|New White Paper Offers “A Practical Approach to Risk Management”|
DALLAS, TX, April 14, 2009 – A new white paper by risk management authority Dr. Vincent Kaminski explores the growing need for risk management platforms for the energy trading industry, which he says must “reinvent its tool box” to meet the new social and economic forces that continue to shape modern energy markets.
Kaminski, who currently serves as a professor of energy finance and energy derivatives at Rice University’s Jesse H. Jones Graduate School of Management, notes in A Practical Approach to Risk Management that record market volatility, changing regulatory environments and the increasing globalization of the energy marketplace pose “formidable IT challenges to risk management in the energy industry.”
At the root of the need for a universal risk management solution is what Kaminski calls a “skills and knowledge gap” between traders who know the energy markets and regulatory frameworks, analysts who employ highly stylized and abstract systems, and programmers who often have limited industry knowledge and poor communications skills. The challenge companies face is bringing these professionals together and ensuring they work in an effective way. Currently, the critical missing link to accomplishing this goal is a stable and scalable IT platform.
Typically, platforms used for energy trading and risk management have evolved from two types of systems: those used for handling physical flows of commodities, and those for financial systems trading bonds and equities. Specialized modules are then added to support energy trading; however, the end result is often a multiple-platform system that creates major integration issues.
Kaminski suggests that IT teams should evaluate their current IT platforms with an eye to several critical risk management functions:
Historically, risk management has been a low priority in the development and installation of software systems. However, with the pressures and volatility in today’s energy markets, an IT-based solution is critical to avoid potentially major catastrophes.
As Kaminski concludes, “Given what is going to happen in the energy market – the supply and demand pressures, globalization and integration – every company will need efficient risk management. A scalable and stable IT platform and the right combination of people, processes and technology will be critical, not just for performance, but also for survival.”
A Practical Approach to Risk Management is available for download on PDF from the Allegro website.
About Allegro Development
Allegro is a global leader in energy trading & risk management solutions for power and gas utilities, refiners, producers, traders, and commodity consumers. With more than 29 years of deep industry expertise, Allegro’s enterprise platform drives profitability and efficiency across front, middle, and back offices, while managing the complex logistics associated with physical commodities. Allegro provides customers with agile solutions to manage risk across natural gas, power, coal, crude oil, petroleum products, emissions, and other commodity markets, allowing decision makers to hedge and execute with confidence. Headquartered in Dallas, Texas, Allegro has offices in Calgary, Houston, London, Singapore, Sydney, and Zurich, along with a global network of partners.
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