For organizations looking for flexible commodity trading and risk management systems, the integration of ETRM and ERP can be very beneficial.
Fremont, CA: Commodity supply and trading operations is a volatile marketplace. Managing such operations require a purpose-built commodity trading and risk management system with robust position/exposure reporting capability. A powerful financial control system with a tightly integrated record-to-report process is a necessity owing to today’s regulatory environment. Integrating energy trading and risk management (ETRM) with ERP back-office systems allows companies to achieve quick time-to-value, optimize total cost of ownership, and manage implementation risk.
Integrating two different enterprise-class software solutions present a certain degree of challenge. Business and IT leaders undertake the integration challenge when the clients have an existing ERP solution and need an extra boost of power and flexibility of a dedicated ETRM solution. In some instances, business leaders seek to replace a mainframe/midrange or custom trading solution with a commercial “off-the-shelf” system. Organizations also look for ETRM and ERP integration if they are migrating existing ERP or ETRM platforms to the cloud.
Upon deciding if integrating and existing ERP footprint with a dedicated ETRM solution, the differences between the two platforms push the organization toward a set of challenges. Some of the challenges include gaps in precision, currency conversion, rounding, and unit of measure. Some other problems are timing mismatches, interdependencies between real-time and batch processes across solutions, and inconsistent and poorly understood data models between both the systems.
The developers of ETRM and ERP assume that the entire origination-to-settlement lifecycle will be processed wholly within the single system. For instance, when a commodity trader enters their deals into the ETRM system, the necessary verification is done. Later, the ERP mirrors the original agreement recorded in the ETRM platform. This scenario results in a straightforward and one-way
interface. Changes made in the deal from the ETRM system are forwarded to the ERP as a modification to the purchase or sale contract. It minimizes the number of corrections and cancellations to the ones that impact the primary economic terms of the deal. As a result, it helps in developing simple business interface rules. Further, it also minimizes the disruption to downstream ERP processes such as treasury management, which is based on movement data, purchase or sale contract information, and more for timeliness and accuracy. The integration of enterprise trade and risk management with ERP has its challenges, but it has a lot of advantages as well.
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