‘Backwards’ thinking: A Game Changer

Post by admin on August 18, 2015

Chess

In the direction of the back…..that’s where Compliance Officers are looking today and don’t forget the Chief Financial Officers, where every cent counts more than ever. Their thoughts are ‘backwards’. However, if like so many, your existing ETRM system was developed by thinking front [-office] first and the back [-office] was an afterthought, it won’t be easy to produce the reporting your business needs in this ever increasing complex market.

Also, ‘backwards thinking’ is a type of cause-and-effect thinking; would you have looked at the back-office more carefully – then, you would have been able to get out what you put in – now. That realization has sunk in with, the forward thinking companies who in this market of increased regulation, compliance, and competition, recognize: Backwards thinking; A Game Changer!

With prices under pressure, competition increasing and extensive compliance reporting put in place, energy companies are looking to reduce cost of trading, increase efficiencies, improve business analysis and comply with regulatory reporting. At the same time they face a rise of complex products and renewables that have implications on processes and technology.

Their ETRM, or spreadsheet-based systems, are under scrutiny as they fail to deliver on those requirements. They lack the data structure and processing capabilities to produce outputs of the complex transactions that were entered by an aggressively creative front-office.

While many ETRM offerings are called next-generation, few were conceived with the back-office as a starting point. When considering the needs of functions like complex contract settlement, portfolio reporting, emissions tracking and compliance management then it is inevitable that the system’s technology must offer the latest in data structure and processing capabilities. Therefore, an ETRM system that is developed from the back to the front will offer superior output capabilities and is truly capable of evolving with the business operations.

An ETRM system based on this ‘back to front’ design will also greatly benefit the front-office because it will inherently be ready to support a flexible, hierarchical book structure where complex structure deals can be easily modeled. The middle office can leverage Straight-Through-Processing workflows and configure complex business processes while meeting audit and compliance policies. Because of this ‘backwards’ thinking, the software will be formula-based so that it can support financial modelling for accurate billing and deliver comprehensive risk reporting.

Thinking backwards while looking forward will help put in place a robust back-office environment that presents a coherent and comprehensive approach to energy trading data in time to meet the real obligations of approaching REMIT deadlines (October 2015 and April 2016) and a new wave of efficiency programs announced to stakeholders.

Energy companies need to extract more value from their complex portfolios, reduce back-office cost, innovate and improve financial accuracy while avoiding regulatory penalties for being incompliant. Translating these defined goals towards ETRM functionality is an examination of thinking about it backwards. Think about what the back-office needs to produce and then walk backwards from that goal. It offers a strong foundation to respond to market challenges, it will be a game changer!

 

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