Periods of extreme market volatility have brought financial liquidity risk to the forefront of challenges faced by energy companies. In various global meetings, the CCRO membership agreed that clear guidance to identify, measure, and manage this risk is essential. We propose a structured initiative to establish best practices, benchmark industry norms, and create a shared knowledge resource for energy market participants. Objectives of the Initiative
Make Clear the Importance of Liquidity Risk Management
Based on historic examples of past failures/mis-steps
Survey Current Industry Practices
Conduct a comprehensive survey of CCRO members [and other market participants] to identify current approaches for recognizing, measuring, and mitigating financial liquidity risk.
Create a Knowledge Repository
Compile a reference resource of published articles, regulatory guidelines, and industry insights on financial liquidity risk.
Define a Liquidity Risk Framework
Based on member discussions across London, Boston, Houston, and Madrid, organize the framework around key components:
Understanding financial liquidity risk and its drivers
Addressing specific liquidity risks by category
Establishing governance and analytical best practices