Achieving commercial advantages from rapid information exploitation

The growth of digital information continues at an exponential rate. The frequency and scale of information being produced creates both substantial challenges and opportunities for all organisations, no more so than organisations which derive competitive advantage from the rapid structuring and exploitation of information.

Global energy trading involves decision making and market execution through structured context and clarity combined with rapid action. Core to the trading process are event and trade identification together with supporting risk management strategies. There are notable conceptual parallels between Balkerne’s approach to real time business physical asset risk management for the insurance industry and the pursuit of competitive advantage in the energy trading industry.

What is real time information? What are examples of successful exploitation of real time information? What parallels are there in real time information exploitation for trading and for business physical asset risk and resilience?

Mr Steve McCarthy is a Global Energy Trader based in Zug, Switzerland, who specializes in taking the requirements of trading companies to implement trading desks, from the digital technology through to the integrated processes. Balkerne speaks to Steve McCarthy on these topics as they discuss the growing commercial advantages that can be achieved by organisations through the rapid exploitation of information.

Balkerne: What is perceived as real time information in the energy trading industry?

Steve McCarthy: In energy trading, the difference between a substantial profit or loss can be a matter of microseconds, such are the transaction speeds on trading platforms. Real time information is supplied via billions of instantaneous data points from countless sensors, thousands of daily news reports, financial market updates and live prices. Data providers are fundamental to what we do and core requirements from their services will always be focused on ultra-low latency, flexibility to rapidly scale and absolute reliability of service.

Balkerne: How would you describe the successful exploitation of real-time information occurring?

Steve McCarthy: With such a vast quantity of real-time data available, maximising its utility is key and a lot of effort goes into identifying and verifying the best sources to use. Upon collection, the industry practice is very much now aligned with the use of cloud-based storage. Research at a macro and micro level is hugely important. Analytic tools allow the trader to manipulate and combine datasets visualising possible trading scenarios driving the trade decision-making process forward. Success is the trading team having the highest levels of confidence in the information and the most intuitive ways to use the data for the best possible trading result.

Balkerne: What are the major use cases for real time information in your sector?

Steve McCarthy: Real time information underpins the entire energy trading industry. Every energy company, whatever their core skill or strategy, will make commercial decisions based on that data. It will encompass national and international energy flows including storage and inventory levels. Weather data which can provide forecasts for entire continents or a single building, aid supply and demand models. Within each company, trading teams of different energy responsibilities will then layer in their own assessment of trade prices and volumes as well as news feeds and financial market data.

Balkerne: In your opinion what key features are required from technology used for real-time information exploitation?

Steve McCarthy: In my industry, real time data on its own is not enough to deliver a competitive advantage. The right analytical tools, visualisation techniques and the ability to automate many areas of research are all vital tools for the trader. Looking forward to the next few years and the harnessing of technology, the ability to integrate machine learning techniques and artificial intelligence into the analytical process, will be essential to enable meaningful interpretation of the ever increasing volume and types of data available.

Balkerne: What advice would you give to organisations seeking to harness and exploit real time information?

Steve McCarthy: The most important point is for an organisation to have consensus on the purpose of the information required, and to analyse the waves of consequences that could occur from achieving knowledge. Organisational culture is also pivotal, as perpetually, there will be different levels of information uncertainty. Culture is fundamental in determining thresholds and accompanying processes for successfully translating uncertainty to an agile achievement of being confident in ‘knowing things’. From here, there has to be the continual development of maturing this knowledge to achieve comprehensive organisational confidence in decision making. A further point I would stress is the need to examine and rate each source of information for relevance, latency, veracity and utility, coupled with an organisational outlook of purposefully pursuing alternative and niche sources for the occasional superior insights which arise. From my experience, any technology solution must be integrated, intuitive, flexible and bring clear coherence to an organisation.

Balkerne: What differences and what parallels do you see between real time information exploitation in the energy trading sector and that for the purposes of business property risk and resilience?

Steve McCarthy: Ultimately energy trading is very strongly driven by the bottom line of financial results and adherence to requirements of compliance. I can see that in your sector, business resilience is a myriad of interwoven consequences; financial, socio-economic, environmental and even touches areas of governance. In energy trading I think there is more of a challenge of having to rate sources by understanding their biases based on their trading strategy, or ultimate ownership. However, several parallels are very evident. From what I saw of your technology solution and use cases, your industry also has a complex and interconnected landscape of information, which decision makers need context and clarity from. Ultimately, the commercial similarity is that organisations which can consistently harness information of consequence to gain understanding and exploit knowledge at speed will have a significant competitive advantage.