the panel is, what does it mean? What are the implications, in terms of these uncertainties? On the left here, you see a little bit of a graph that we put together highlighting a couple of sectors, not all the sectors in Canada, but certainly the ones that are represented by some of the panel members today. It's interesting – you look at where we've come in the last two years in terms of the onset of the pandemic. We've seen this massive emergence of clean energy in the orange in terms of cumulative return. But we've also seen a recovering in mining and we've seen a recovery in oil and gas. You look at the latest crude prices, there's a big recovery and we expect that to continue into 2022. Also, in the power and utilities space there, we've seen some recovery, but generally they've retained their performance over the last two years.

In terms of implications on the right of the slide, I won't drill this, but there's a couple of things I wanted to highlight for our audience today. With regards to workforce characteristics and planning, employees are desiring more flexibility and resources post-pandemic. One statistic we pulled out from a study that we did is 54% of employees are prepared to quit if they aren't provided with the flexibility that they now need at work, and 48% of employees want upgraded at-home hardware, internet and phone reimbursement from their companies — you've got to plan for this stuff.

In terms of strategic planning and capital allocation, if we unpack that a little bit further, the way executives think about capital allocation has begun to change, and our panel members this morning will talk about that. 68% of CFOs surveyed increased their spending on digital investments. The biggest competitive threat, according to CEOs, in the three years will come from outside their current sector and we're seeing this merging of sectors. One that I'm particularly interested in is oil and gas and power and utilities, and how those two sectors come together.

Financial performance and investor confidence is another area where non-financial reporting and disclosures are influencing investment decisions these days. You think about ESG sustainability (decarbonization) - this is important for the energy and the natural resources sector, but it's actually also important for many different sectors like manufacturing, agriculture, food and banking. All of these sectors in some way are influenced by ESG. 72% of investors surveyed said that they would conduct a structured evaluation of non-financial disclosures, and that's a jump of 32% compared to 2018. Hence, this stuff is becoming more and more important for investors. Finally, 75% of investors found value and assurance in a company’s robust planning to mitigate climate risks. With the onset of all of that, it creates uncertainty, but it also creates a massive opportunity for big thinkers, strategic minds and planners in organizations to help these companies prepare for the future.

That's a great segue in fact, into our first polling question. If we could pull up the polling, you should see the polling question in the audience. What we wanted you to do is use the polling question and tell us what type of significant risk emerged in your business due to the global pandemic and select all that apply. Whether it's real estate and footprint changes that you've had to make in your company; supply chain shortages and delays; escalating costs; changes to customer needs, i.e., has the pandemic forced your customers to think differently about what they require from their providers, from their suppliers, from the products that they buy; evolving employee issues related to productivity, teaming and mental health; new competitive forces; or changing regulation. This is not a laundry list, but these are some key elements in terms of what we see.

The poll results are coming in now and we're starting to see that on the screen there. Maybe as those results start to firm up, Pramod, I could pull you into the conversation at this point. Could you talk a little bit about your reflections on some of those results?

Pramod Bhatia: Yeah, Lance, absolutely. First of all, morning and good afternoon to everyone again. Before I go into that, maybe just a quick recap — Badger as a company is one of the largest providers of non-destructive excavation services, and we are vertically integrated as well, i.e. we manufacture our own trucks and operate them. With that, Lance, as we think about what went through for us, we work on large infrastructure projects with our customers. The biggest challenge that a lot of these points will connect with was trying to get a sense of the demand as projects were moving around. With that demand not being as predictable, leads to challenges of managing costs, both in terms of escalating cost as well as trying to predict what those costs are. All of that, as you can imagine, starts translating into how do you forecast, how do you plan with this uncertainty? That for us was real. How do we manage our production supply of trucks? How do we have people in the right places? You talked about the changing requirements from demographics as well. They did all interconnect and ultimately getting down to how do you do plan and manage risk under these scenarios.

