Energy Trading & Risk Management

We design appropriate risk governance structures that facilitate commercial decision-making combined with operational control by management and shareholders. This includes:

• Setup of the risk organisation at both the group and business unit level (including interfaces and reporting lines);
• Specification of detailed roles and responsibilities covering risk committees, risk management and commercial functions, specialist corporate functions, internal audit, and the business units;
• Development of risk policies and supporting procedures and operational manuals covering market, credit and liquidity as well as operational and wider business risks;
• Management of specific risks such as treasury, financial regulation, environmental policy, etc.; and
• Definition and development of risk reporting from Board level risk dashboards to daily and real time operational reports for traders and risk managers.

We develop, calibrate, or validate models to measure and report market and credit risks, as well as cashflow uncertainty stemming from cash margining, including:

• Standard metrics for trading portfolios for market risks (e.g. parametric and Monte Carlo VaR) and credit risks (e.g. potential future exposure, expected credit loss);
• Models that recognise market illiquidity and assume positions are held open and optimised to delivery (e.g. Profit-at-Risk, Earnings-at-Risk, or Cashflow-at-Risk);
• Models which do not rely on standard pricing assumptions such as lognormality, and which are capable of handling irregular price behaviour such as jumps and spikes; and
• Models that consider physical assets and volumetric uncertainty.

We review an organisation’s risk management and commercial practices on behalf of Risk Management Committees, internal audit, and shareholders. Our analysis is informed by up-to-date and in-depth understanding of regulation and best industry practices. We provide a clear report with our findings together with practical and actionable recommendations for improvement.

We support investments, acquisitions, and divestments by reviewing valuations, contractual terms, and associated transaction risks. Our services include:

• Valuation of contracts or assets in the context of sales, auctions, or internal performance measurement, including model validation, and review of assumptions;
• Valuation modelling with complex optimisation of flexibility, real options, variable weather effects, and other stochastic effects;
• Assessment of operational, regulatory, market, credit, and other transaction risks; and
• Acting as an expert witness and supporting Monitoring Trustees for auctions.