Commodity-and-Energy-Risk-Management.pdf

Analysis class cost of service and tariff design

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analysis, class cost of service and tariff design Catalogue and prioritise universe of relevant compliance requirements Cost Recovery/ Prudence Readiness Evaluate fuel and power market supply planning, contracting, purchase and disposition performance in light of regulatory requirements and relevant market conditions Review fuel and purchased power cost adjustment filings to identify gaps/issues Benchmark fuel and power costs versus relevant market peers Assess adequacy of fuel procurement documentation in light of potential prudence challenges by regulators S T R A T E G Y C O N C E P T I M P L E M E N T A T I O N Commodity & Energy Risk Management Model Development, Validation & Remediation Operations Tax Accounting Regulatory Internal Audit Forensics & Investigations Governance, Roles & Policies Hedging & Risk Strategy Credit & Collections Risk Reporting & Management Information Systems Commodity and Energy Risk Management | 11
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Credit & Collections KPMG Service Activities Credit Risk Identification and Measurement Identify and measure key credit exposure based on defined qualitative and quantitative metrics, including: – Current – Potential – Concentration – Settlement Identify methods to assess and quantify counterparty, customer and vendor credit exposures Develop a methodology to evaluate and assign internal credit ratings to unrated customers and counterparties Assist management to develop credit downgrade triggers and the related impact to borrowing costs, collateral requirements, or market liquidity Credit Risk Strategy Design credit limit allocation and measurement guidelines to align with corporate risk tolerances Develop credit “risk-based” pricing methodology Identify and evaluate alternative credit risk mitigation methods applied by industry practices (e.g. contract terms, collateral guidance, credit derivatives) Credit Reporting and Performance Review and develop KPIs (e.g. Risk-adjusted return on capital (RAROC)) Develop management reporting packages Assist to automate or select reporting tools Collections Develop strategies and methodologies to help improve overall collection performance Introduce technology methodologies to help minimise collection expense Evaluate outsourcing opportunities to potentially balance capacity or obtain capability In recent years, credit defaults and credit-related losses have increased, from the combined forces of rapid industry evolution, sustained economic challenges, volatile foreign exchange and commodity markets and increased competitive participation from traditionally passive parties. Executives and risk managers recognise the need for improved credit risk strategy, measurement and reporting.
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