Lance Mortlock: Thanks, Pramod. Maybe Dan, I could bring you in at this point. From an oil and gas Suncor Energy perspective, any reflections on the results and how it relates to what you see?

Dan Collins: Yeah, one of the things, just maybe a reflection on your earlier comment as the polls, as the results are coming in, I'm having a little trouble seeing the full data set here. But certainly, with the pandemic, we got an early picture of what the future could look like in the future of transportation, in the future of downstream demand and retail fuel demand for our business. And if anything, it highlighted for us the importance of good scenario planning and thinking about the future and about the future needs of our customers. I'm curious to see the poll results exactly on that result because that was a huge area of interest for us through the downturn.

Lance Mortlock: Yeah, I'm reading looking at the results here and changing customer needs is sort of 11.5%. What seems to have emerged to the top is evolving employee issues related to productivity and mental health. That one received the highest result, Dan. Thoughts on that? Does that surprise you?

Dan Collins: No, actually, no, it doesn't surprise me at all. Through this period, employees have thought about their jobs, their roles and their ability to impact change within the organization in a very different way than they did before the pandemic. Part of our job as strategists and planners is how do we capture that energy from employees and funnel it, channel it into the strategic direction that we want to bring the company going forward? The challenge in front of us is how do we do that and how do we do that well? That's an interesting result.

Lance Mortlock: Yeah. And Jas, maybe bringing a risk lens to this, like you spend your time helping client’s manage enterprise risk. Are you surprised by these significant risks that you see here? And what's emerged to the top?

Jas Hothi: Hey, Lance. Not at all. As you're going through the top risks, it's consistent, not with just what we've seen different organizations do, but with each board meeting that we've been in in the last 18 months, the top two topics being discussed are decarbonization and talent. What we've seen is a dramatic shift across several clients, agnostic to sector, where their real estate footprint has gone to a much smaller space. Reducing their fixed costs and deploying those costs, investing those costs into new strategies around attracting and retaining talent — that's the shift we've seen quite substantially across different sectors and clients.

Lance Mortlock: Fair enough. Ok, I'm going to move us along here and get us to our second question here. What we wanted to tackle here is whether these risks have impacted or changed your specific planning approach at your respective companies? Maybe I’ll bring John into the discussion at this point. If you could talk a little bit about your experience at Hydro One and given the context of the risks and everything that's at play, what is Hydro One done to deal with that, and has anything changed in the last couple of years?

John Gracie: It's an interesting question for utility and a regulated business, and all of the associated rate cases that go along with that and the long-range planning that we do. There is a degree of protection in some of this, but when you get an event like COVID-19 coming through, it brings a level of disruption. We felt it in the supply chain — access to materials and the associated rising costs are two of those risks there. The other one is just grappling with the traditional utility mindset and how to manage employees who have worked for a very long time for Hydro One and have been set in their ways. How do we take these risks and turn them into opportunities? Supply chain is one where we are very good at cost management, so it helps there. We did something that is a little bit different for a utility. We reacted fast to the real estate risk and have adjusted the footprint and we're looking at that is more of an opportunity now. It does present a different way to look at it, and from my perspective on the planning and the strategy side, if we had stuck to what we were doing to a degree, we need to bring stability, but we need to show responsiveness.

We're doing planning in a much more agile way now and we're looking more into the future. Changing horizons are what we're looking at, and we're trying to make sure that we're not caught off guard, but we thought to plan for different eventualities. We're building those more longer-term perspectives and discussions into our executive team dialogue. Also, the closer integration between enterprise risk and strategy — we're using this as a bit of a catalyst to again bring that much more into the same room and staying lockstep as we make decisions, and we start to put options out there.

The last area in which we've started to change our planning approach is to formalize and think and test and pull it apart and put it back together again, the strategy cycle. How are we going about keeping the strategy evergreen and fresh, bending in the wind and making sure that we respond timely to some of these risks that are coming through, so that we're not caught off guard, but we can also demonstrate stability and moving forward as well. It's been an interesting couple of years.

