What Risk Officers Want from Their ETRM Software

What Risk Officers Want from ETRMAs we mentioned in our last blog post, Allegro recently attended Energy Risk London with over 150 senior energy risk managers and traders from across Europe. Knowing that this is an audience well educated on commodity management current threats and trends, Allegro conducted an onsite survey capturing fresh market insights specifically on the following two questions:


1.  What is the biggest challenge for Risk Officers in the energy sector?
2. Which features in your ETRM solution do you most benefit from?

Today, we are going to break down our findings from the second question listed above. The three most common features that emerged in the answer to this question were Cloud hosting, pricing analytics, and asset optimization.

Cloud Hosting
Today’s fast-paced society and technology advancements require energy companies to think smarter about their business processes if they want to effectively respond to industry changes; and the Cloud is a major component to future success. In fact, LogicMonitor’s Cloud Vision 2020: The Future of the Cloud Study predicts that 83% of enterprise workloads will be in the Cloud and on-premise workloads will shrink from 37% today to 27% of all workloads by 2020.

In order to manage front, middle and back office on one commodity management software platform, market participants are turning to Cloud-enabled technology, such as Allegro Horizon, for fast, flexible, and extensible solutions that meet current needs and align with future growth opportunities.

Allegro Horizon provides customers with the following capabilities:

  • Reduced time to go-live and lower cost of implementation through building, testing and validating using Cloud services
  • Deployment options through the Cloud or a hybrid approach
  • Faster goal achievement due to Cloud development, training and usability
  • Decreased cost of ownership through product families, agile infrastructure and the smaller teams that will be required for product support
  • Integration and extensibility with both native .NET and REST API’s
  • Leveraging of native Microsoft Azure services for elasticity, security and identity management
  • Availability of DevOps tools for automation and disaster recovery

Pricing Analytics
Commodity prices are somewhat different than other prices set in financial markets. With short-term supply and demand imbalances, prices for short-term delivery of the commodity – or spot prices – tend to exhibit significantly different behavior than prices for delivery of the commodity in the future, or forward prices.

As most commodity markets experience a degree of volatility, accurate, real-time pricing analytics are a necessity. Allegro Analytics, powered by FEA, provides pricing analytic solutions that utilize stochastic processes to form the basis of derivatives pricing and risk management models, allowing customers to:

  • Model possible price evolution through time
  • Assign probabilities to possible future prices as a function of current spot and forward prices, as well as a set of parameters that describe the possible variability of those prices over time

Asset Optimization
Many businesses that deploy assets in the commodity value chain (such as storage, power generation, transportation, transmission, shipping, refining, processing, etc.) struggle to derive maximum profitability from a portfolio of assets. This is largely due to the inability to understand and quantify complex optionality within each asset and trade around the asset using real options.

Asset optimization analytic tools are necessary for any energy business to effectively manage the complexity of assets, multiple commodities, co-optimization of multiple assets, commodity price volatility, asset constraints, quant based techniques, and the extraction of maximum value from assets. Allegro Analytics offers a full suite of asset optimization products that provide enhanced risk management solutions and full decision support.

Our asset optimization analytics product suite includes:

  • Storage/StoragePlus: Real options-based decision support, optimization and valuation tool. StoragePlus is an enterprise application that integrates trade/market data, and pricing analytics into a single user-friendly application
  • Power Generation: Real options-based decision support, asset optimization and valuation tool designed to manage and hedge power generation units and structured tolling transactions
  • Windworks: Module for balancing uncertain wind generation within a portfolio of conventional energy assets and associated contracts
  • LNGWorks: Module for optimizing the scheduling of a fleet of cargoes given a supply of LNG and a portfolio of demand  contracts
  • Renewable (PowerWorks): Module for production-based valuation and risk management of a portfolio of Wind, Hydro, and Solar generating assets
  • Battery/Power Storage: Real-options based valuation and decision support tool for electricity storage, taking into account standard physical constraints, including maximum charge and discharge rates, as well as more complex operational constraints like cycling limits
  • StructureTool: A simulation based tool designed to allow users to efficiently compute values and hedge statistics of user defined exotic and structured products

Whatever your main portfolio management challenges are, it is critical that your business has a comprehensive approach to risk management; and Allegro’s ETRM software solution can provide you with just that. Interested in learning more? Click here to contact us.

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