“By working together with CCRO companies to help identify, clarify and publish these advances in risk metrics, we create an opportunity to validate our current practices and uncover new ones…”
What's this About?
CCRO members are looking forward to developing our understanding of risks by creating an entirely new information source for industry related benchmarking statistics. Key Risk Indicators (KRIs) are an important part of this initiative. A keen awareness of KRIs can help energy companies with management of their operative risks that can be so elusive to address.
Recommended Practices for Key Risk Indicators
KRIs are designed to provide leading-indicators of potential problems. They can be invaluable to risk professionals by enabling insightful and actionable risk dashboards & reports. However, the specifics about KRIs are often unclear, they certainly are not standardized, and virtually no industry data is available on them. These unfortunate truths have prompted a lot of attention among CCRO members.
Benchmarking: “Where do I stand?”
Our continuing dialog about KRIs has led members to focus on a set of readily standardized KRIs that also are good candidates for industry benchmarking. CCRO member companies from US and Europe have expressed keen interest in this subject. In fact, the Trade Area KRI Database has become a premier topic for CCRO discussions.
A growing list of members volunteer to contribute their internal KRI data to the CCRO, where it is aggregated, and group statistics can subsequently be developed. We are planning member webinars for discussions about the draft KRI statistics, the KRI formulae, and an expanded menu of KRIs for this benchmarking initiative.
For our proof of concept, companies have started submitting data needed for three simple trade operations KRIs:
KRI: % Late Trade Entries
KRI: % Edited Trades
We break these percentages down in a number of ways, these include by commodity; by trade execution platform; and in the case of Edited Trades, we look into pre-confirm and post-confirm edits.
These specific KRIs were selected for their characteristics:
Data to calculate can be found at most any trading operation
Results can be agnostic of commodity or location (wide participation possible)
Associated risks can be significant (MTM and VaR errors)
The group now wants to expand their KRI list and to widen the data set. Credit KRIs look to be a next focus. Ultimately, this database of KRIs will allow CCRO members to benchmark their own KRIs against this anonymous industry peer group. We are already seeing the results are powerful insights.
“As we push into the challenging area of operative risks, KRI benchmarking will bring an entirely new perspective to the table for risk managers…”
…The on-line KRI Benchmarks Viewer
We have now available an on-line viewer accessible to all participating companies, providing insights into how your company’s KRI performance (anonymous to all but you) compares to peers. For this web page, we’ve loaded limited data for the public to see how this works and gain appreciation for how dynamic this working group’s efforts are… check it out!