Lance Mortlock: Yeah, that last bit you said there, John, in terms of just the importance of strategic flexibility is music to my ears because the danger is, you get caught in sort of this linear process of A to B, but like what happens if C happens halfway through that you didn't expect? And what you're unpacking a little bit is just the importance of maintaining that agility. We live in an uncertain world and things keep changing. Yes, you might have a five-year plan or even a one-year plan, but the organization needs to have those muscles to be able to flex and change as you go along. That's a good point there. Dan, anything you want to add to that in terms of what you've seen at Suncor and how you guys have adjusted in a very uncertain environment.

Dan Collins: Yeah, thanks, Lance, I like John's comments a lot. I might just hitchhike on them a bit to say that the downturn also validated a lot of things that we were doing. It validated the fact that we're on the right track in some places. For example, our digital transformation, i.e., our office activities to transform our base business cost structure — it was clearer than ever those efforts were as important and more important than ever, going forward through the downturn. I'd say that's an example of that.

Other initiatives are real-time planning. It gets to the strategic agility that you and John have been referencing, which is the ability to plan in real-time, i.e., putting in place the systems and digital capabilities to do that. Finally, I like the connection to risk to that was mentioned. Risk is opportunity and it's also risk. How do we bring a more integrated approach into the strategy conversations and bring our critical risks to that conversation as well? Those are three areas that we are already doing, but I would say that the last couple of years has validated the fact that those things are super important to continue to progress.

Lance Mortlock: Yeah, I like your comment there, Dan, about the importance of integration and more than ever, we need to bring different groups together to solve some of these complex problems. Gone are the days that you can operate in your silos and be successful. But how does the full value chain, whether you're an oil and gas company or making hydrovac trucks, or a power and utility company. The left hand and the right hand need to work together if you're going to be successful.

John Gracie: Lance, there is just one thing I wanted to build on there. I thought there was one word in there that was key that I didn't say, which was the word critical, critical risks. It's great to know what your risks are. It's great to have a flexible planning and strategy approach. But unless you're able to define what is critical and important, you need to be able to remove all the other noise. It's one piece that I didn't bring up, and we're spending quite a bit of time on defining the signals that are important and taking out all of that other noise that are distractions here too.

Lance Mortlock: Yeah, fair enough. Fair enough. Do a few things well, not a lot of things average. Pramod, anything you want to add from your vantage point?

Pramod Bhatia: Yeah. Maybe just jumping a little with John and Dan, and they made good points. Our industry where we work in, and Lance, you know it well, we don't have any of the regulatory protections that let's say, John's company enjoys. For us, some of the same themes that folks were talking about, ERM became integral. However, thinking about downside risks in some of our planning, I will say for 2020 and 2021 in particular, it's very interesting that we shifted away from deterministic planning to a lot more scenario planning and a lot more nimble and agile planning.

And with regards to the other piece — I don't want to repeat what everyone said, because all of that makes a ton of sense and resonates — but one thing that helped us was that it gave us an opportunity to dig in to understand what are the dependent variables in our planning? What are the independent variables, and where the cobwebs are? To your point, Lance, that it has to be integrated, it has to be everyone all in this together, not just the strategic planning group doing this in a silo. Not that we did, but this went even further towards shining lights on the dark side. From a longer-term perspective, it probably makes us better, but it was quite interesting.

Lance Mortlock: Yeah, it's interesting your point, Pramod, about times of crisis and uncertainty, it almost forces organizations to unpack those details at a level of granularity that maybe they didn't do before. I'm going to move us along here to our next question, which is given the unprecedented level of uncertainty that we've been experiencing in the last couple of years — and we've touched on elements of this already — has your organization considered planning for different futures? And if so, could you share how you've approached it? Have you used different data sources, new tools and technologies? Have you used that to improve the timelines, for more dynamic planning, shorter iterative planning cycles? I wanted to deep dive into this a little bit. Why don't we start with you, John, on this? Because you've talked a little bit about it, but maybe you could unpack it a bit further.

