Volume 2 — Governance and ControlsGovernance and Controls © Copyright 2002, All rights reserved 14 4.0 Support Functions Support areas such as legal, internal audit, information technology, treasury, and tax play active roles in reducing the business risk profile of a trading and marketing operation. 4.1 Legal Legal support can be in-house or outsourced, but must be skilled and knowledgeable in regulatory, contract, bankruptcy, and insolvency laws. Legal support is necessary when establishing new trade agreements or contracts, seeking to enter new markets or business lines, and resolving counterparty non-performance events. Legal should review trade agreements and contracts for changes in market practices and applicable laws. Additionally, legal should evaluate transactions to determine whether they are permissible under applicable laws and regulations. Legal should also advise the credit risk department on applicable bankruptcy or insolvency laws and on the procedures necessary to ensure enforceable transactions and adequate documents. 4.2 Internal Audit Internal audit’s minimum responsibilities in support of the trading and marketing operations include annual financial and process audits and reviews. If the ROC engages outside consultants to perform process reviews, reviews should be coordinated with internal audit, and internal audit may be asked to lend support to those engagements. Internal audit should conduct routine audits of trading operations to ensure compliance with controls, policies, and procedures. 4.3 Information Technology Information technology (IT) is critical to trading and marketing operation in ensuring that systems are in place and function so that transactions may be accurately captured and reported in a timely manner. A company’s IT policy supporting a trading and marketing operation must provide for: redundancies for networks and telecommunications failures effective management of data (i.e., reliable availability, integrity, migration across systems, development, and maintenance of tools to obtain and utilize data) security of data and physical location change control disaster recovery and business continuity plans. IT functions should be performed by personnel independent of the front office. 4.4 Treasury Treasury’s minimum responsibilities in support of the trading and marketing operations are cash management activities not supported by the back office. Critical activities include analyzing the company’s liquidity position (including stress testing and contingency planning), developing interest rate curves, and hedging foreign exchange exposures. Further discussion of treasury activities in support of energy trading and marketing activities are outside the scope of this document.