Energy risk manager outlines post-Dodd Frank reporting vision

Energy risk managers must develop a sustainable reporting system and not focus on finding "perfect technology", says ConocoPhillips risk manager

“As risk managers, we are more accountable for more information and data every year,” Mark May, North American risk manager at ConocoPhillips, told attendees at an energy trading risk management conference in Houston on November 8, 2011.

Trading data is now required on an enterprise-wide basis and the Dodd-Frank Act will introduce even more data labels, more information to be collected and the need for more people across the company to connect to the data reporting system – all of which the risk manager has to oversee.

Under the new regulatory regime, the success of new data reporting systems should be measured by sustainability, not whether the system was created on time, according to May. In developing sustainable reporting, “there is no perfect technology system”, he said. While technology remains important in data reporting now and in the post-Dodd-Frank world of energy trading, May added, so is developing consistent policies and processes that all staff members are trained to understand, as well as ways to measure whether these processes are being followed.

Two years ago, ConocoPhillips transitioned from a regional to a global trading model, creating the need for the implementation of a reporting system across its various trading operations, including those in Houston, London and Singapore. May’s team implemented two steps to ensure the new policies, processes and measuring tools were uniformly applied across the business globally.

Firstly, early alignment among the various business leaders on what it would take to develop and implement the system was required. “We sat down with each business leader and all management officers to explain the new system and inserted it into everyone’s goals,” he said.

The company then set out minimum standards to ensure the same trading information was reported in each region. “There is a tendency in risk management to over-engineer data requirements, but that’s not often sustainable on a daily basis,” May said. “Working across commodities to try to gather a high level of trading data consistently is very difficult. So we came up with a minimum level and everyone agreed. Regions can add to that but they must deliver the minimum.”

May concluded that “reporting is a journey, not a destination”, something energy risk managers should take into account when developing systems to address evolving energy trading rules and regulations.