John Gracie: This is a topic that's near and dear to my heart, but we're in the middle of this right now. As you know, Lance, we are building a scenario planning muscle, I would say. The regulated nature of the utility industry, the fact that the industry itself hasn't gone through a revolution. Well for the last century, it's been small incremental changes, but we see a huge amount of disruption coming, and with that disruption comes by divergence. Hence, we're building utility-grade and tailored scenarios for our executive team and our business to unpack and keep an eye on what's going on and try and not remove but understand the uncertainty that is coming.

There's two other things that we're looking to also do in this space, and that's creating a lot of data-driven approach to strategic planning. It's one thing to go off anecdotes and look at past trends, but we're trying to get into, ok what are those leading indicators? Where do we forecast or think that the industry could go? And that is particularly important for us because it allows us to remove the noise of past events. And if we say, look, we haven't done anything like this in the last 20 years, it's like, well, what happened over the last 20 years may actually all be compressed into the next six months in terms of level of change, and that's important to look at.

And then the other third component is really getting into the innovation space, which is another topic that's near and dear to my heart. What we want to be able to do is use innovation to lead and shape the energy future that benefits Hydro One shareholders, of course, but also to shift the benefit onto our customers, onto Ontarians and Canadians as we think about net-zero commitments delivering against a better future and brighter future for all. Those three elements would be what I would add to this discussion.

Lance Mortlock: John, it's interesting. You touched on innovation there. Given the market that Hydro One and other utilities that are listening in today operate, certainly within the regulated market — can you truly be innovative the way it's defined? What's your view on that? How important is it to be innovative versus truly operationally excellent? Do you have a view on that?

John Gracie: This gets back to where we were traditional utility or over the last 20 or 30 years, there was a need to be operationally excellent and efficient. With the rise of the prosumer or the omnisumer or the customer and the voice and power that that group has, we can't just be operationally excellent, particularly in the utility space. It's a given now, it's almost an expectation that I touch my light switch and the power comes on. What we are hearing and what we're reacting to is don't just do that, but I want all of this other stuff as a customer and how am I going to get it? Either as a utility, we can play in that space, or we can say, look, that innovation is going to be delivered by someone else. For me, I prefer it was us.

Lance Mortlock: Yeah, fair enough. Disrupt yourself or be disrupted in a way.

John Gracie: And it changes a bit, it changes the mindset. You think, ok, it's not just power delivery, but what other products and services are our customers trying to get to? And sometimes, it may not be ready today, but we got to think — and this is the whole point of scenario planning and looking into the future — what could they be wanting in 2030 or 2035 when everyone's driving EVs? They've all got electrified houses. Everyone's smart. They're running everything through their phone. What could the possibilities be? That's the innovation space.

Lance Mortlock: Yeah. 100%. Mauricio, I wanted to bring you into the conversation at this point. What's been your experience, from an economics lens? What are you seeing when you work with different clients in Canada as it relates to this third question?

Mauricio Zelaya: Yeah, for sure. Thanks, Lance. I'm happy to share my experience here. We've certainly seen this shift in using what I would say, non-conventional real-time data to proxy for some of these short-term views that we've been asked to look at. For example, how to navigate this COVID-19 situation we're in in Canada, or in my case, an example would be that we've typically helped some Crown corporations and public sector clients with near-term funding allocation challenges that they're facing. But again, if we step back a little bit during this time and look to the innovation points that's been brought up, what we're seeing more and more is actually deploying some more advanced models. Here it's defined as a mixed frequency statistical approach. But that just means you're combining high-frequency data. You think about scraping news content and search engine data and things of that sort. What traditional economic indicators that typically come out on a monthly, quarterly, or even annual basis to provide those meaningful results for our clients.

