Energy Credit Best Practices – Chapter: Information Technology http://ccro.org © Copyright 2022, CCRO. All rights reserved. 19 3.1.2 Batching Processes It is the computational technique where large amounts of data are processed all at once. For Credit Systems, especially older first-generation applications, the batching processes would apply to (i) the loading of transaction records and (ii) the exposure computation process (and associated analytics). Since these processes can take a significant amount of time (up to multiple hours for large data sets), companies will typically schedule this once-per-day. Usually, at night, few or no individuals would be accessing the system. This results in firms managing risk on a T+1 basis. While sufficient for many organizations, this time lag does have some significant drawbacks for others. Some firms attempt to bypass this limitation by running multiple (sometimes smaller) batches during scheduled times throughout the day. This can be problematic for trading desks that are very active or operate in multiple geographic markets and need a more real-time view of their credit positions and exposures to make trading decisions and cannot afford their system to be out of commission hours each day. For this reason, newer generation platforms offer real-time (or near real-time) processing that allows the user-facing portions of the system to run continuously. In contrast, the extensive computational processes run in the background and update what the user sees as they are completed. 3.2 Elements of an Integrated Credit Information Ecosystem 3.2.1 Exposure Calculation Attributes The calculation of Credit Exposure is the primary purpose for any credit system. The particulars of these exposure calculations are covered in various other sections of this paper (e.g., netting terms by contract are covered in the contract section) however, a few general best practices are addressed below when considering calculating exposures in some type of credit system. We • Accuracy and Operability - Credit groups should always be able to promptly answer the question, “How much money will be lost if (Company X) goes bankrupt?” The primary purpose of a credit department is to mitigate credit-default losses. This entails the ability to calculate the size of a potential loss quickly and accurately. As well as the agility to look at exposures contractually and operationally. A Credit Risk Management System can help enable these capabilities. For example, it’s frighteningly easy to lose sight of operational exposure in the wake of bull markets whose duration can be measured in decades. Conversely, carefully tracking and managing Credit Risk becomes even more critical during extended positive market runs to the point of being a competitive advantage as recent events have exposed in a handful of cases. Many companies use an exposure calculation, which does not reflect their contractual obligations in the event of a default. They may instead look at the exposure