Energy Credit Best Practices – Chapter: Information Technology http://ccro.org © Copyright 2022, CCRO. All rights reserved. 21 3.2.2 Integrated Margining System With companies growing more sensitive to how available cash is being leveraged, there has been an increase level of scrutiny on margining. There are three best practices to calculating margin correctly, including: • Connection to ETRM System(s) - The first practice is having a promptly available and accurate valuation of the Credit Exposure that’s subject to margining. This practice requires having a direct and automated integration with system(s) providing portfolio valuations. • Integrate with Treasury Systems (GL) & Bank Facilities - The second practice is knowing your collateral position by each marginable contract by using as much data as possible directly from the system of record. Separating the margin cash from invoice payments by legal entity and contract is more of a hypothetical perfect state rather than a common practice. A more reasonable best practice is to verify the total cash received compared to the sum of expected receivables and total margin for the given entity or legal family. • Automating Margining Calculation - The third practice is to automate the calculation of margin to ensure accuracy and reliability. Ideally, your automated margining platform should support: − Capture of common credit margining terms in your major areas of operation − Support for exposure calculation modification to account for common modifications in your area of operation − Automatic generation/distribution of margin calls − Provide an operational summary of expected activity for the day – what the analyst needs to do and expect from parties − Provide a report of all marginable contracts and associated metadata (e.g., exposure against contract, collateral in transit, current outgoing and expected incoming margin calls, etc.) − Ability to exclude / include transactions from margining and − Support for dispute resolution. 3.2.3 Integrated Contracts Contracts are another key element of an integrated Credit Information Ecosystem. The following are two key practices to consider in this area: • Contract Credit Terms - All key credit-related contract terms, including relationships between contracts (set-off language) and relevant governing law, must be captured, and incorporated into the calculation of Credit Exposure to ensure accuracy.