Best Practices for Energy Risk Management
Energy markets present a greater challenge to the successful application of best practices for trading and risk management than in any other commoditized industry. Trading and risk management best practices come to the energy industry from the financial services industry. The unusual nature of energy exposures, the high degree of price and volume uncertainty, the high magnitude of volatility, and unusual price behavioral characteristics require a translation and modification of best practices to be successfully applied for energy market participants.
ERC's consulting philosophy is that best practices in risk management are supported by a number of sound business principles which are essential to achieving positive results. However, implementing best practices is not a bludgeon to force organizational behavior and structures into a cookie cutter product. Rather, best practices result from a considered examination of organizational objectives, resources and constraints which, when mapped into sound business practices, lead to a set of policies, responsibilities and authorities that will reflect both the sound principles and the realities of our clients’ operations. In this manner, the final structures adopted will accommodate responsible practices with the minimum organizational disruption and expense.
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