Interview: Not All Risk Is Created Equal

As one of the largest electric utility companies in Latin America’s largest economy, the Brazilian unit of Portuguese firm EDP needs to know how new technologies will disrupt and shape the business world, all while maintaining growth and competitiveness.

In this interview, the unit’s CFO, Henrique Freire, shares his knowledge and experience on innovation, building financial teams in the digital age, cybersecurity, and managing growth in a volatile environment.

Q: What is EDP doing in terms of cybersecurity in the financial department?

A: In the cybersecurity space, EDP invests in people, processes, and technology continuously. In terms of people, we are investing in mandatory e-learning training for all employees and in internal communications campaigns to reinforce the importance of protecting our data and the precautions to avoid phishing.

Speaking of technology, we frequently upgrade existing tools and invest in new solutions to help us protect our environment from invasions. For instance, the Security Operation Center monitors EDP to proactively identify any deviation in the company's environment and take immediate action. From a process perspective, we frequently run internal and external audits to identify gaps and/or improvement opportunities in order to guarantee that the best practices are in place. Apart from that, we also run vulnerability tests in our applications. Last but not least, we are also performing some preliminary analysis to review and adapt our existing systems to be compliant with the future LGPD [Brazil’s new data protection law].

Q: What is EDP doing in terms of innovation in the use of technology for the financial area?

A: We are taking advantage of robotic process automation (RPA) technology to avoid manual errors in transactional processes, increasing efficiency and improving the productivity of the team, while freeing up time for the team to bring more added-value activities. As of [May], we have 45 automated processes already in the financial area. In terms of analytics, we have developed a solution using machine learning to define the best strategy to reduce delinquency.

Q: How do you build financial teams in the digital age?

A: We have been training our employees in digital methodologies, such as design thinking, agile scrum, and RPA development. Besides classroom theory, we also expose the financial teams to practical experiences by leading minimum viable products (MVP) related to their functions and connecting them with start-ups that can help us solve business problems.

Q: What do you think are the main risks of implementing new technologies? How can you prevent those risks?

A: By being an early adopter of new technologies, we face risks of all kinds, such as maturity of technology, limited players to support during the implementation, lack of internal support to change existing processes or even implement new ones, mistrust and resistance from the users to challenge the status quo, and, worst case scenario, investing money in innovation that may not result in ROI or that fails to solve a business problem when the technology does not play the intended role. However, we value innovation at EDP; it is one of our core beliefs. We strongly believe that the risk of not being innovative is more adverse than the risk of being an early adopter. But, in order to prevent or even minimize the risks as much as possible, we use the MVP approach, in which we start small, invest a small amount of money, pick a controlled group for testing, and only after that scale as we advance.

Q: How do you manage growth for a company in a volatile environment?

A: The first step is to understand how technology is going to change your business, what the big disruptions and what the new businesses are in this new environment. In order to be a successful company, it’s necessary to both reinvent your core business and implement new business models simultaneously. EDP Brasil’s recent growth has been supported by the construction of mid-sized hydropower plants and currently through the expansion of the energy transmission and energy services segments. We have been able to grow profit through superior execution on greenfield projects and improve the efficiency of operations at the same time we invest in new disruptive segments, such as distributed solar energy.

This interview was conducted by Latin Trade for Council of the Americas.