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This is the forward to a strategic paper on ETRM and risk management and reporting.

Towards All Pervasive Strategic Awareness

Energy Trading and Multi-dimensional, Continuous and Correlated Risk Reporting and Management

Welcome to this industry specific expose of the Cambriano Risk Framework (CRF).

In a volatile, perfidious and rapidly changing economic world, one fraught with fear, uncertainty and doubt, and beset with excessive amounts of paranoia and defensive posturing, Cambriano Risk Framework is a means of focusing attention and thinking constructively and iteratively about key aspects of risk in a trading organisation. The Cambriano Risk Framework is a support structure that is conducive to the methodical formulation, verification, development, quality assurance and implementation of well-structured and integrated approaches to the provision of reliable, effective and usable risk reporting and risk information management.

This paper explores the practical and pragmatic meaning of Pervasive Strategic Awareness in business as it relates to the energy industry, it illustrates the significance that multi-dimensional, continuous and correlated risk reporting and risk information management have for today’s energy trading organisations, and lays out an agile, sound and evolutionary approach that energy trading companies can adopt in order to leverage existing know-how, frameworks, processes, practices, best-principles and technologies, in order to best support an organisationally focused, integrated, business-driven risk management process, as a process that aims to satisfy all the key stakeholders of the organisation.

In this paper I have addressed a wide-range of contemporary energy commodity trading and risk management issues, with the prime purpose of showing, as unambiguously as possible, just how leading energy trading companies, of all sizes, can go about the task of minimising the gaps between the business need for continuous and correlated multi-dimensional risk management, a shortage of business know-how, the true potential of available technology, and the most effective use and integration of legacy systems with proven and commercially available technologies, by simply taking advantage of the author’s insight, multi-faceted wealth of knowledge and experience, and their skills in proven cross-industry methods, best principles and practices.

In the following pages I have primarily kept the focus on the principal elements of a proposed risk framework, in order build up a clear picture of how effective this structured approach can be in supporting both the imperative business requirements that drive the demand for a comprehensive risk solution, and to demonstrate the effectiveness of the multi-dimensional, continuous and correlated risk reporting and risk management in a volatile and fast-moving energy trading business. To that end, the document will drill down on the following focus areas:

Current and evolving business imperatives

  • Energy trading spectrum – instruments and strategies
  • Risk management spectrum – classes of risk
  • Business Information Management
  • Framework for multi-dimensional, continuous and correlated risk reporting and management
  • The process of risk calculation, reporting and management
  • Supporting architecture, technologies and techniques
  • All pervasive strategic awareness
  • Next steps

This paper is used to illustrate how the Cambriano Risk Framework can be a very useful reference tool, one that can be used effectively in the discussion and formulation of the risk reporting and management needs of any trading organisation. In this particular instance, the focus of the framework is on energy commodity trading – especially involving those energy traders who work closely with oil, gas, power generation, transmission and distribution, but also for those organisations who trade in energy commodities, either as a means of hedging obligations, taking out insurance against potential supply or demand obligations, taking out options on futures, as purely financial instruments, as a means of taking advantage of transient arbitration (when different market prices for the same thing exist) opportunities or as simply a means of placing informed and speculative wagers on energy price movements.

Martyn Richard Jones

January 2014

To find out more about the Cambriano Energy framework for ETRM, please contact Martyn Jones. See side bar for details.

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