Liquidity forces energy firms to get creative with risk management

In some corners of the over-the-counter energy market, liquidity has become increasingly thin during the past few years. As a result, firms need to think more creatively about how they handle liquidity, say risk managers. Stella Farrington reports

For firms trading in the over-the-counter energy markets, liquidity is a risk like no other. Even in cases where companies have a watertight risk management programme and a deft hand on market fundamentals, a sudden shortage of liquidity can quickly erode the value of their positions and impair their ability to respond to events. For such reasons, periods of sharply diminished liquidity are often