Energy Risk Awards 2016
Several years ago, a multinational refining company decided to upgrade decades-old technology used to underpin trading, risk management and other business activities. The refiner wanted to engage a consultancy that could take a holistic view across the firm, recommend an appropriate IT strategy and implement it. It chose PwC.
Beginning in October 2014, the project remained in the planning phase for about a year and has now switched to the implementation phase. PwC professionals in technology, finance, tax and strategy have been involved; the project team includes staff from the US, Europe and Asia as well as developers based in India. For PwC's commodity trading and risk practice, it is the largest project the group is currently engaged in.
"By bringing our professionals together under a single team structure, the client did not need to go through a bunch of different boutiques, as had been their approach in the past," says Marty Makulski, a Houston-based partner in the practice. "It's given them a much stronger sense of the team and the ability to have one person accountable for not just the vision and the strategy, but also the execution, implementation and achievement of the business case that they were setting out to achieve."
PwC, the London-based professional services giant with more than 208,000 employees worldwide, has pushed aggressively into the energy space since 2014 despite the collapse in prices for crude oil and other commodities, which has squeezed profits for many players in the industry. Over the past 18 months, the size of PwC's commodity trading and risk practice has more than doubled in terms of staffing and revenue, according to the company. Cutbacks in IT spending by clients have "certainly affected the business, but we've still grown at a time when a lot of our competitors are shrinking", Makulski says.
As the practice has grown, it has leveraged its commodity market expertise to branch out into new industries. "Initially there was more focus on oil and gas and utilities, and we've grown and expanded capabilities in both of those sectors," says Austin Morris, a Houston-based partner at PwC. "We've also expanded into transportation and logistics, agricultural companies and some metals-related businesses in the past year or so."
Another development that has enhanced PwC's offerings is its integration with the strategy consulting business formerly known as Booz & Company. PwC acquired the New York-based firm in April 2014 and rebranded it Strategy&. The addition of the ex-Booz team has given PwC a seat at the table in upfront business strategy discussions with clients at the board of directors and C-suite level, according to Morris. "It has allowed us to improve our value proposition with our customers, from the initial strategy all the way through [to] the implementation and execution side of things," he says. "We had a strategy group before, but it wasn't nearly as large and didn't have nearly the capabilities that we have now."
The capabilities of the commodity trading and risk practice have given PwC a front-row seat at some of the most interesting trends reshaping global energy markets. For instance, at a time when energy consumers around the world are eyeing the abundant, inexpensive natural gas supplies unleashed by the North American shale revolution and the US is ramping up exports of liquefied natural gas (LNG), PwC has been enlisted by an Asia-based global energy firm to help set up its new North American LNG business. In the ongoing project, which began in August, PwC has worked with the client on its business processes, accounting, tax strategy and risk management strategy as well as its approach to transfer pricing. The project is now in the systems implementation phase.
Clients praise PwC for both the breadth and depth of its skills, which makes it well-suited for a project such as the creation of a new trading unit. "They're extremely capable," says a senior manager at one of PwC's current clients. "They've sent over very qualified, capable people, and we haven't always gotten that from other consulting shops."
PwC combines the IT knowhow of a systems integrator with the financial expertise one would expect from a Big Four accounting firm, according to Makulski. "We don't take anything from just a pure technology angle," he says. "We make sure that we're bringing an understanding of the relevant market and the economic drivers behind the client's business, and we bring those to the project in addition to the technology skills."