Intro. to New Utility Enterprise Risk Management- ERM Software
The Current State of ERM Software & Introduction to the Next Generation Utility Enterprise Risk Management- ERM Software Solutions
The interdependencies and intricacies of today’s utility enterprise risk management- ERM have never been so complex and all-encompassing. The risks for utilities fall into several related yet often disparately treated risk buckets. The main risks a utility must manage include but are not limited to market risk, credit risk, operations/operational risk and compliance risk that include many facets of compliance like Emissions, RECs and regulatory risk (FERC, NERC, EPA and more). While utilities are often thought of as risk adverse these risks are real and eminent and often managed disparately in silo systems and spreadsheets.
While utilities are actively managing the mentioned risks disparately there is an opportunity for improvement and efficiencies through a single, holistic view of ERM. A true ERM program is designed to bring all mentioned risk into a roll-up view so advanced enterprise risk metrics can be performed; some of those metrics include all at risk models, for example Credit Value at Risk -CVaR, Cash Flow at Risk -CFaR, Collateral at Risk -CaR, Earnings at Risk -EaR, Potential Future Exposure -PFE, and Total Potential Exposure -TPE and more.
Utility Risk Bucket Management & Systems Limitations
Utility risk buckets are often treated in silos not because utilities choose to manage them that way it is more of an issue of systems integration where technologies and the ERM vendor community have failed to offer an all-encompassing, single ERM platform that is feasible to deploy. Why is that, the task of managing ERM, on a large integrated utility scale, has many challenges and facets and technology has been slow to offer this all-encompassing solution without extensive, risky customization efforts.
To date, technology vendors, that have attempted to offer utilities a true ERM, have failed to delivery from two perspectives, cost and lack of ability to feasibly and economically delivery unique and challenging requirements. Traditionally, ERM software needs to be coded or “customized” to meet unique utility ERM requirements and the system gaps are far and wide; this type of large scale customization effort presents a huge challenge to deliver and more times than not its where projects fail. Another challenge is finding an off-the-shelf product that offers a utility ERM functionality that is close to the requirements and/or one that can quickly and economically close the gaps.
The Challenge with Utility ERM
Because no two utilities do ERM exactly alike, the challenge for ERM vendor companies has been to build out and offer ERM functionality that justifies an attempt to deliver or close gaps, in other words, a solution that meets near 80% out-of-the-box of the requirements and that will easily deliver the other 20%. To date energy trading and risk management –ETRM vendors have stretched their offerings to a point that many companies attempt a build out to ERM; however what they too often find is that the gaps and cost to close those gaps are too far and wide.
To date, a utility is lucky to find a solution that meets as much as 60% of their ERM requirements out-of-the-box and even if the vendor convinces them that they have 80% available those gaps are going to be painful to fill with traditional “customization” of coding efforts. Because of this dilemma silo systems still exist and those utilities that have attempted such an undertaking have mostly failed.
Meeting the ERM Needs of Utilities
Today that is changing as new technologies are stepping up to the challenge with new, easily “configurable” no coding needed, template and formula-driven software architectures that are designed to rapidly meet unique utility ERM requirements without expensive consulting or customization efforts. These next generation ERM applications offer all risk buckets on one organically built enterprise platform that is designed to rapidly “configure” to close gaps and easily meet unique ERM requirements. This approach removes the mentioned barriers and risks that have plagued ERM delivery by drastically lowering the time to deliver and the risk of delivery making a true ERM attainable for fractions of the cost.
Pioneer’s utility ERM solution is designed to meet 60-80% of the needs of large utilities out-of-the-box with the ability to rapidly and accurately close the gaps with highly configurable modules that are designed specifically to handle ETRM, emissions mgmt., RECs mgmt. and all enterprise compliance needs out-of-the-box. To find out more on how we are changing the ERM software space with our next generation, all web-based enterprise technology platform contact the below representatives:
Director of ERM, ETRM & EMIS Solutions
Director of ERM, ETRM & EMIS Solutions
Tel: +44(0)20 7887 7870