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Energy Enterprise Trading and Risk Management Industry Study

Energy Enterprise Trading and Risk Management Industry Study. Why should my company participate?. Benchmarking helps establish an organization’s true competitive position. Improves operational management. Improves strategic planning. Why should my company participate?. … to effect change.

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Energy Enterprise Trading and Risk Management Industry Study

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  1. Energy Enterprise Trading and Risk Management Industry Study

  2. Why should my company participate? • Benchmarking helps establish an organization’s true competitive position. • Improves operational management. • Improves strategic planning.

  3. Why should my company participate? … to effect change Resources Human Data Analysis Decision Analysis Risk Mgmt Risk Mitigation Physical Disposal Info Gathering Basic Competent Advantaged Increasing skill level Level

  4. Why should my company participate? … to effect change Improve, Redesign, Reengineer Monitor Utility Monitor Reallocate Resources Performance Level

  5. Business Asset valuation/ optimization Convergence Increased market volatility Real-time decision support Business processes Complexity of technical plant operations/ performance Risk assessment and management Enterprise Integration and standardization Mergers/acquisition Performance measurement and reporting Regulatory issues (FASB 133, GISB, EITF) Key business drivers Technological • Real-time data • System customization • E-commerce (internet sales, auctions) • Lack of proper system integration • Rapidly changing business needs • System selection and update

  6. Key Business Drivers characteristics of leading companies • Are innovative and opportunistic. • Scale is good for increasing returns from certain business functions. Negative returns to scale can also result. • Use risk management programs as integral parts of their business model.

  7. Key Business Drivers characteristics of leading companies • Commodity price volatility can quickly destroy or enhance shareholder value. • Work in a real-time environment to anticipate and mitigate potential risk

  8. Key Business Drivers characteristics of leading companies • Have a comprehensive understanding of the risks in these volatile markets, coupled with resource commitments. • Have integrated strategies across the entire value chain. • Undertake ownership or control of energy assets, control of transmission/ transportation capacity, have effective back office operations, specialized information systems, or superior ERM business processes.

  9. What is the Energy Enterprise Study? partial areas of interest Risk Measurement VaR / DEaR Risk Adjusted Performance Stress Testing Option Greeks Management Reporting Daily P&L Limits and PositionTracking Coordinate Cash and Financial Stress Testing Daily Mgmt Report Transaction Documentation Deal Capture Data Entry Verbal Confirms Initial Reconciliation Written Confirms Program Standardization Transaction Settlements Brokerage Commissions Margins & Premiums Liquidity & Cash Flow Invoicing Program Evaluation Trading Process Flow Report Design Efficiency of Systems 3P Document-ation Forward Risk Coordination

  10. What is the Energy Enterprise Study? • The wholesale origination/structuring interface. • The retail origination/structuring/risk management interfaces. • Asset management activities versus trading activities. • The quantitative analysis function.

  11. What is the Energy Enterprise Study? • Risk management focus that differentiates control and performance functions. • Inclusive FTE definition of mid-office categories to enhance comparability. • Inclusive FTE definition of back-office categories to enhance comparability.

  12. What is the Energy Enterprise Study? • Careful definition of parent company/corporate metrics and expense allocation criteria to enhance comparability. • Regional analysis of physical volumes, revenue, COGS, and compensation Inclusive definition of bonuses and stock options. • Use of cash flow metrics to determine the ability to convert revenue to cash. • Review of income statement, balance sheet, and ROCE metrics on a trading-operation-specific basis.

  13. TERA • Teknecon Energy Risk Advisors (TERA), LLC is a consulting firm with focus in the oil, natural gas, and electricity industries.   • TERA’s business reputation is built on a thorough understanding of trading and risk management, and how the marketplace views energy companies through the drivers of shareholder value.

  14. Alliance of Energy Suppliers • The Alliance of Energy Suppliers, a new division of the Edison Electric Institute, serves the needs and advances the commercial interests of power producers and marketers. • By providing new business tools, strategic market intelligence, and advocacy in multiple forums, the Alliance is helping to define the markets and new rules for this competitive industry.

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