MANAGEMENT’S DISCUSSION AND ANALYSIS Our Chief Administration Officer and Chief Financial Officer (CAO and CFO) is responsible for ensuring that the risk management program is  an integral part of our business strategy, planning and objective setting. The CAO and CFO has specific accountability for ensuring that ERM  processes are established, properly documented and maintained by our company. Our senior managers, line and functional managers are responsible for managing risks within the scope of their authority and accountability.  Risk acceptance or mitigation decisions are made within the risk tolerances specified by the head of the subsidiary or function. The CAO and CFO provides support to the Audit and Finance Committee of our Board of Directors, the President and CEO, the senior  management team and key managers within our company. This support includes developing risk management frameworks, policies and  processes, introducing and promoting new techniques, establishing risk tolerances, preparing annual corporate risk profiles, maintaining  a registry of key business risks and facilitating risk assessments across our company. Our internal audit staff is responsible for performing  independent reviews of the effectiveness of risk management policies, processes and systems. Starting in 2013, our Board of Directors has  taken on an enhanced role in our governance structure. Each committee of the Board of Directors will take accountability for reviewing specific  risks of our company. Key elements of our ERM Program enable us to identify, assess and monitor our risks effectively. These include having an ERM policy and  framework which communicates our philosophy and process for risk management across our company. A discussion of risks is an integral  part of each line of business’ planning documents on an annual basis. Risk identification is also considered as part of each business case for  investments. Finally, discrete risk assessments and workshops are performed for specific lines of business, key projects and various profiles,  such as customer relationships and regulatory compliance. In order to drive consistency throughout our risk identification and risk management  processes, we use a standard list of risk sources known as our risk universe. These sources are maintained in a single database that provides  a consistent basis for risk identification and classification and serves as a repository for our risk assessments. All risk assessments in our  company start with this risk universe. We also use standard risk criteria, which establish the metrics and terminology used for assessing and  communicating on risks, and help ensure a consistent basis for our risk assessments and risk evaluations across all lines of business. Risk criteria  include formally established risk tolerances and standard scales for assessing the probability of a risk materializing and the strength of controls in place to mitigate them. The Province owns all of our outstanding shares. Accordingly, the Province has the power to determine the composition of our Board of  Directors, appoint the Chair, and influence our major business and corporate decisions. We and the Province have entered into a memorandum  of agreement relating to certain aspects of the governance of our company. Pursuant to such agreement, in September 2008 the Province made  a declaration removing certain powers from our company’s directors pertaining to the off-shoring of jobs under the Inergi Agreement. In 2011,  the Province made a declaration preventing our company from seeking cost recovery through the regulatory process for the cost of upgrades  required for either Micro FIT or Small FIT generators for costs related to investment and expenditures made. Effective September 30, 2013, the  Province made a declaration regarding the outsourcing of services covered by the Inergi Agreement. In 2009, the Province required our company, among other entities, to adhere to certain accountability measures regarding consulting contracts  and employee travel, meal and hospitality expenses. The Province may require us to adhere to further accountability measures or may make  similar declarations in the future, some of which may have a material adverse effect on our business. Our credit ratings may change with the  credit ratings of the Province, to the extent the credit rating agencies link the two ratings by virtue of our company’s ownership by the Province. Conflicts of interest may arise between us and the Province as a result of the obligation of the Province to act in the best interests of the residents  of Ontario in a broad range of matters, including the regulation of Ontario’s electricity industry and environmental matters, any future sale  or other transaction by the Province with respect to its ownership interest in our company, including any potential outcomes arising out of the  recommendations of the Ontario Distribution Sector Review Panel’s report, the Province’s ownership of OPG, and the determination of the  amount of dividend or proxy tax payments. We may not be able to resolve any potential conflict with the Province on terms satisfactory to us,  which could have a material adverse effect on our business. Ownership by the Province  35 HYDRO ONE ANNUAL REPORT 2013