Energy Trading and Risk Management Goes Mobile
Written by Lauren LaFronz of Triple Point Technology
Competitive advantage in the energy sector is increasingly being secured by the quality of the technology deployed. Lauren LaFronz of Triple Point Technology makes the case that ongoing tightening in the markets combined with technological developments will push the next battle for differentiation into the mobile arena.
THE GLOBAL CHALLENGE
The economic roller-coaster ride in the energy market has been well documented. Rapid and large price swings have become commonplace, particularly in the oil industry where it’s become a non-event for prices to swing between 15 and 30 percent. This volatility is caused by multiple factors, including extreme weather phenomena that are changing consumption habits, political instabilities that are disrupting strategically important geographies, and biofuels and other renewables that are complicating financial models.
This price volatility and uncertainty is making it exceptionally difficult for energy companies to make long-range business decisions, and if price fluctuations are not properly managed, profitability suffers.
Additionally, demand from developing countries, notably China and India, is rising, and this trend is expected to continue. According to several sources, including IHS-Cambridge Energy Research Associates, by 2030 energy demand will jump between 30 and 40 percent from 2010 levels primarily due to requirements from emerging economies. While this growth presents big opportunities, it also presents big challenges related to supply, operations, and logistics.
Furthermore, the cost of doing business has risen due to stringent regulations regarding environmental practices, corporate governance, and financial management. And last but certainly not least, the complexity of the energy market has increased exposure to all four key types of risk as identified by the Committee of Chief Risk Officers (CCRO): price risk, operational risk, counterparty credit risk, and regulatory risk.
ENERGY TRADING AND RISK MANAGEMENT
In this challenging environment, energy companies need every possible competitive advantage, and have increasingly turned to specialized systems for energy trading and risk management (ETRM). These systems have such a critical role that they are the subject of an annual ‘Magic Quadrant’ report from global analyst house Gartner, which examines the offerings of leading ETRM vendors.
Sophisticated ETRM platforms enable energy firms to:
Optimize trading by fully integrating physical and financial positions for multiple commodities.
Minimize risk by delivering complete visibility into the four key areas of exposure identified by the CCRO, and providing tools for analyzing positions and exposure in real-time.
Streamline the supply chain by managing the unique scheduling and logistics requirements of coal, power, natural gas, and liquids.
Increase productivity and reduce manual errors by providing straight-through processing (STP) from the front- through to the back-office.
FROM COMPUTERS TO SMARTPHONES
These systems have typically been provided through a desktop or laptop interface. However, the current overwhelming trend in enterprise technology is the move to mobile. The wholesale use of Blackberries in the early years of the 21st century, and more recently the advent of iPhones, iPads, and other tablet computing devices has taken enterprise computing to a new level, and created new ways of increasing productivity.
As a result, the workforce as a whole is becoming increasingly mobile. In a survey conducted for IBM, 75 percent of executives stated that the deployment of mobile devices is critical to the long-term successes of their companies. The Fortune 500 has already embraced modern mobility: according to Apple, iPhones and iPads are already being deployed or tested by over 90 percent of the world’s biggest companies. And furthermore, research from Forrester shows that 75 percent of companies report increased worker productivity from deploying mobile applications.
The power and prevalence of today’s mobile devices is transforming the shape of the modern enterprise. Mobile applications empower executives to make informed, rapid decisions by giving them the data and analysis they need, when and where they need it.
APPS CONDUCIVE TO BUSINESS
Mobile business applications were originally limited to delivering news and information, or serving as generic productivity tools. Recently, however, there have been big advances in the development of applications for specific business environments. These applications have the power to revolutionize the way companies in the energy sector do business.
Due to its global nature, the energy market lends itself to the adoption of mobile technology. The energy industry operates across multiple time zones, frequently involves co-ordination of efforts, resources, and information within very short timeframes, and is subject to rapid changes and fluctuations in both price and operating conditions. It depends on informed, time-sensitive decision-making on a continual basis to maintain productivity and secure margins.
When looking for suitable mobile applications, there are a number of points to consider. The most valuable tools are not simply lighter versions of full desktop applications - they are developed precisely for the device concerned. The idea of moving an entire desktop solution to a mobile platform is also sub-optimal: the ideal solution will include only those tasks that are suitable to the mobile environment, and will offer seamless performance of just the key functions that are appropriate and/or necessary for the designated users. The most important point to consider is that mobile applications are a complement to desktop solutions, not a replacement for them.
The new reality of the energy industry means that industry participants must adopt the latest sophisticated technology-based tools, and do so now. Market volatility and complexity are here to stay. Early adopters of desktop and now mobile solutions are already gaining competitive advantage; their competitors risk being permanently left behind.
Triple Point Technology provides solutions for commodity trading, energy and oil risk management, and logistics. To find out more visit www.tpt.com