Energy Credit Best Practices – Chapter: Information Technology http://ccro.org © Copyright 2022, CCRO. All rights reserved. 2 Table of Contents ACKNOWLEDGEMENTS ................................................................................................................................................... 4 1. INTRODUCTION ............................................................................................................................................5 1.1 OUR OBJECTIVES........................................................................................................................................................ 5 1.2 THIS CHAPTER’S SCOPE: THE CREDIT INFORMATION ECOSYSTEM ........................................................................................ 6 1.3 INDUSTRY’S MOVE TOWARDS DIGITALIZATION ................................................................................................................ 6 1.4 CORE THEMES OF THIS CHAPTER ................................................................................................................................... 7 1.4.1 Alignment .................................................................................................................................................... 7 1.4.2 Robust Controls with Independence ............................................................................................................ 8 1.4.3 Data Integrity............................................................................................................................................... 9 1.4.4 Secure & Reliable ......................................................................................................................................... 9 1.4.5 Understood & Documented ....................................................................................................................... 10 1.4.6 Flexible & Innovative ................................................................................................................................. 11 2. TECHNOLOGY FOR GOVERNANCE ............................................................................................................... 12 2.1 CREDIT IT DESIGN ALIGNS WITH ORGANIZATIONAL STRATEGY .......................................................................................... 12 2.1.1 Board of Directors Mandate for Credit IT Design ...................................................................................... 12 2.1.2 Credit Risk Committee Duties/Oversight of the Credit IT Design .............................................................. 13 2.2 DESIGNING THE CREDIT INFORMATION ECOSYSTEM........................................................................................................ 13 2.2.1 Automation and Analytics ......................................................................................................................... 15 2.2.2 Expectations for Controls ........................................................................................................................... 16 2.3 POLICY ................................................................................................................................................................... 16 2.3.1 Security Approach ...................................................................................................................................... 16 2.3.2 Model Requirements ................................................................................................................................. 17 2.3.3 System Documentation.............................................................................................................................. 17 3. INFORMATION TECHNOLOGY BEST PRACTICES ............................................................................................ 18 3.1 DATA MANAGEMENT................................................................................................................................................ 18 3.1.1 Single System of Record ............................................................................................................................. 18 3.1.2 Batching Processes .................................................................................................................................... 19 3.2 ELEMENTS OF AN INTEGRATED CREDIT INFORMATION ECOSYSTEM .................................................................................... 19 3.2.1 Exposure Calculation Attributes ................................................................................................................ 19 3.2.2 Integrated Margining System .................................................................................................................... 21 3.2.3 Integrated Contracts .................................................................................................................................. 21 3.2.4 Integrated Credit Scoring Process.............................................................................................................. 22 3.2.5 Digitalization of Credit Documents ............................................................................................................ 22 3.2.6 On-Boarding System and Processes .......................................................................................................... 22 3.3 CLOUD SERVICES...................................................................................................................................................... 24 3.4 SYSTEM SECURITY AND REDUNDANCY .......................................................................................................................... 25 3.4.1 Data Security ............................................................................................................................................. 25 3.4.2 Controls...................................................................................................................................................... 27 3.4.3 System Documentation.............................................................................................................................. 27 3.4.4 Auditable Change Record .......................................................................................................................... 27 3.4.5 Version control ........................................................................................................................................... 28 3.5 ADVANCED INFORMATION TECHNOLOGY ...................................................................................................................... 28 3.5.1 Artificial Intelligence (AI) ........................................................................................................................... 28 3.5.2 Machine Learning (ML) .............................................................................................................................. 28 3.5.3 Shared Ledger (Block Chain) ...................................................................................................................... 29 3.5.4 Natural Language Processing (NLP) .......................................................................................................... 30