Trade and Risk Management

Trade and risk management
A provider, trader, producer and vertically integrated power company can benefit from competition in the energy market. Operating successfully in the developing and liberalizing markets requires planning and realization of an effective energy trade strategy with efficient risk management – this supports price stabilization, the optimization of production capacities, the increase of market transparency, and security of distribution quality. Also important is the understanding of current market dynamics – the key to this is continual evaluation and examination of the market role and business strategy of the power company, as well as the implementation of new market rules and the monitoring of current trends and developments.

Trade as central pivot
Over the last few years, trade has developed into a central pivot through the growth of the energy markets and reorganization of energy providers. Different commodities (power, gas, coal, carbon dioxide and also weather) are now traded in society. This serves the optimization of resource usage and the implementation of synergy effects, and certainly has led to more complex organizations, process interfaces and system infrastructures. Particular demands are made on data quality and risk management in order to avoid an increase in operational risk.

Cross-border trading
Cross-border trading is becoming more important and being more actively pursued. New market models are being discussed (e.g. market coupling) that will make it easier to transcend the boundaries of trade. On the other hand, trade in different markets still means that various sets of rules and requirements must be followed. Capacities must be bid for in auctions and then later booked. An effect is a more complex design in the trade system, which leads to new challenges in settlement and also requires adaptation to existing risk management mechanisms.

Structured products and closer collaboration between trade and distribution
Distribution clients want to benefit from price fluctuations without carrying the total price risk, and they expect more flexibility and service. This results in the development of more structured and more complex distribution products. Thus, new demands arise for settlement, data quality, risk management and valuation. In addition, the close interaction between trade and distribution, in which the newly offered distribution products are usually presented as a combination of standard products, is becoming more important. The interface between trade and distribution is increasing in importance and the demands on technical interfaces, communication and education are becoming stricter.

Our services
KEMA offers a wide range of coordinated services in order to meet current challenges and secure the company’s long-term success with the optimal energy mix:

• acquisition and accumulation of know-how and detailed knowledge of different trade products, commodities, risk and portfolio management
• analysis of the current status, selection of strategy to build up and improve trade and risk management, as well as analysis and valuation of the operational risks
• development of desired concepts for processes and IT, and preparation of comprehensive risk management and controlling
• procurement and selection of IT services
• implementation of processes and IT.

KEMA's modularly designed services enable energy companies to achieve their current goals. The five coordinated modules, from general knowledge acquisition and accumulation to implementation of the operative processes and supporting IT solutions, present a selection of possible support services. Together with clients, KEMA develops individual, situation-based project approaches for optimal support of business strategies and operations.