Why Your E/CTRM May Not be the Best Credit Tool for your Business

ComTech has long stated that C/ETRM is, in fact, a misnomer. It stands for Commodity Trading and Risk Management but over the years risk management has become increasingly complex and specific in various areas like price, market, credit, regulatory, operational and so on meaning that most C/ETRM’s fall a long way short of delivering comprehensive risk management across these areas. However, it is also true that some C/ETRM’s do a better job than others in various aspects of risk management – mainly price and market risk and in some forms of regulatory risk. Despite this, many users still use their C/ETRM for various risk management purposes. The problem with this approach is that, as stated above, many C/ETRM’s really do not cater for risk management at any level of depth or granularity rather often simply offering various canned or custom reports. This is particularly true when it comes to credit risk. ComTech has always seen credit risk as comprising three inter-related parts – counterparty credit management, calculating and reporting various credit exposures and applying credit limit monitoring, and collateral management. Most C/ETRMs offer very limited credit functions that may be limited to a manually entered credit limit and limit warnings.… continue reading