Energy Credit Best Practices – Chapter: Information Technology http://ccro.org © Copyright 2022, CCRO. All rights reserved. 5 1. Introduction 1.1 Our Objectives This is just one chapter in our on-going work towards a comprehensive CCRO white paper that documents best practices to be found in the energy Credit Risk Process. We intend for this work product to be subject to an annual peer-review and updated to always reflect the latest industry developments. A recurring thread throughout the entire paper, and one notably demonstrated in this chapter, is the interdependence between Credit Risk and many other functions within an organization. In this chapter, we hope to strengthen the Credit Risk function’s ability to leverage technology to work with other company functions more effectively. Working together is becoming more critical today as interdependence and associated information flows are rapidly growing The use of Information Technology (IT) to support all aspects of business continues to increase at an ever-accelerating rate. This phenomenon is having a significant impact on data-oriented professionals, such as energy Credit Risk Managers. From simulating future exposures to collateral management, credit risk professionals have become increasingly reliant on technology to succeed at managing the credit risks created by their company’s businesses. The ability of IT to improve the credit risk function's capabilities and efficiencies is undeniable and will continue to advance as Digitalization progresses at energy companies. At the same time, credit risk managers need to be aware that this reliance on technology can be a double-edged sword if not prudently managed. The CCRO advocates here a set of best practices that will yield specific benefits: • Leverage technology to improve effectiveness and efficiency of energy Credit Risk operations • Diminish the risks that rapid change may pose to the entire Credit Information Ecosystem. The direct responsibility for accomplishing these two goals falls squarely on both the energy Credit Risk professionals and the IT professionals supporting the company’s credit function. This chapter provides specific recommendations for the best practice use of information technology in support of credit operations. Discussion around each recommendation provides background and context for the risk professional to better understand them and to assess any gaps that might exist in current practices. • We suggest that a formal benchmarking initiative of current technology practices versus those recommended herein could greatly facilitate a company’s prioritization of internal change initiatives and help build management support for implementation.