Driven by an increasingly complex marketplace, as well as outdated technology leading to workarounds and poor manageability, the cost of implementing an energy trading and risk management (ETRM) system has come under question in the past years. Still some buyers paid only lip service to their call and now experience the costly consequences. Others were sold on so called preconfigured solutions with limited implementation effort and low cost but ended up disappointed when it did not work for their business. Companies don’t implement an ETRM system on regular basis and expectations may not factor in what it takes to make it fit their business and strategy. So instead of a cookie-cutter approach, how To Stand Out? Implement a Configurable ETRM!
ETRM solutions are purpose-built software systems to automate tasks and business processes supporting the entire trade cycle from deal capture and contract management, to pricing and complex fees, trade confirmations, portfolio management and valuations, risk controls, collateral and credit management, to settlement, and regulatory compliance reporting. With so many different requirements and wishes, it takes an effort to firstly understand all of them, through scoping exercise, and secondly to configure and tailor the system to support your unique go-to-market strategy.
Of course, if you choose a less configurable system then you may have all requirements in the world, but there will only be 1 one way to implement and configure your new ETRM system: the same way as other users of that same standard ETRM system. No chance to reflect and support your business operations you devised to compete in the market. It might be cheaper, but it also limits what is possible.
So, what is really involved in an implementation of a truly configurable ETRM solution? For starters, when the system can be configured in more than 1 one way, it offers much more options and therefore the implementers will have many more questions to ask, therefore longer scoping and therefore more configuration work. Do not confuse system configurability with cumbersome setup functions, which is driving implementation cost. No, this need for configuration is purely driven by even minimal requirements to properly set up the ETRM for a particular customer.
While standard configurable functionality is out-of-the-box, this just means the ability to capture a deal, the ability to import a price forward curve, the ability to produce a mark-to-market report, or an invoice. Like a house, it has a living room, bathroom, bedrooms etc, but it needs to be furnished and decorated to fit your taste and lifestyle. Imagine these furnishings and decorations to be carbon copy with your neighbors, and you understand that your individuality is gone. The same for configuring an ETRM system that fits your business like a glove.
Consider your wholesale deal capture process and the what & how for your book structure, deal templates, holiday calendars, workflow, positions report (and no, a report that works for one customer does in our experience hardly work for another customer). Or risk control, and the what & how for limit and alerts, approval workflow, market prices, what-if scenarios, and risk factor. Your back-office process and the what & how related to trade confirmations, settlement calculations, invoice templates, margining calculations, approval workflow, regulatory reporting like REMIT, EMIR or Dodd Frank, as well as End-of-Day reporting setup. Many questions to ask, many processes to understand and configure.
Moreover, an ETRM system does not exist without source data and therefore interfaces from Trading Platforms and Market data systems, in addition to exporting or submitting data to for scheduling and nomination, accounting, and submission to repositories that each have their own proprietary format.
TRMTracker offers a high degree of user configurability, which reduces the risk that large monolith legacy system face: unmanageable, inflexible and costly to maintain. TRMTracker achieves this by allowing users to easily extend the application functionality without having to go back to coding, such as the ability to create user-defined field and tables that can be added to extend data models concerning deals, counterparties, and mapping tables. This also offers flexibility to meet the needs of companies’ changing businesses, while resulting in a lower total cost of ownership.
An ETRM is a specialized system for a niche market configured specifically for you. Under most circumstances, it will take a serious investment, albeit less time and less money than in the past due to next-generation technology that enables an agile approach and much higher configurability without coding. Claims of implementing in a week for little money are not real. That is either a ‘cookie-cutter’ solution or marketing nonsense. If you want to stand out, ensuring your business strategy is reflected in your ETRM system, invest in configuring it fit for you.