CONSULTING SERVICES
POINT OF VIEW
TRADING INFORMATION MANAGEMENT: MOVING BEYOND ETRM Author: Austin Morris, managing partner, SunGard Consulting Services
Today’s energy trading and risk management (ETRM) systems offer a wealth of capability, with functionality covering the vast majority of the business processes of buying and selling commodities, from contract management through invoicing and accounting. Given that many of these systems are rarely fully integrated, few companies are able to answer fundamental business questions with them (such as P&L, deal profitability and asset performance) without considerable time and effort to manually consolidate data and extract key information and metrics. Today, organizations are recognizing that a fully integrated systems architecture, or trading information management (IM) platform, should be coupled with an effective business intelligence (BI) strategy and toolset. Without this partnership, it is very difficult for an energy or commodity trading firm to move beyond answering the most basic question about a trade – “what happened?” – and realize the benefits of knowing “why” it happened, and developing a strategy to answer the most difficult question requires a proactive strategy: “what will happen?”
The age of increasing scrutiny In order to implement a proactive business intelligence and information management strategy, firms must grapple with increased scrutiny imposed by regulators in an environment of increasingly active shareholder involvement where companies are turning their attention to regulatory accountability and financial performance. Proactively managing regulatory risks and improving financial performance requires operational and financial visibility, in near real-time, across the entire enterprise. Management must be able to quickly identify those business units, assets, or even deals that may negatively impact the business, slowing growth, reducing profitability or creating increased regulatory exposures. Without this depth of insight, optimization of operations and financial performance simply cannot be achieved. Most systems and architectures have been designed to capture the events of business – the contracts, deals, commodity movements and costs, and the accounting transactions that reflect those events. Unfortunately, even though much of the information related to any transaction may be present in the ETRM system, these solutions are many times not capable of answering whether those events lead to truly profitable outcomes, as the critical information stems from a number of other systems that may not be contained in the ETRM, such as tax, treasury, cost of capital, or credit management systems. Optimizing business operations first requires that information flow be optimized and integrated across all functional areas of the business, from deal origination through treasury, providing critical insight and enhanced capabilities in areas such as portfolio management, asset management, trend analysis and market and credit risk management. Achieving such capabilities requires the development and deployment of an IM platform that enables business intelligence and measurement of performance in all dimensions – across assets, business units, portfolios and time.