Over the last couple of years or so, this has been proven to be quite useful for them and especially when they're looking to understand their potential economic, financial, or social impacts during this level of uncertainty. And of course, as more information comes out and has been coming out, we were able to calibrate these economic models to help them further understand potential future outcomes over the next few quarters or a year. But in a very similar case, what we're seeing is based on the needs for innovation and using different types of information, there's been this increased demand in helping clients develop performance measurement frameworks. Which means, helping them understand how to monitor their business through different lenses, right? Through an economic, financial, or even social lens. And a large portion of this work is tied into the types of tools that we're deploying for clients, how we measure these outputs, which means it must be intuitive and transparent in nature. Simple to understand, but of course, rigorous enough to withstand scrutiny from all stakeholders. Of course, it's certainly not an easy task that we have here, but nonetheless, there's a role that we're playing here in terms of helping our clients navigate this period of uncertainty.

Lance Mortlock: Thank you for that, Mauricio. I definitely appreciate the sort of balanced scorecard approach of economic, social and financial. That's something that is very important.

Let's move along here to our second polling question. This is another audience polling question. We want you to choose one of the following options as it relates to — have you considered planning for multiple futures in the last 18 months within your organization? What tactic did you employ if you did that? One tactic is the use of artificial intelligence and advanced analytics to leverage alternative data sources that Mauricio talked about. Or have you changed to shorter, more dynamic planning cycles? Have you created a special cross-functional task force? Have you partnered with industry peers or associations to identify relevant benchmarks? “e)” is my favourite answer — have you contracted an external provider to provide leading practices and insights? I had to put that in there. Or have you leveraged scenario planning and other management techniques as it relates to your specific experience in your company? Take a moment. Look at those questions and we'll pull up the results from our second poll.

As the results start to come in, maybe Pramod, I could ask you to opine on these and give us your thoughts. Anything that surprises you or reinforces what you expect to see.

Pramod Bhatia: Yeah, I don't think there's much of a surprise in all of this. The results are still coming in so maybe I'll just keep talking through it that. We all talked about, and I maybe I'll underline this again, how critical the enterprise risk thought process connects to all of this. Maybe I'll give a shout-out since you brought that last question to EY for helping us with the ERM exercise last year. It was important for us to make sure that's embedded in our planning.

At the end of the day, I talked already about the shorter planning. It was almost like a dynamic planning horizon that we incorporated as we worked through the pandemic scenarios. Coming to thinking about how the influence of COVID-19 impacts our human capital requirements and so on. All of that to say, yeah, as I'm reading some of these answers or poll results … they resonate, the shorter dynamic planning and all of that, those were quite real for us.

Lance Mortlock: Yeah. Dan, not to put you on the spot, my friend, but I'm disappointed that AI doesn't feature higher up. Like, we keep talking about AI, it's the best thing since sliced bread. It's going to solve all our problems. But you know, the audience that we have with us today are just saying that is not a consideration that is important. Does that surprise you?

Dan Collins: It does and it doesn't. It doesn't surprise me in terms of Lance, you know, we've had this conversation of the challenges of how to appropriately apply AI inside the business, right? To bring real insight and information to bear. It doesn't surprise me, the numbers that you're seeing here on the screen. But I think it will get bigger over time, and we're going to see that that grow. One of the things we've done at Suncor, that maybe I can tell the audience a little bit about, is that we have applied some AI tools at Suncor to help us understand the pulse of our customers a little bit better. In the space of our sustainability office, testing the base of our customers and also the group that does communications as well has set up a tool to help us better understand how our customers are relating to different events that are occurring in the external world. To help us understand how do we position current and future products, services, and offerings? Its early days still, but it's definitely helping us stay focused and on point around the concerns of our customers, and being more in tune with what we're sensing out in the general audience and the general world if I could say that. I guess to answer your question, I'm not surprised at the size of the number because it's a real challenge to find the right AI tool, the right metrics and then how to use it effectively inside your organization, but we're going to see it get bigger over time.

Lance Mortlock: Fair enough. Mauricio, anything you want to add to conclude this question?

