ETRM/CTRM software house of the year, Asia: Openlink

Energy Risk Asia awards, 2017: Market maturity drives demand for risk management software

Greg Moyle, Openlink

Being ahead of the curve has paid off for Openlink, whose pre-sales relationship-building in Asia-Pacific has delivered results as the market has matured. A greater proportion of the market is making its first purchase of energy or commodity trading and risk management software than elsewhere.

“Often they are moving off excel spreadsheets, whereas in Europe a lot of people are actually about to go into their second purchase of ETRM/CTRM software,” says Greg Moyle, vice-president for energy sales, Asia-Pacific, at Openlink. “So far, the challenge is more about proving the value of software that, on the whole, people have not been exposed to.”

Part of the hurdle to overcome is the difference in cost: there is quite a difference in moving from paying a few dollars for an Excel licence to receiving the necessary budget allocation for a full enterprise software licence. However, as businesses grow, Excel sheets struggle to cope with large volumes of transactions. Openlink’s products offer the capacity to trade and manage a large amount of risk for a wide range of asset classes.

Moyle says Openlink’s products can mitigate operational risk, and allow large organisations to share information across geographies quickly and effectively.

“The gaps we see or errors in the data can sometimes go unnoticed until such time that perhaps an audit is called or a trade is suddenly uncovered,” he says.

Market maturity is progressing at different rates and with different drivers across Asia, says Craig Bennett, managing director, Asia-Pacific.

“On the one hand, regulation dictates companies should be able to report better on their hedge bets, and their risk position,” he says. “But also on the flip side of that, deregulation of the market allows for greater trading opportunities for a company, and therefore greater trading volumes and more adventurous trading. [So] a system like Openlink can enable market participants to manage that portfolio and have greater visibility on positions, P&L, and risk.”

Japan’s deregulation of its electricity market energy has proven just such an opportunity. The three-stage process, running from 2015 to 2020, first allowed independent suppliers to engage in flow, then consumers were allowed to choose providers, and finally transmission and generation businesses will be unbundled. New suppliers and trading operations have been created, and with them a wider customer base for software providers. Openlink has successfully connected with many of them, says Bennett.

Changing market circumstances has required firms to scale up and have a better management of risk, leading to the need for both flexible systems, and more powerful systems

Greg Moyle, Openlink

But in some cases, new firms have struggled to commit to full-scale software implementations. Openlink has adapted over the past couple of years, by developing a cloud-based offering that can quickly be deployed and doesn’t represent a fixed cost for customers.

“What we endeavour to do is provide the same sophisticated and powerful solution we have always offered,” says Bennett. “On the cloud, the advantage is that Openlink can manage it, and perform all the maintenance and services.

The cloud allows firms to set a baseline computer processing capacity so large systems can run cost effectively. At the same time, it can provide the full range of instruments Openlink’s flagship Endur platform is capable of handling.

Traders exposed to credit, currency and commodity risks have celebrated Openlink’s cloud delivery model. One Japanese client, with exposures in power, liquefied natural gas, coal, oil and weather derivatives, says the system is intuitive to use, and “light years ahead of its competition”.

The range of asset classes Openlink covers also makes it suitable for firms moving into new areas. Its work with liquid petroleum gas in the US made it a suitable partner for an Asian importer, for example, which had seen its popularity grow in the petrochemical sector. As a result, Openlink has established a foothold in a new market, and broadened the portfolio of energy commodities traded in the region.

“Changing market circumstances has required firms to scale up and have a better management of risk, leading to the need for both flexible systems, and more powerful systems,” says Moyle. “As we already have all the assets covered effectively within the system, we can provide that sort of one-stop shop for them in terms of fulfilling that need.”