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.
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