Tag Archives: Credit

Navigating the ETRM/CTRM EcoSystem (TM)

Introduction

When was the last time you thought of an ecosystem? Specifically, an energy/ commodity transacting and risk management (ETRM/CTRM) EcoSystemTM?

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Usually, for most business and information technology (IT) personnel involved with ETRM/CTRM, the thought of ETRM/CTRM as part of a broader ecosystem is an after-thought. Their focus may primarily be on implementing an ETRM/CTRM solution for a specific business need. This siloed approach often ignores the wider organizational ETRM/CTRM EcoSystemTM. The result can be a complex, sometimes redundant web of IT systems.

What is an ETRM/CTRM EcoSystemTM?

ETRM/CTRM EcoSystemTM is an interplay of all systems, business processes and people that are important for the successful functioning of an E/CTRM system through its transacting value-chain.

Let’s take an example of a typical ETRM/CTRM system and its interactions and interconnectedness with other systems. An ETRM/CTRM system may interact with any of the following systems:

  • Other ETRM/CTRM applications
  • ERP/ GL systems
  • ERP / Inventory management applications
  • Price curves applications
  • Advanced risk analytics applications
  • Credit applications
  • Derivative Accounting Applications
  • Fax/ Email applications
  • Data marts and Operational data stores
  • Data warehouses
  • Reporting Applications
  • Instant messaging systems
  • Electronic Trading Exchanges

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In addition, there are business processes – (a) internal to company and (b) each application specific – that together are instrumental in making these systems effective in meeting business needs. A transaction approval process, a confirm process, an end-of-day risk reporting process, and an interface to corporate accounting and financial reporting process are examples of business processes that form part of the ETRM/CTRM EcoSystemTM.

People form a critical component of the ETRM/CTRM EcoSystemTM. Systems and business processes are expected to help people become more effective in their work. However, for people to effectively use the systems and business processes, they need to understand and be trained on the interconnectedness and interplay of the various components comprising the ETRM/CTRM EcoSystemTM.

Navigating the ETRM/CTRM EcoSystemTM

As with any natural ecosystem, “habitats” exist within the ETRM/CTRM EcoSystemTM – these “habitats” are the key IT systems – ETRM/CTRM, ERP, Data Warehouse, and others. Specific people have a stake in these habitats. These are our stakeholders. These habitats are interconnected and their interactions are facilitated by business processes – the value chain that is important for managing end-to-end transacting processes. However, as in natural habitats, these ETRM/CTRM EcoSystemTM habitats also compete and cooperate in the ecosystem. Competition is for funding, functionality, resources and people time, while cooperation is driven by expected business benefits.

So, how do you navigate such an ETRM/CTRM EcoSystemTM? One optimal approach is to take a holistic view of the ETRM/CTRM EcoSystemTM. The goal is to maximize cooperation and lessen competition among the various habitats.

The holistic approach begins with mapping comprehensive business requirements for the entire ETRM/CTRM EcoSystemTM. Many times, the focus is on developing application or business unit specific requirements only. The next step is developing an “aligned” functional design on which the stakeholders agree. This looks across the entire ETRM/CTRM EcoSystemTM to improve cooperation across the ecosystem and reduce competition for housing key functionality in various habitats. It is vital to obtain agreement on, for example, where cash will be posted, where the sub-ledger will be housed, where the inventory will be managed and so on. There will be trade-offs and resulting implications of these trade-offs. A key objective is maximizing the company’s competitive advantage when planning for customizations and enhancements.   Design and pre-design phases are where the greatest flexibility exists in managing trade-offs. A tool such as CTRM-IQTM (1) can facilitate and expedite this process.

An additional element is the management of ETRM/CTRM EcoSystemTM implementations. Components of the ETRM/CTRM EcoSystemTM are best managed as part of a program. This helps in managing release cycles, customizations, and turning on key functionality.

The key to the ETRM/CTRM EcoSystemTM for an existing portfolio of systems is to view all IT systems in the ecosystem as “habitats” and understand the functions they serve. It may be prudent to “move” some habitats. Tools, such as AppRatTM (1) can assist in mapping and understanding the interactions among these habitats.

Conclusion

ETRM/CTRM systems form one habitat that are part of a broader ETRM/CTRM EcoSystemTM. Understanding the dynamics among key habitats helps in addressing many of the complexities of the web of IT systems and creating a holistic approach to managing key ETRM/CTRM systems.

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About the author.

ImagePrashant Shah is a Principal at AXCELERUS, a specialized ETRM/CTRM consulting practice with global client-base and solutions for the full spectrum energy transacting value chain.   Prashant focuses on risk management activities, risk reporting, front, middle and back-office processes and energy transacting/risk management (ETRM) systems. Prashant can be reached at prashant.shah@axcelerus.com.

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These materials and the information contained herein are provided by AXCELERUS, LLC (“AXCELERUS”) and are intended to provide general information on a particular subject or subjects and are not an exhaustive treatment of such subject(s). Your use of these materials and information contained therein is at your own risk, and you assume full responsibility and risk of loss resulting from the use thereof.

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