What Is The Importance Of Energy Trading Risk Management System?

What Is The Importance Of Energy Trading Risk Management System?

Energy CIO Insights | Wednesday, October 14, 2020

Due to the recent advancement in technology, most of the organizations are adopting Energy Trading Risk Management Systems to streamline tasks, reduce operation costs, and manage risk. 

FREMONT, CA: In today’s market, Energy Trading Risk Management is challenging and demands a secure, stable, seamless, end-to-end integration of various processes for commodity trading activities from the inception point of the trade to post-settlement. ETRM uses software and technology to integrate trading processes between the front, middle and back offices, often in real-time, as part of the overall enterprise resource planning strategy. ETRM strategy also includes managing commodity trading positions and exposures in real-time with market-to-market analysis, P&L reporting, and regulatory monitoring.

Why is an ETRM System Vital? Operational Risks

Top 10 ETRM Solution Companies - 2019ETRM Software is considered as a sub-category of the broader CTRM software category. ETRM software supports the business processes associated with trading energy commodities. Financial institutions and investment banks engage in commodity trading using various systems such as manual, automated, and often hybrid trading systems. The operational risks that are the result of systematic failures, back-office and settlement errors, and manual trade-entry errors lead to an increasing number of failed trades. Having a strong ETRM strategy that involves an STP system mitigates these risks, reduces costs, and increases efficiencies.

 It will provide Real-Time Access to the Markets

Financial companies can utilize technological innovations to streamline the trading process with the help of Straight Through Processing (STP). By enabling the uploading of trade blotters directly to the system parsing the data and assigning it to relevant fields, STP eradicates manual entry of trade details. Several human errors are caused associated with inputting erroneous trade data so that this process will reduce those errors. In the market, it has become crucial to gain access to real-time positions and data, so here ETRM systems provide near real-time access for MTM values concurrent with ICE and other exchanges. If all the functions will be automated through electronic processing, it will prevent costly errors due to human mistakes and delays in manual processes.

See also: Top Energy Tech Solution Companies

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