Anticipate & Mitigate
Strengthening enterprise risk management is a key strategic objective for PJM and its Members and stakeholders.
Events of recent years demonstrate an increasing need to promote organizational resilience by strengthening risk management across the organization. From continuous improvement in response to grid operation risks posed by severe weather to applying lessons learned in markets, PJM focuses on comprehensive enterprisewide best practices. These include:
Anticipating Risk Areas
In its markets, PJM regularly reviews and verifies Member risks. This includes an annual review of information submitted about Member companies, credit, market activity, external exposures, collateral and trading portfolios. Member implementation and adherence to robust internal risk management practices ultimately benefits the entire membership.
Besides requiring the sharing of internal Member risk policies, PJM’s annual Member recertification process of PJM Voting and Affiliate Members includes:
Sector selection
Affiliate disclosure
Principals (for market participants only)
Company information
Contact managers
Related parties
Officer certification form
Audited financial statements
Know Your Customer
In 2024, PJM Members endorsed by acclamation an enhanced Know Your Customer (KYC) protocol. More stringent information requirements from Members were first implemented at PJM in 2020. The 2024 KYC effort endorsed by Members reevaluated and expanded the definition of a “principal” in the PJM Tariff. PJM is awaiting a FERC decision on this proposed Tariff change in early 2025.
In October, both the Markets and Reliability Committee (MRC) and the Members Committee (MC) endorsed a proposal that will minimize credit risk arising from bilateral transactions in the capacity market.
Operations Risk
As of December 2024, PJM shared with Members and stakeholders that all recommendations for improvements in the wake of Winter Storm Elliott in 2022 had been completed.
