23 May 2012, Energy Risk team, Energy Risk
In addition, in the past 12 months, the firm has expanded within Asia, completed its first implementations with Russian power companies and launched a package model for the Turkish power market. It also successfully completed the acquisition of commodity risk management software provider SolArc.
When developing its regulatory compliance offerings, OpenLink recognised that the majority of its clients could comply with the major requirements of Dodd-Frank using their current version of Endur.
“There wasn’t a compelling enough change in regard to what new data people would need to justify major upgrades,” says Kevin Hesselbirg, OpenLink’s chief executive. “We were also aware that, in this economic climate, it would be very challenging for many of our customers to go through an expensive upgrade.”
Therefore, the company concentrated on developing extensions to the existing product that address key regulatory requirements but provide cost-effective flexibility at a time when regulations are still subject to change. New add-on modules released in 2011 include: Regulatory Compliance Solutions – these not only satisfy reporting requirements, but enable active risk management, particularly in terms of position management;
Collateral Desktop and Margin Desktop – at the cutting edge of credit risk management, this module provides not only credit risk mitigation tools but solutions for dealing with liquidity risk;
Connectivity and Interfaces – this module allows clients to connect and interface with the many different exchanges, central counterparty clearing houses, execution venues and service providers, the numbers of which are set to grow under Dodd-Frank and equivalent European regulations.
Credit analytics and reporting features have also been added. These cover potential future exposure, credit value adjustments, quantifying margin risk and incorporating credit support annexes into credit risk calculations.
The firm’s original investment in its core architecture is something that Hesselbirg is extremely proud of, as this is fuelling the company’s growth today. “The fact that we can move into new marketplaces without needing expensive re-architectures is a testament to things we invested in years ago,” he says. “It now allows us to move into new geographies much faster than we were initially able to grow the company.”
However, he acknowledges that there are always challenges when moving into a new region or marketplace. “Having a robust core architecture doesn’t mean that no additional development is required when operating in new marketplaces, but it does mean we don’t have to go back in and rip out the core architecture and start all over again. As you expand globally, you also expand locally, and when we move into new territory, there will always be things we don’t know. But due to our core architecture, we’ll be in a good position from which to start.”
Another big achievement in 2011 was OpenLink’s purchase of SolArc, completed in December. With 20 years in the energy and commodity markets, SolArc had particular expertise in oil and refined products, and physical bulk commodities.
“We were very impressed with SolArc’s Compass product as it allows you to see, for example, your physical delivery risk in a much more visual way than poring through pages of reports,” says Hesselbirg. “SolArc and OpenLink rarely competed, so the acquisition means we can now focus on the best of both suites to design and develop even better solutions in more markets. We are expanding the technology footprint so that we service the end-to-end commodity transaction life cycle.” OpenLink is working to extend its risk and analytics capabilities to address the needs of its expanded client base. Hesselbirg adds.