RISK MANAGEMENT

"Duke Energy is entering a new and larger universe of risk, based on volatility of energy commodity markets, credit markets and foreign exchange. It's an expanding universe because of the dramatic growth in the scope of our trading and marketing activities and our energy assets. We cannot afford to hedge away risk or to avoid it by pursuing a timid or sheltered business strategy. With risk comes reward. How do we manage our risk profile and exploit Duke Energy's competitive advantages? The way we structure acquisitions and overseas investments. The way we develop commercial arrangements to mitigate risk. The way we employ financial derivatives and instruments. And we continue to recruit aggressively for the best minds from the energy industry, as well as banking and other industries with a traditional focus on market risk management."

Duke Energy has elevated risk management to encompass and integrate its diverse energy businesses. Duke Energy's aim is to manage risk – as a strategic and competitive advantage. A corporate risk management committee, chaired by the chief financial officer, establishes risk management policies that address volatility associated with commodity prices, interest rates, credit and foreign exchange.

As energy commodity trading and marketing have grown dramatically, corporate risk management has established a comprehensive system to assess, manage and hedge commodity price risk. Risk management also addresses commodity price risk exposures inherent in such diverse energy assets as power generation and natural gas processing. Duke Energy does not just hedge against risk in a defensive position but creates competitive advantages for assets, market services and customers.

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