Justification for a New Energy Trading Risk Management -ETRM System

Post by admin on May 16, 2012

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Why Companies Should Implement an Energy Trading & Risk Management (ETRM) System?

  1. The goal of implementing an ETRM system is to improve the bottom line performance of a corporation through superior business insight while capturing, normalizing, managing and mitigating risk proactively.
  2. A comprehensive ETRM solution will enable scalability for business growth. If you anticipate growth in the future, the time is now to implement an ETRM system that is designed to easily integrate merger & acquisitions (M&A) assets and data for a single view.
  3. Recent financial debacles show that operational risks can result in significant financial losses. A robust ETRM system can provide superior, proactive risk management capabilities that disparate spreadsheets and/or manual risk tools cannot
  4. An enterprise ETRM system will facilitate a company’s ability to deploy a comprehensive, proactive risk management program for managing market (i.e., price), credit, operational and regulatory risks.
  5. The operational efficiencies, business metrics/intelligence, improved reporting & risk management that a single ETRM system of record or single version of the truth brings to an organization will outweigh or offset the cost of a system; can you afford to not have this capability?
  6. Spreadsheet tools are prone to error and do not provide sufficient auditability in order to insure effective risk management. Not having a robust ETRM solution in place will result in continuous scrutiny from internal and external auditors.
  7. A suitable ETRM solution should be all web-based and easily deployable. It should offer an easy-to- use template-based adhoc reporting capability for quick, drillable custom reporting.
  8. New configurable, template-driven ETRM systems require no coding expertise to implement thus supporting rapid deployment resulting in drastically lower implementation, maintenance and ownership cost over time.
  9. Advanced metrics like earnings at risk (EaR), profit at risk (PaR) and more can easily be implemented with a formula-based risk system.
  10. Seamless credit risk management insures that credit exposures are managed proactively and in addition can leverage advanced metrics like total potential exposure (TPE) potential future exposure (PFE) and credit value at risk (CVaR).
  11. ETRM systems feature hypothetical analysis tools that can be used for day to day operations and/or leveraged in M&A evaluations for better impact analysis studies.
  12. ETRM systems that feature ease-of-integration tools (i.e., middle-ware technology) that speed the integration of M&A data for quicker and faster asset integration.
  13. Embedded, programmable work-flow can automate many tedious processes, monitor activities and kick-off events etc. that ultimately promote operational efficiencies and improve risk management.
  14. Shadow settlement capability and invoice straight-through processing improve accuracy and efficiencies of accounting processing. Furthermore, accounting entries can be automated to GL systems thus promoting Sarbanes/Oxley compliance.
  15. A robust and flexible ETRM system will evolve with the business and regulatory requirements and promote ease-of-compliance such as Dodd-Frank compliance.
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