Next Generation C/ETRM Solutions
When C/ETRM systems were introduced 20 years ago, the goal was to automate the complex and routine tasks and business processes of commodity trading, eliminating manual processes, reducing costly errors, minimizing operational risk and increasing efficiency. Today we live in an age of digital transformation, artificial intelligence, virtual reality, blockchain, and much more, with the goal to be agile, streamlined, efficient and harness the ability to leverage opportunities. While some of those cutting-edge technologies certainly cross the path of C/ETRM systems, industry surveys tell us that even the original automation goals have not been realized by the legacy solutions. Next-generation C/ETRM systems take advantage of the latest technology and deliver functionality to do more with less.
Robust Deal Entry Functionality
While having been promised front-to-back automation, the legacy C/ETRM system limitations hamper easy deal entry, near-real-time position and risk reporting, and the settlement of non-standard contracts. As a result, far too many trading shops are relying on little armies of deal entry clerks, spreadsheet jockeys, or settlement analysts. Next-generation C/ETRM systems provide functionality that allows a company to redirect its’ staff to get involved in more productive activities and at the same time achieve its other goals of reducing its cost of trading and be more competitive.
Deal Templates for Timely Entry
In the front office, a repository of smart Deal Templates can be set up by the user that are pre-populated for product trades that include necessary pricing or cost formulas, so that only the minimum amount of data needs to be keyed in, such as price and delivery period. Deal templates can also be used behind the scenes to help automating the import of confirmed trades from Exchanges. Subsequent to the timely entry of deals, a modern C/ETRM system is capable of immediately processing and recalculating based on the latest data so the traders always have an updated position.
Full System Integration
Consequently, the timely entry of trades and near real-time updating by the system also benefits the mid-office. Moreover, apart from having live insight into the business, an integrated C/ETRM system also represents – or otherwise supports – a huge single data repository. This subsequently allows to take advantage of advanced analytics. For example, predictive analytics is the use of (historical) data, statistics/mathematics and machine learning techniques to get insights into the likelihood of specific future scenarios. Consider how using models for price (and load) forecasting, simulations to support asset optimization in a world of renewable resources and short-term trading, can directly improve profits and result in a competitive edge. Additionally, user-configurable What-If scenarios can be created to allow quick analysis of Profit & Loss, Mark-to-Market, and (incremental) Value-at-Risk valuations for predefined situations. This way the What-if scenario allows a business to respond to alternative situations more quickly and effectively because they have developed strategies to rely upon.
Leveraging Automation Processes
Similarly, leveraging contemporary technologies, rule-based algorithms can help to streamline unique and laborious processes. For example, a next-generation C/ETRM can automate complex equity gas nominations and the optimization of gas flows to meet demands. It takes a single scheduler to easily view his supply and demand positions by location and run a solver to get the optimized flow, further supported by an embedded gas nomination process.
Back Office Benefits
When a C/ETRM system provides an integrated solution, the back-office will benefit from straight-through-processing and built-in workflow management thereby streamlining the contract-to-bill process. A C/ETRM system that has a notion of Billing Determinants and Charges Types, will be able to automate 95% of all contracts, whether EFET / ISDA master agreement, complex PPA, Intercompany, or Generation and Renewables contracts. Like with the Front Office, also here template and formula driven software will be leveraged. This functionality is also required if one wants a complete P&L report i.e. do shadow settlement to calculate estimates. Taken together, the savings and efficiency improvement will be substantial (6+ FTEs).
Mobile Access Increases ROI
In a fast-paced digital and mobile world, traders and portfolio managers need access anywhere anytime. A C/ETRM’s Mobile App empowers users to not only monitor information in real time, but also to act on that information, thereby improving productivity while taking full advantage of the C/ETRM system and increasing its ROI.
The Competitive Edge
A modern integrated C/ETRM system supports a trade processing framework that reduces manual intervention, minimizes errors while enhancing transparency. New technologies are available to achieve 21st process automation that companies expect and look for to do more with less, leverage advanced analytics to make better decisions, and be more competitive.