Energy trading & risk management (ETRM) is a commercial decision making and market execution tool in an integrated system that enables data exchange among traders and retailers, generators, and operations, contract, and accounting functions. The ETRM system covers complex trading requirements of a liberalized energy market and helps market participants to trade in the full range of contracts across the globe. The ETRM system also entails comprehensive risk management strategies and policies, event and trade identification, and scheduling and settlement execution. It provides consulting services for market monitoring, price transparency, and regulatory compliance. ETRM systems can be implemented to manage the entire value chain of the energy business. These systems are installed to understand the real risks involved in the value chain and provide the best options to overcome these risks. Major global firms engaged in the energy business adopt ETRM solutions widely to maximize profitability and manage the risks in the best possible manner. Oil & gas, coal, power, and biofuel industries are the prominent energy sectors that require energy trading and risk management services.
Based on operations, the ETRM market can be broadly categorized into front office, middle office, and back office. Front office performs operations related to deal capture, position management, deal evaluation, and price discovery, while the middle office conducts operations associated with credit risk, market risk, and enterprise risk. The back office primarily carries out accounting operations and performs tasks such as inventory and derivative accounting.
Effective execution and ability to take quick market decisions are the two major factors driving the ETRM market. Furthermore, need of significant returns in the energy business and maintenance of an organization’s hedging portfolio are augmenting the ETRM market. Energy trading is a risky business and profitability margins are exposed to various fluctuations in the market. Complex supply chains, volatility in prices of energy, and evolving regulatory requirements are some of the key challenges that market players face in the energy business. Therefore, market players that offer ETRM can take advantage of volatility in prices and provide unique solutions that can be effectively designed according to the business requirement of a firm. ETRM solutions can record trading and equity data in a much efficient manner as compared to the manual manner, which can be prone to errors. Logistics and inventory management solutions are also one of the others factors that encourages investment in energy trading and risk management solutions. Lack of technical expertise may hamper market growth in the near future. However, increase in financial risks and expansion of major business organizations provide growth opportunities to the ETRM market.
In terms of region, the global ETRM market can be segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa. Asia Pacific is an emerging market in the energy trading business. Thus, the need for ETRM solutions is anticipated to rise in the region during the forecast period. Key trading firms located in North America and Europe are also investing significantly in ETRM solutions. Increase in shale gas consumption in countries such as the U.S. and volatility and complexity of energy markets are some of the factors driving the ETRM market in these regions.
Prominent global companies operating in the ETRM market are Allegro Development Corporation, Openlink LLC, Amphora Inc, Eka Software Solutions, and Triple Point Technology Inc.
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