Mauricio Zelaya: Yeah, I completely agree with what Dan there that leverage scenario planning does make sense, but I do believe that the applied AI section will grow over time. I do think that having breadth and depth of certain specializations and competencies is the key to moving forward for organizations. When you're balancing talent or technology and using that internally, or you partner up with an external provider, that's going to be quite valuable. Because for us, what I'm seeing more and more from our clients is that we are bringing all these types of competency from strategists and finance professionals to econometricians and statisticians like myself to help answer some of this. I'll be selfish here, but from an economic perspective, that's why I'm happy to see the scenario planning to be quite large because it's important to understand and model these macro risks. Going earlier to the beginning of this presentation, from modelling and understanding policy and regulation changes, to investor behaviour and sentiments and risk appetite and this labour market imbalance, you use that information to help inform and understand what your business-specific risks are. And just like how the COVID-19 situation has accelerated certain consumer and business trends. This is no different in that over the last couple of years, you've seen this growing need to have this cross-functional team using advanced analytics to understand more near-term outcomes, as I'll call them. Hence, not surprised necessarily on what we see on the slice of the pie. It’ll probably just get a much larger over time.

Lance Mortlock: Agreed. In the interest of time, I’ll move us to our next question here. Question five. In the context of strategic planning and the context of that influence by the pandemic, I wanted to talk a little bit about the role of the C-suite and how that role has changed or might change in the future, given all the uncertainty and everything that's playing out. Jas, maybe I could bring you in at this point. What are you seeing in terms of the risk space? Are you seeing changes in the C-suite that are going to either be important in the future or have already changed?

Jas Hothi : Yeah, Lance, we're seeing the risk dialogue as a whole, taking much bigger airtime and quite frankly, in the strategic planning process. That started and became more pronounced at the start of the pandemic. We're seeing from the CEOs, CFOs in financial services, the Chief Risk Officer, directly not just wanting to understand what their top risks are, but wanting to get to the science behind it. The quantitative risk exposure, some of the dialogue we've been having today around scenario planning.

What we've been doing is just helping the C-suite from the CEO right across with understanding the probability of different risk exposures derived from some of the things that Mauricio was saying such as deep-dive business analysis and statistical risk modelling. The idea here is to identify improvement areas and mitigation activities to reduce that overall risk exposure around critical risks. The most important piece is also to inform where the resource investment decisions should be, and by how much to reduce these risk exposures.

I would say, more broadly speaking, the risk dialogue has definitely extended from just a CRO (Chief Risk Officer) or your CFO, to right across the board. These are conversations that are happening quite frequently, even at the board level. It’s not just an audit committee conversation anymore, but quite broadly right across the board. We're seeing it even get more pronounced as ESG is starting to take a bigger precedent across different sectors.

Lance Mortlock: Yeah. One of the things that fascinate me, Jas, is that we have these periods of relative calm and “business is good” and “business is booming”, followed by periods of uncertainty. If you go back over the last 50 years, that cycle keeps happening. And I wonder whether we're in this period right now with tons of uncertainty and risk is important, then we take it less seriously for a few years until everything blows up again. And then we go through these cycles and what I hope is, as we go forward, that there's a fundamental shift and we take risk and enterprise risk management more seriously as a C-suite priority and integrating it into the strategic process. I guess with that, John, maybe I’ll bring you in for a brief comment — anything you wanted to add in terms of what you're seeing at the C-suite?

John Gracie: Yeah. I might just reflect on one of Jas' points. I think I heard Jas saying that it's not that the role of the C-suite is changing, but how they are actually delivering on that is some of what we've learned over the last year or so under this pandemic. At Hydro One, is the role of the executives changing and how exactly is it changing? No, not particularly, they're still leading the company. Nor are we creating a chief resiliency officer to manage us through these times of disruption and adversity. But having said that, we have noticed a lot more, I'm going to come back to innovation here, but a lot more people talking about innovation and what it could do. It's a prioritization of this capability, and it's not looking at just brand-new and big products and services. It's everything from that strategic innovation to tactical sustainment innovation through the cultural innovation, are all important, because then you're tackling the industry disruption to making a defensive play around your core business to protecting your employees and their capabilities.

