𝐈𝐟 𝐲𝐨𝐮 𝐜𝐚𝐧’𝐭 𝐬𝐞𝐞 the risk, 𝐢𝐭 𝐝𝐨𝐞𝐬𝐧’𝐭 𝐦𝐞𝐚𝐧 𝐢𝐭 𝐢𝐬𝐧’𝐭 𝐭𝐡𝐞𝐫𝐞 (𝐞𝐬𝐩𝐞𝐜𝐢𝐚𝐥𝐥𝐲 𝐢𝐟 𝐲𝐨𝐮 𝐡𝐚𝐯𝐞𝐧’𝐭 𝐥𝐨𝐨𝐤𝐞𝐝).

➤Do you understand your company’s full energy market exposure across different time frames?

➤Are current processes performing as well as they could?

In the energy market, understanding commercial risk, where it sits and how it can be managed has always been critical to long term success.

It is easy to see risk as being purely something that revolves around the commodity markets, and measure value-at-risk, or mark to market.

While these measures provide a view of current risk (based on the models used) they don’t look at the wider macro-environment, or internal process effectiveness.

The energy market is a linked network.

From a commodity price perspective this is obvious, but from a wider web of exposures – there are more nuanced and slow-burning links.

Commercial risks are many in nature, and any business facing the energy market is exposed to them in one way or another.

To name a few:

𝐌𝐚𝐫𝐤𝐞𝐭 𝐫𝐢𝐬𝐤𝐬
The traditional starting point for risk modelling.

Liquidty, volatility, credit and collateral are normally top of the list.

For those with longer term market access or similar contracts, a more fundamental review of products, services, costs and counterparty exposure is sensible.

𝐏𝐫𝐨𝐜𝐞𝐬𝐬 𝐄𝐟𝐟𝐞𝐜𝐭𝐢𝐯𝐞𝐧𝐞𝐬𝐬

What handoffs are there between business areas? What assumptions are being made (why?)? Is there consistency across the whole business?

𝐏𝐨𝐥𝐢𝐜𝐲 𝐃𝐞𝐯𝐞𝐥𝐨𝐩𝐦𝐞𝐧𝐭𝐬

Energy policy is a complex, evolving beast. Away from the complexity of codes, the real world impacts are many and large. Sometimes many years in the making, they can creep up and have devastating effects for the unprepared.

𝐏𝐫𝐨𝐝𝐮𝐜𝐭 𝐚𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭

If you have a product, does it perform as you think it does? Does it work well in the market environment? Are all the internal elements aligned.
 
From kicking the tyres, to deep dive reviews, there are times when spending time looking internally makes sense, and its generally too late at the time of crisis.

𝐖𝐡𝐢𝐥𝐞 𝐧𝐚𝐯𝐞𝐥-𝐠𝐚𝐳𝐢𝐧𝐠 𝐢𝐬 𝐠𝐞𝐧𝐞𝐫𝐚𝐥𝐥𝐲 𝐧𝐨𝐭 𝐫𝐞𝐜𝐨𝐦𝐦𝐞𝐧𝐝𝐞𝐝; 𝐜𝐥𝐞𝐚𝐫 𝐟𝐨𝐜𝐮𝐬𝐬𝐞𝐝 𝐨𝐩𝐭𝐢𝐦𝐢𝐬𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐫𝐞𝐯𝐢𝐞𝐰 𝐢𝐬!