November 2009 

The area of credit risk started getting increasing scrutiny on the part of commodity trading firms at the height of the Enron and energy merchant saga. Before that time it is a truism to say that the industry's focus and that of energy trading & risk management software was exclusively on market or essentially price risk management. The ripples caused by the collapse of the merchant segment created a renewed awareness of the risks that traders were exposed to in the area of counterparty credit which became even more magnified through the impact of the ongoing banking and financial crisis. 

CommodityPoint's early 2009 study into the impacts on commodity markets, traders and software of the financial crisis and commodity market volatility showed quite clearly that reduced market liquidity, tightening credit conditions and cost of credit were major issues ranked in the top 4 critical business issues identified for and by trading firms. Recent high profile cases such as the one involving Constellation Energy in the summer of 2008 have only served to heighten the focus on credit risk.

CommodityPoint sees this increased concern and emphasis on credit risk management also reflected in the increased demand for solutions. Recent CommodityPoint independent research performed in the summer of 2009 showed that 30% of those surveyed planned to procure credit software over the next 24-months.

Over the same time period (from around the time of the Enron collapse) and, in response to demand from the industry, a number of software vendors set about building credit risk solutions while the traditional ETRM software vendors started to add some level of credit risk management functionality to their solutions. Today, the credit risk software market is somewhat confusing as a result and this Technical Briefing Note will attempt to reduce that confusion and will focus on the perceived market leading solution from Triple Point.

Ends -- 

Gary M. Vasey, Ph.D.

CommodityPoint, General Manager, UtiliPoint Europe

CommodityPoint, A Division of UtiliPoint International, Inc., covers the Commodity & Trading and Risk Management software category as an independent analyst and consultant. This software category continues to develop at a rapid rate in conjunction with the changes taking place in commodity markets and commodity trading generally. As a result, CommodityPoint will from time-to-time issue "Technical Briefing Notes" on technology and technical issues relating to the software category and/or specific vendor products where we believe this constitutes a technical innovation or event of importance to consumers of such software products. CommodityPoint's Technical Briefing Notes will include specific vendor coverage, but this coverage does not—and should not—imply our endorsement of any vendor or its product. CommodityPoint issues such briefings only to inform and educate and does not explicitly nor implicitly endorse any particular product or vendor.

www.commodity-point.com

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credit risk - utilipoint

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