Consider A Supportive and Flexible ETRM System to Handle Marketplace Challenges
Energy Trade & Risk Management system has become a navigator of total business activities, especially in today’s escalating complex marketplace. It has become the core of energy business, which incorporates not just risk & trade management but even strategy, analytics, accounting, and compliance in a holistic manner. The system is designed especially for complex multi-asset environment.
Commodities financial market has seen functional merging, where the underlying markets has evolved physically into more segmented and complex structure. Now, it needs deep insights and advanced tools to accurately price energy assets economics.
New business needs
Energy market and participation pool is changing so there is a need and demand for ETRM systems that include –
- Great prominence on supply chain & logistics risks.
- Added market & credit risks within commercial contracts.
- Trade-able elements in the chains operational parts like offering emphasis on managerial flexibility and risk analysis valuation along with operational choice.
- Major focus on the contract portfolio risk.
- Prominence to energy asset & risk management portfolios.
- Capability to incorporate inventory management system and accounting.
Impact of physical and financial world interaction
Blending financial and physical data of commodities market is complex. In addition, it has become more financialized than the past. Alternatively, energy and trade risk management programs need to handle with financial products operational and credit risks including derivatives, futures, and forwards, while taking into consideration the underlying physical asset.
Energy and trade management program also needs to manage the interconnection between underlying physicals, business, and risk measures. The main reason is that energy trading depends basically on the physical asset’s performance. It does not matter if they are pipelines, warehouses or power plants. It chiefly relies on the underlying assets physical optimization, operations, logistics, and scheduling relevant to the business. Therefore, create a proper planning of risk fundamentals, so as to precisely capture energy trading risks in business portfolio.
Supportive energy & trade risk management program
The program needs to support strategic decision after applying the integrated asset optimization, analysis, and valuation tools. Integrated tools will be designed –
- To deal with supply chains management, logistics, and optimize supplementary services
- To update market information, accounting, risk models, pricing and valuation.
All this will ensure that you get a streamlined process.
Evolving market environment and regulation makes it necessary to possess a system, which is flexible. Non-financial risks like operational, logistics, and supply chain is hard to measure, so a supportive and relevant framework needs to be incorporated.