Blog telling the story of the selection of an ETRM for a small subsidiary of a big group of companies.

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Selection of an ETRM
Blog by Adam Rice, July 2019
Introduction
The client was building a trading process from scratch. There were only three people on the
local payroll who were very busy recruiting, acquiring, fitting and furnishing an office, liaising
with banks and brokers, and deciding on authority levels etc etc and so wanted to contract in
some help during this very busy time.
I agreed to a project time of 17 days. The project was planned and executed on time and on
budget.
The ETRM market
The market in ETRM can be banded by the size of the vendor. I would say that the larger
vendors, like Allegro, OpenLink and TriplePoint, are generally more suited to larger clients.
Although they have tried to broaden their appeal by offering cloud/ remote server solutions.
Of these we only put Triple point on the long list.
The rest are smaller vendors. Of these there are two medium sized, AES Aspect and
Amphora Symphony, who are well established. There are a host of smaller vendors who are
a mixture of recent start-ups and small businesses that have been around for some time
now.
We looked at two medium sized and seven of the smaller vendors as part of our long list.
Stakeholders and Business Analysis
The first thing that I had to do was some business analysis. Although the client had given
me a general idea of how they expected the business to work during the briefing, I needed to
get a little deeper and a little more confident on what was required. This involved talking
especially to business people, operations, IT and the accountants.
The next step is to identify the stakeholders to the project. These are people including the
following.
Trading Manager
Needs to be sure that the system can capture the required data and enables the data to be
retrieved to be analysed. The system should be capable of being reported according to local
and group requirements.
Risk Manager
Needs to be sure that the system has integrity, the reports that it produces are consistent
and complete according to the data entered. It must be capable of capturing and reporting
the market risk and the operational details sufficient to identify operational risks.
Needs to be sure that the system has sufficient controls to meet the control objectives
(safeguard assets, orderliness, produce accounts, compliance.)

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Operations Manager
OM needs to be sure that the system meets the objectives for progressing the client’s trades
and meets the reporting needs of the group on operations. The system must be easy
enough to use by the operations
staff, and required training must
be put in place.
Accounts Manager
Needs to be sure that the
system can generate reference
data, transaction data and
month end accruals sufficient to
produce accounts each month.
Needs to be sure that this data
can be extracted and captured
in a reasonably efficient way.
Needs to assess whether data
must be interfaced from the
accounts system to the ETRM.
Must be sure that the
requirements from his/her own team for the project and for future operations can be
resourced.
IT Manager
ITM need to be sure that the system can be supported and does not risk interfering
adversely with established systems. They also need to be sure that the project does not
pose a threat to the delivery of other projects.
Must make a risk assessment of the project, likelihood of failure and consequences of
failure.
The IT Manager will be a good person to ask if there are any other stakeholders that I
missed.
Tax Manager
The TM needs to be sure that the way that transactions are processed complies with tax law
and group policy and that the group requirements for reporting are satisfied by the system.
Finance Manager
Needs to be sure that the system can capture required data and generate reports for the
finance teams’ purposes and the reports required by the banks. Needs to assess whether
data is required to be interfaced from other systems for this purpose.
Credit Manager
The system must have controls over new counterparties. Must be able to extract reports on
credit exposure according to group policy.
Reference Data Manager
The system must have sufficient controls over the input and updating of reference data to
comply with group policy.
Compliance Manager
The system must be capable of segregating data and producing reports that satisfy the
requirements of the banks that finance the client’s business. It must be powerful enough to
give evidence, where relevant, that the policies of the company are being carried out. It

