Build or Buy? How to Invest in Forward Curve Risk Management

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Now that market phenomena like negative crude futures and even equity volatility bonanzas like GameStop are increasingly commonplace, chief risk officers are living their best lives. The limelight has never shined so brightly on risk management.

I know I am not alone in my rubbernecking to watch the newfound stock market trading craze from the safe distance of our commodity trading community because, well, I follow #energyfinancetwitter. These days traders are losing their minds over the opportunity in market volatility and risk. And risk managers are shaking their dang heads.

For risk analysts who are on the path to implementing fresh technology to stave off the consequences of such insane volatility and price exposures, most teams reach a fork in the road. Build or buy? The investment is big, but the rewards are bigger, particularly in our exceedingly risky commodity trading world.

So, what are the costs that companies invest to build their own automated forward curve risk management system? Today’s case study outlines how much our customer, a multinational power and gas trader, saved by taking the path towards buying CurveBuilder to manage and automate forward curves.

After our customer laid out the overall fiscal costs (not to mention time) its team would spend building a new forward curve risk management software in-house, the total was $97,000 more expensive than purchasing the Enverus CurveBuilder solution, which includes around-the-clock support from the Enverus professional services team.

While we cannot break down the all the numbers here, we can provide a couple of high-level categories that may ring a bell: “increasing operational efficiencies,” “compliance management,” “risk mitigation,” and “driving business growth.” It’s safe to say that pocketing an extra hundred grand would pique any businessperson’s interest! So, we’re inviting you today to just consider what your risk management organization could look like with a CurveBuilder implementation.

 

Eight reasons why commodity chief risk officers and heads of risk are choosing CurveBuilder for risk management:

 

  1. It’s low-risk compared to building from scratch. Enverus already has a live production product serving 10 million daily curves for hundreds of clients today in the energy and commodity sectors.
  2. We have a global support team constantly engaged to support our products and services. That’s 75 FTE data developers, 50 FTE software developers (with 15 on CurveBuilder enhancement), 25 FTE ops/support, if you’re counting.
  3. Enverus as a partner has low business continuity risk with 1,500 FTE and double-digit YOY growth.
  4. Switchover is fast with Enverus’ experienced curve deployment team – less 12 weeks of elapsed time for switch over.
  5. Enverus is more than just curves. Our Trading & Risk team delivers a single source of the truth for end-of-day and real-time data aggregation, end user desktops (Excel), fundamentals, research and APIs.
  6. Automate or die – CurveBuilder has a high degree of automation, with detailed audit trails and advanced monitoring tools.
  7. Enverus’ highest ranking data quality and vendor relationships are hard to beat.
  8. Enverus has proactive managed services, including curve monitoring and resolution management, curve formula or rule package maintenance, and critical symbol and price monitoring.

 

Consider the benefits of outsourcing forward curve and data management to a cloud-based provider. Innumerable. But if we had to summarize, here are some of the key CurveBuilder features to contemplate:

  • Automated extrapolation process and curve building
  • Dashboard for monitoring data quality checks and validation process
  • License, permissions and compliance all in one
  • Transparency into curves, market vs extrapolated
  • Streamline vendor contracts, one central data repository
  • Maintain holiday and rollover calendars
  • Audit tracking and curve versioning
  • Integration of market data and curves to Endur or other ETRM solutions
  • Real-time data and curve updates

 

Are you ready to learn more? Sign up for our virtual luncheon coming up March 3. We are offering two opportunities – during lunchtime in London or Houston – to take a deeper dive. Sign up here!