What also came out for us in this space is the awareness of what an event like this can do to how our customers are using our product, how they are using energy. And why that's important is that it gets back to, okay, what is our C-suite focusing on in terms of planning and the future and the longer-term future. Particularly, when you think that in order to deliver net-zero commitments, it is going to cost money. Through the pandemic, it was look, our customers are using energy differently. We've got different load codes. We've got different affordability challenges. And so, it's now forcing our executives and our C-suite and our board to almost change the way in which they're looking at what we're doing here a little bit. Again, it’s an interesting time.

Lance Mortlock: Yeah, that's good framing there, John. Dan, any concluding comments on this question.

Dan Collins: Yeah. You know, I was just thinking about what John was saying and just pondering a bit on the question. Suncor has been using strategic planning for some time and I think, I guess my comment around this would be again, and I touched on it earlier in the call, which was that, if anything, I think it really highlighted the fact that having tested your strategy with various scenarios and being ready and having options in the portfolio that you thought of, that you've started to develop that would address some of these scenarios, really have helped us over the last couple of years to accelerate our work into the energy transition space. We wouldn't be, I would say, anywhere near where we are around our investments and our interest in areas like carbon capture and storage and hydrogen, clean hydrogen and renewable fuels, if it weren't for the fact that we had been doing scenario planning, we had identified risks and opportunities in the portfolio that were aligned with our integrated model and where we had some competitive advantages. And then through the downturn, it just gave us that extra impetus to say, hey, let's actually push these a little bit harder. That has to be led from the C-suite.

To get to this question around, part of that is making sure the executive leadership team of your organization is sort of engaged, bought into and that they've thought through how their businesses would perform in each of these potential scenarios, and that they've got opportunities and risk mitigations thought through and half-developed, so that we're ready to execute on those, if and when the signpost suggests. We’re moving into a new scenario more aggressively than we had maybe previously thought.

Lance Mortlock: And back to that flexibility piece, Dan, in terms of you looking for those signposts and then you're able to react and adapt.

Time has flown by. We've got this last question to wrap up here. If I could ask the panel members to keep their comments short and sweet and give one piece of advice that you would leave with our audience across the country today with respect to planning in today's very volatile, uncertain, complex and ambiguous environment. Let's start with you Pramod. What's your one piece of advice?

Pramod Bhatia: Yeah, what I'll say is — as we think about the macro drivers due to the planning, and we generally tend to focus a lot more on that in scenario planning, what I'll say is don't forget the micro. Focus and understand how the interconnections of decisions are being made within the organization that impact that. Take inflation and its impact on pricing as one data point as an example. I would say make sure the macro and micro are connected.

Lance Mortlock: John?

John Gracie: I’d just like to draw a very quick comparison to Marvel's multiverse. It’s very easy to be blinded by what is changing, especially when you put all of that time, sweat, tears and effort into short-, medium- and long-term plans. You may think you have that perfect answer, but the speed of disruption, particularly what the utility industry is facing right now, is being set at very small random events, which may unfold your reality and land you in one of those alternate realities. If you find yourself feeling too comfortable, it probably means that you've missed that random event and you're going sideways already. So, beware of comfort.

Lance Mortlock: Thank you, John. Dan?

Dan Collins: Again, I'm going to hitchhike on John's point, which is to say I agree with everything John just said, and that shows the importance of what I call strategic agility. The ability to quickly adapt to the environment that you have in front of you, not the environment that you maybe wish was in front of you.

The second point around that would be culture. How do you prepare your organization? How do you prepare your organizational culture to be able to have strategic agility? That old saying that culture eats strategy for lunch (breakfast) is still true. You have to make sure you build a culture that is innovative. Innovative not in a macro way, but in a micro way that employees feel empowered to change their sphere of influence as necessary to meet the new realities without a major bureaucratic program being put into place.

