Risk management
Enel Chile considers risk management one of the main tools for defining its business strategy and integrating sustainability throughout the value chain.
In carrying out its industrial and commercial activities, the Enel Chile Group is exposed to risks that, if not effectively monitored, managed, and mitigated, could affect its performance and financial position. Therefore, understanding the context is crucial to identify external or internal factors that can become potential risks at the Company’s every business and area level.
Enel Chile has an Internal Control and Risk Management System that combines the standards and procedures to identify, measure, manage, and supervise the main corporate risks. Furthermore, it helps ensure asset value, the efficiency and effectiveness of business processes, financial reporting reliability, and compliance with laws and regulations, bylaws, and internal procedures.
Main ESG risks of Enel Chile
Thanks to the Company's integrated business strategy, environmental, social, and governance risks are an integral part of the risk management and matrix ESG. The main ESG risks and actions to mitigate their impacts and ensure their proper management are described below.
Risks associated with climate change
Climate change and the energy transition may affect the Enel Chile Group’s activities. To identify the main types of risks and opportunities and their impacts on the business in a structured manner consistent with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board, the Enel Group has adopted a framework that represents the main relationships between the variables of the scenario and the risk and opportunities types, indicating the strategic and operational management methods that also consider mitigation and adaptation measures.
The purpose of developing the described framework is analyze and evaluate the effects of transition phenomena, including those pertaining to the physical and energy context. In addition to the quantitative and modeling methodology used to develop these scenarios, an ongoing dialogue with internal and external stakeholders is also incorporated.
The energy transition process is associated with both opportunities and risks, including changes in the technological and competitive landscape, electrification, and market conduct. Physical risks are divided into acute, associated with extreme weather events, and chronic, which reflect gradual but structural changes in climate conditions.
Extreme weather events can cause prolonged outages to assets and infrastructure, as well as restoration costs and inconvenience to customers. In the long term, climate changes can generate new risks or opportunities, such as variations in electricity demand and production due to changes in temperature and the impact on production capacity due to changes in precipitation or wind. Adapting to these changes can also lead to opportunities for innovation and strategic development for a sustainable future.
The geographic and technological diversity used in generation and a good predictive measurement of climate phenomena allow the Company to mitigate and manage changes associated with climate patterns.
Enel Chile has integrated these risks into its analyses and maintains an active monitoring and predictive measurement system to mitigate them. Furthermore, the Company develops initiatives with local stakeholders, especially in the case of water resource reduction, for actions that generate a collective impact on the mitigation of these risks.
Enel Chile has chosen to lead the energy transition, preparing to capitalize on all the opportunities that arise. The Company's strategic decisions, which are already firmly focused on this transition, allow it to integrate risk mitigation and opportunity maximization from the outset, considering the phenomena identified in the medium and long term. These strategic decisions are accompanied by the Company's best operational practices.
Regarding the management of social risks, it is important to note:
Risks linked to health and safety, for example, risks caused by accidents with company personnel or contractors. Enel Chile prevents these risks by promoting a culture based on safety, which includes developing policies and including safety in processes and training, among others.
Related to employee diversity, attraction, and retention in the context of the energy transition, to meet these challenges, Enel Chile has a Diversity Policy, along with a Talent Management and Promotion Policy. The Company carries out different initiatives dedicated to work-life balance and promotes education and personal growth through scholarships and courses.
Regarding the management of governance risks, it is important to note:
Risks arising from unlawful conduct, including corruption, lobbying, etc., by company personnel or contractors, or from anti-competitive practices. Enel Chile maintains an Internal Control and Risk Management System based on standards and procedures that allow for risk mitigation.
Human Rights violations, risks that are detected through due diligence processes, which are conducted annually throughout Enel Chile value chain and subsidiaries and across all operations. Action plans are developed from the due diligence process to address identified areas of vulnerability or impacts.
Additionally, the risk matrix includes emerging transversal risks related to:
Personal data protection: in the era of digitalization and market globalization, Enel Chile business strategy has focused on accelerating the transformation process towards a business model based on digital platforms, through a data-driven and customer-centric approach, which is being implemented throughout the entire value chain. Enel Chile boasts a sizeable customer base that reaches more than two million, with more than two thousand people directly employed by the Company.
Consequently, Enel Chile new business model requires managing a much larger volume of personal data than in the past. This means greater exposure to risks associated with processing personal data and increasingly stringent privacy legislation worldwide.
Some of the ways in which these risks can occur include a breach of confidentiality; loss of complete, accurate, current, and available personal data of customers, employees, and third parties (such as suppliers and contractors), and problems in the systems’ resilience, all of which could result in sanctions, interruptions in operations or processes, economic or financial losses, as well as reputational damage.
To manage and mitigate this risk, Enel Chile has adopted a personal data governance model (Data Protection Compliance Program) that assigns roles at all levels of the companies in Chile (including the appointment of a Data Protection Officer (“DPO”), adopts digital tools for data mapping, and includes an adequate risk impact assessment, technical and organizational security measures, among others.
Digitalization, IT efficiency, and service continuity: Enel Chile is carrying out a digital transformation for how it manages its entire value chain, developing new business models and digitalizing processes, integrating systems, and adopting new technologies. A consequence of this digital transformation is that Enel Group in Chile is increasingly exposed to risks related to the functioning of the information technology (IT) systems implemented throughout the company, with impacts on operational processes and activities that could lead to service disruptions or data leaks and data loss.
To mitigate these risks, the Digital Solutions unit, which is responsible for leading the Group’s digital transformation in Chile, has set up an internal control system that introduces control points throughout the value chain. The unit’s internal control system oversees activities performed internally and those entrusted to external associates and suppliers. In this way, Enel Chile is promoting the dissemination of culture in this area to successfully achieve the digital transformation and minimize the associated risks.