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must otherwise comply with company policies (eg data protection and privacy, KYC,
segregation of duties, etc).
Executive Manager
Must assess whether the deliverables of the project meet the group objectives. Must make
sure that the project is run properly. Must make sure that sign off of the project and stages
of the project are assigned to appropriate people.
All these people needed to be kept informed of the project and I sent a questionnaire to all of
them followed up with a call or two from myself or the local managers.
The Approach
The client already had some idea of two or three ETRMs that were available but wanted to
make sure that they covered
the market. This was important
because when clients are
implementing a project, they
will inevitably experience time
in the Trough of
Disillusionment. This is the
point in the project where
things get tough, and you don’t
want people looking back and
wondering whether the Select
stage of the project should
have selected a different
ETRM!
It’s also important to be able to tell the senior stakeholders that you have made a systematic
selection process.
So, I collected data on 10 ETRM systems in total as our long list and summarised them for
my client. The data I collected included a review of the ownership structure. This is
important because we need to be sure the vendor is going to survive, financially, during the
time that the client is using the system. For the basis of the project we assumed ten years
for this. Also, we didn’t want to face a ramp up of prices after implementation, by which time
the vendor could have the client by the short hairs. The risk of this is reduced if you know
the vendor’s objectives and drivers as well as, of course, covering this issue in the contract.
I went through a 90 point questionnaire with all the vendors that covered the functionality of
their system. The questionnaire covered the following.
 Reference Data
 Price feeds for pricing and M2M
 Pricing of trades
 Analysis of business (strategies/ entities/ books etc)
 Physical trade capture
 Physical operations
 Process

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 Stock/ Inventory
 Costs
 Financing
 Paper trades
 Forex
 Invoicing
 Interface
 Receipts and disbursements
 Document handling
 End of day
 Reporting
With this data the relevant managers were able to quickly identify the three vendors that they
wanted on the short list.
I informed the vendors who had been
successful at this stage and those who weren’t
on the short list.
I made the demo appointment with the vendors
two weeks after the short list decision was
made. This gave them the time to prepare and
make arrangements to come to London. I also
used the time to give the vendors on the short
list some scenarios that I wanted them to put
into their system during their demonstration.
Also during this time, I could prepare some
preliminary process notes of how the business
process would be set up using these vendors.
The different systems have different
capabilities and that effected how the business
process would work.
For instance, if the system could not produce
invoice documents, then this would have to be
done in the accounting/ ERP system (which
was SAP in this case.) If it could not manage
operational functions like out-turn gains, this
would have to be dealt with in some other
manner. Decisions on whether to put new
counterparties into the ETRM or into SAP first
had to be taken with some view as to whether
this fitted in with the controls required by the
Reference Data Manager. Etc etc.

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Moral Issues
As I had been talking to all ten
vendors in my initial discussions
with them, they had shown me their
systems and been quite frank and
helpful. I certainly did not think it
ethical to share that information with
other vendors with questions like
‘System X does this, does your
system do that too?’
In fact, I didn’t even tell the vendors
who it was that reached the short
list. Not even to the vendors on the
short list. Do you think that this was
the right thing to do? Or was I being too strict with
myself? Let me know what you think. You can
contact me through my web-site: www.amjar.limited .
Final Selection
The final selection has to be taken by the client. I am only there to makes sure that they
have the information that they need and that they understand the process consequences for
the selection that they make.
In the end the client made a choice for a system that gave a lot of support to the trader but
had less functionality at the operations end of the system.
My last task was therefore to draft a plan for the implementation and leave the client with the
outline business process maps. These documents made it clear to the client where they
would need development and where they needed to concentrate on integration with the
other business functions.
Conclusion
Local management got a lot of slack from senior management on the selection of the correct
solution. I think that this was partly because it was clear that a proper assessment of
systems was being made and that local management understood the requirements of the
group and stakeholders. It made it easier and quicker to make the selection because
approval at each sub-stage was not required to be gained from the management hierarchy.
Final approval on the system was of course taken. That represented the closure of this
stage in the overall project and means that the business can go to the next stage focussed
on what it needs to at that stage. Going through the overall project stage by stage like this,
getting proper closure when each stage is completed, increases the likelihood of success,
and saves money in the end.
The time that I spent on the project was capped at 17 days and that corresponded to the
amount of time that I actually spent. I am pleased to say that the project was delivered,
again, on time, on budget and on Spec.
Image byTumisu from Pixabay