Energy Credit Best Practices – Chapter: Information Technology http://ccro.org © Copyright 2022, CCRO. All rights reserved. 22 • Linked with Margining System - The terms Margining collateral must be incorporated into the Credit Risk calculation, and an automated link with the margining system to import collateral position is the standard here. 3.2.4 Integrated Credit Scoring Process The general concept of reviewing the creditworthiness of a trading partner has been important since trade was invented. The best practice is doing everything possible to understand your trading partners before engaging in business and then regularly evaluating the partner’s health and the relationship. The tools to accomplish this can • Financial Statement Data – Raw information obtained from public sources or the trading partner. • Ratios and Weightings – Calculations based on the raw information • Qualitative Assessments – Subjective measures such as the length of the relationship. The use of third-party management software tools can help automate the credit scoring process, both during on-boarding as well as part of on-going monitoring. For example, these tools can automate the counterparty review process and ensure relevant reports occur on a timely basis. This relieves analysts of the repetitive work of third party-related data collection and calculation while providing they are done thoroughly, accurately and, timely. This leaves more time for the analyst to work the more subjective aspects of the credit review process, which cannot be automated, and leads to a better overall result. 3.2.5 Digitalization of Credit Documents As a best practice, credit analysts should have easy access to electronic copies of documents relevant to credit. This would include such things as contracts executed with trading partners, credit facility terms, parental and 3rd party guarantees, Letters of Credit, and Trade Credit Insurance policies amongst others. This applies regardless of whether a credit system is being used as no system will have out-of-the- box capacity to capture the full nuance of all the listed items in all cases. 3.2.6 On-Boarding System and Processes Data On-Boarding can generally refer to any exercise where a new data object is set up or initialized. For credit functions, this typically means the On-Boarding of new counterparties or customers.