CTRM software house of the year: Mobius Risk Group

Energy Risk Awards 2023: RiskNet’s unique data provides rich insights to clients during 2022 turmoil

Last year’s high energy prices, extreme market volatility and hikes in margin calls made it hard for energy producers and consumers to understand the full value, or expense, of existing and potential risk-management strategies. This left some firms floundering when they could have been reaping financial rewards from, for example, rapidly unwinding, adjusting or increasing hedges.

Against this backdrop, Mobius Risk Group’s RiskNet platform stood out for providing unique market intelligence that enabled firms to better navigate the turmoil of 2022. In a year when the analytics and insights informing decision-making could make or break energy firms, Mobius grew the RiskNet platform significantly, increasing functionality and integration, gaining multiple clients and growing the number of users at existing clients.

The cloud-based RiskNet platform – which, according to Mobius, can be implemented and launched in “as few as 48 hours with audited controls” – integrates an organisation’s real-time financial and operational data with market pricing, allowing the user to visualise revenue and expenses impacted by commodities at the portfolio level or in facility-specific detail. The platform, which is intended to replace legacy commodity trading and risk management (CTRM) software systems, allows firms to track, manage and visualise daily reconciliation of cash, credit and commodity risk position for energy, metals and other commodities.

“Instead of 60- to 90-day-old information, RiskNet provides the company’s current and forecasted cash, credit and portfolio position based on daily reconciled market pricing and valuations,” says Mohit Arora, vice-president and head of risk analytics and decision sciences.

This gives RiskNet clients a near real-time view of their true financial position, including credit available from counterparties, cash and a current valuation of their trade position. Leadership can then evaluate decisions based on the company’s unique short- and long-term goals and shareholder expectations, all of which enables faster decision-making with more confidence.

“Our job is to illuminate value for our clients,” says Paul Smith, chief risk officer. “Instead of blanket recommendations based on price movements, we find pockets of value in the market by looking at things like the value of puts versus calls, mean reversion of spreads, reverse volatility and skew – and we express that to our clients in a way that helps them understand the potential actions available, and the potential impact of those actions on their goals. We only want our clients to act if there is a true opportunity or risk.”

One very important offering on RiskNet is its integrated risk management advisory services. When Mobius onboards clients to RiskNet, it carries out a review of all the firm’s existing physical and financial contracts and live transactions to generate an accurate picture of its current portfolio. Mobius then reviews this with the client identifying any discrepancies and discussing its true risk based on its current portfolio in conjunction with market activity. Mobius may then recommend specific contract language updates and work directly with the counterparties to negotiate.

“Typically, this includes a number of contract updates that either generate immediate uplift, or, over time, create uplift in the thousands or tens of thousands of dollars,” says Matt Parker, vice-president of market strategy.

A notable success last year was Mobius’s work with an oil and gas firm that used the RiskNet platform to understand the full value of its existing hedge and then worked with Mobius to restructure the hedges during lows of the market. This helped the firm pay down all its debt, before implementing a new hedge strategy.

The functionality of the RiskNet platform – which has a “significantly lower price tag” than large, traditional CTRM software offerings – extends beyond typical CTRM functionality, according to Mobius. The platform includes integrated electronic signing tools for confirmation and document management, and verifies that the information in confirms and trade logs are accurate, with daily reconciliation. Users can share real-time data and visualisation across multiple teams and departments and have access to dashboards forecasting potential market transactions.

“Our methodology, M-Risk, provides not only dry data, but visualisations,” says Arora. “Clients are able to view data in a customised way, for example, quickly scanning portfolios with particular agendas in mind such as market value, hedging or costs.”

Mobius has added several important technical enhancements to the platform in recent years. In March it launched an integrated carbon calculator to provide carbon footprint calculations. This integrates seamlessly with Mobius’s carbon strategy offering and carbon portfolio-valuation tools launched in 2021.