White Papers Risk as a Service – The Next Thing in Affordable C - Page 3

Risk as a Service - The Next Thing in affordable Corporate Risk Management? A ComTechAdvisory Whitepaper RISK SOFTWARE SOLUTIONS IN ENERGY AND COMMODITIES For any risk professionals in energy and commodities, most E/CTRM solutions do not really offer sufficient risk capabilities. In many E/CTRM solutions, risk management functions are limited to basic ‘risk’ reports like position and PnL, basic credit and position limits, and perhaps some fairly simplistic valuation tools that probably have limited applicability to physical instruments or assets. Often, what risk tools are provided need overnight batch jobs to run to completion to produce the reports, and any form of omission (prices, for example) can result in the job not completing at all. This can mean that up to date position and PnL reports are unavailable at critical moments in the trading day. To get around the risk management weakness inherent in most E/CTRM software solutions, many firms have hired experienced risk management staff who have built up an array of internally developed risk tools, or they have procured specialist risk analytic or credit risk solutions from the limited number of small consultancy- come-vendors that offer specialized risk software in the space. These then have to be integrated with the E/CTRM(s) being used by the firm adding cost and complexity. ComTech estimates that around half of the market for advanced risk analytics is served by in house solutions of one form or another. It is an area lacking a dominant supplier or indeed solution, and this adds to the ongoing expense of risk management. Furthermore, there is a need for quantitative professional risk staff who are also in demand and can therefore be expensive, ensuring that providing solid risk management can be a pricey proposition. On the credit side, there are a very small number of comprehensive commodity-focused credit solutions on the market and some of these are now aging being 15-years or more, old. Essentially, the E/ CTRM is often insufficient as a risk tool and it needs to be supplemented with a true advanced risk analytics/ credit solution. © Commodity Technology Advisory LLC, 2020, All Rights Reserved. 3