Customers in the energy business experience fluctuating commodity prices, which can significantly change business performance from a very profitable day to a loss-making position. To avoid unexpected surprises and increase the transparency of traded positions including risk assessment, PwC has developed an advanced trading application to ensure company positions and exposures are correctly reported.
Client challenge – an example
Our client recorded traded positions with commodities in an Excel spreadsheet on a daily basis. The traders were permitted to undertake sales and purchases of commodities for trading, and for sourcing end-customers. The performance of the trading department was monitored and analysed in two trading books – i.e. the results of sourcing end-customers (applying own-use exemption for accounting purposes), and speculative trading (subject to mark-to-market recalculation). Due to a lack of internal controls and the ease of reclassifying individual trades in Excel between the two books, it was not possible to independently evaluate the performance of the trading department by individual trading book. Traders could open positions with the goal of speculative trading, and if the stock price did not develop as they expected, they could reclassify the trade in Excel from a speculative position to sourcing the end-customer. This meant the results were on the books of the KAM account and the profitability of the sales department decreased.
Approach
PwC has developed an advanced deal reporting tool covering multiple areas and departments of the client's business to report traded positions and risk results transparently, in real time, accessible 24/7. The application is fully customizable to client and business needs, easily connectable to different sources (e.g. stock exchanges, market operators, etc.) and multiple automated processes at the company. The application is used by multiple departments - trading, dispatching, back-office, sales, etc.
Key functionalities of the application:
1. Recording deals with all the required information in auditable form
2. Summarizing and reporting positions per counterparty, country, and connection point
3. Financial reporting on results via mark-to-market revaluation of opened positions
4. Automated confirmation process for closed deals
5. Easily auditable for inputting data and change requests (unlimited storing of history)
6. Basis for analysing the performance of the trading department and individual traders (KPI analysis)
7. Supports dispatching department for nomination purposes
8. Preparation of underlying documents for accounting department
9. Enables risk assessment tools to monitor exposure
10. Dashboarding customized to individual roles and responsibilities
Impact
The application supports our client in establishing a transparent and easily auditable environment within the trading department and supports risk roles. The results of the trading department are readily available - from a monetary, volume, counterparty, geographical and trader perspective. Dashboarding strengthens the control environment and simplifies reporting requirements. The online application is customized to individual roles, so each user receives the essential information they require.
Contact us
