Energy Credit Best Practices – Chapter: Information Technology http://ccro.org © Copyright 2022, CCRO. All rights reserved. 14 STEP 4: Identify gaps and/or technology-driven opportunities in the existing Ecosystem, and get on the IT roadmap for future investment of time and resources. (Regarding Steps 1 and 2, the Credit Group should lead this process, and clearly document what requirements and capabilities are necessary to ensure their success.) Once these critical roles and responsibilities are understood, then the Credit Group, with help from the IT Group and other possible resources, can focus on Steps 3 and 4, which should consider the following: • Existing internal Systems and/or repositories that contain needed data • Internal Systems that can support required processes or capabilities • External/third party data sources that are required • External/third party Information System • As necessary for needed processes or functions and • Evolving technology capable of improving the operations of the Credit Information Ecosystem. (Regarding Step 4, for an energy trading business, arguably the “backbone” of a robust Credit Information Ecosystem is the Energy Trading and Risk Management (ETRM) platform, with the remainder of the “central nervous system” being comprised primarily of the Enterprise Resource Planning, General Ledger and Treasury Systems.) The ETRM, in concert with the entire Ecosystem, should be able to perform one or more of the following primary functions across one or more traded energy products: • Capture the primary economic terms of the deal • Manage and process physical logistics or movements of product, and associated documentation • Value transactions (e.g., Mark-to-Market, Profit and Loss) • Document approvals and validations and • Compute settlement values. Many ETRM’s offer additional capabilities beyond this core set of functionalities, including, among other things, the calculation of market risk and return metrics (cross-commodity risk), calculation of Credit Exposures, hedge accounting, and compliance reporting. Additional elements of a robust Credit Information Ecosystem are discussed in greater detail below. As the General Ledger system typically houses all financial records, integrating with the GL is crucial for getting a complete picture of the portfolio's credit status. The essential pieces of information from the GL are for credit are invoices and cash applications. Invoice data is normally straightforward to get. However, the speed and accuracy of the cash application process vary significantly across organizations. Therefore, a best practice solution would be to estimate payment of invoices based on specific rules, true up those estimates with a feed of actual cash