Energy & Utilities (E&U) organizations worldwide are facing highly uncertain times with volatile prices for input commodities such as petroleum, natural gas and coal. The recent financial crisis brought a huge clampdown on the credit lines of these companies. There is a renewed focus on revamping energy trading strategies for both the upstream and downstream markets. The seeds for these strategies were sown a decade ago from the fallout of the energy crisis in California and the Enron debacle. With the increase in IT integration and compliance requirements across the industry, E&U companies are on a constant quest to focus on smarter energy trading operations, risk control and asset optimization.

Calling for help

These fundamental changes in the energy industry have led to service providers ramping up their domain expertise to offer solutions for effective commodity trading and risk management. Integration with a strong IT-led backbone will help their clients realize their business value. The time has come for leading IT-BPOs to go beyond offering generic, horizontal-led services and focus on critical solutions to help their clients manage their commodity trading operations.

Improving the entire energy value chain

Offering a holistic approach to commodity trading will require investment in terms of skilled talent and the requisite tools and technologies. Service providers intent on cracking this market will need to ramp up their consulting manpower with seasoned traders and risk managers, apply supply chain management and procurement best practices to increase the effectiveness of operational risk management, and invest in bespoke tools and infrastructure to measure and model business strategies for their clients. These services must be applied to all stages of the energy value chain (primary production, refining and storage, and retail distribution).

Tangible benefits for the business

Areas of the clients’ business which will show a definite improvement include:

• An overall optimization of the operating model across trading, supply and distribution through streamlining of supply chain and asset operations
• Increased level of financial control and risk management by effectively setting levels for risk, managing risk exposure and allow transparent dissemination of financial information throughout the company
• Simplification and standardization of processes by consolidating front- and back-end trading operations under a common governance structure
• Compliance management through rigorous monitoring and tracking of regulations and market information