Lance Mortlock: Thanks, Dan. Jas.

Jas Hothi : Yeah, as the old saying goes, no crisis should go to waste. What I would offer in times of uncertainty is natural inclination. Human nature is to focus on the downside risk of what could go wrong. But there's always an opportunity to identify and assess what the upside risks are in the planning process. Increasing capital in the markets is a good time to divest, or alternatively acquire another business. What I would offer is just not to lose sight of the upside risks.

Lance Mortlock: Thanks, Jas. And last, but by no means least, Mauricio,

Mauricio Zelaya: Thanks. My advice would be twofold there. First would be to try not to underestimate the likelihood of some of these macro events that are occurring. What that means is just stress testing each of these costs and revenue drivers that you have based on these macro events, to help understand your economic risk exposure. That's something that's often overlooked when I worked with certain clients.

But related to this point, it's becoming more important to not only focus on what I'll call the direct impacts to your business but dig a little bit deeper on potentially those indirect impacts. For example, this could be looking deeper at the risk drivers from complementary sectors. Lance, you had mentioned the oil and gas, power and utilities, whether it's outside your value chain or not. Also, being mindful of certain risks that are present in other jurisdictions and thinking about what that means to you, and potentially translating those risks to further again stress test your financials. Often what we're seeing is that this ripple effect, so to speak, from these indirect impacts, at times, can actually be as substantive than these more direct impacts that are typically looked at over time.

Lance Mortlock: Thank you for that, Mauricio. To wrap up, I'm afraid we've run out of time. But before we go, I just wanted to sincerely thank our panel members, our speakers today, Jas and Mauricio, and of course, our guests, John, Pramod and Dan. Thank you so much for sharing those rich insights, experiences and perspectives over the last hour. And thank you to all the folks across the country that have been tuned in today. Hopefully, you've taken a few nuggets and insights from today's dialogue. I certainly did. Couple of notes that I wrote to myself that I thought resonated was making demand more predictable. How do we leverage good scenario thinking in the future? Jas pointed out that employees need to be front and centre from a risk perspective, and there's this context of decarbonization that is important to not only the energy industry but many industries across Canada.

We talked about how do you turn risks to opportunities. John mentioned that, and Jas mentioned that later on in the in the dialogue. But also, be more flexible. How do you build that agility, to Dan's point, that strategic flexibility so that you can react and adapt when your world and your context changes. And a more integrated approach where you're working across the silos in the organization and bringing different perspectives together to work in a very uncertain environment.

Prioritization is critical, and John said this — remember, you can't do everything well, so pick your battles, pick those critical few things that are going to drive impact in your business.

A data-driven approach is going to be important in the future. And although AI did not feature as highly as we expected it to, it is becoming more important. It is a powerful tool. The panel referenced that as we go forward in the next few years and this technology becomes more sophisticated, how can you leverage and test its capabilities to drive greater insight?

There's also the changing use of economic models, and Mauricio talked about this balance of economic, financial and social lenses that you apply to your planning items. Risk is becoming more of a C-suite priority, and how do you ensure that you retain that as things in the market hopefully settle out over the next few years? Don't lose sight of that next major uncertain event, like the pandemic, which will happen. John talked about the multiverse. I need to look that up and learn more about that. But in all seriousness, thinking about John's point, multiple futures and preparing for those futures is going to make you a more resilient organization.

And at the end of the day, I wanted to conclude by saying that culture, to Dan's point, eats strategy for breakfast. Changing fundamental behaviours in your organization is going to be a recipe for helping your business revive in a very uncertain world.

To wrap up, look for an email from us in the next few days with a recording of the session and our speakers’ contact information. Please reach out to them or your local EY advisors in different cities across Canada. And again, thank you to everyone for taking time to join the discussion and have a great rest of your day.