Credit Risk Management in RightAngle

Boosts Efficiency and Flexibility

Credit Risk Management in RightAngle

Understanding and Managing the Complex Challenges of Credit Risk

Credit Risk is associated with the risk of a loss occurring due to the failure of any counterparty to abide by the conditions of a financial contract. Credit risk generally occurs due to the deteriorated financial condition of the counterparty. Failure to mitigate credit risk can disrupt the cash flows of the lending party and ultimately, take a toll on the organization’s finances.

Value Creed helps its business users better manage credit risk and presents an opportunity to greatly improve overall performance and secure a competitive advantage.

Credit Risk in the Energy Sector

Credit risk has a huge impact on the energy sector and, following the credit crunch, more sophisticated methods of measuring, monitoring, and managing credit and related risks is now the norm. Four challenges arose as a result of this shift.

Energy Supplier Logistics Risks

When negotiating credit terms with a supplier, consider the added exposure that comes with long lead times in cutting production if a customer defaults

Sunk Costs and Overhead

The nature of the industry requires suppliers to pre-finance infrastructure and other non-commodity billing components

Dwindling Margins

Fierce competition and the global nature of energy and other commodities markets place a premium on liquidity and cash flow, which credit anomalies may significantly disrupt.

Unpredictability of Demand

COVID-19 and its aftermath turned the energy market upside down. Factories limited production, remote work dampened fuel demands, increasing the potential for excess supply.

Key Factors and Challenges in Credit Risk Management

Analytics

Internal evaluation aimed at workflow
improvements

Benchmarking

External scoring still important, but other metrics have emerged

Sophistication

Standardization of credit worthiness and
exposures all along the value chain

Focus

Credit risk concerns are genering more executinve scruntly and becoming strategic

Tangential Risk

Managing and increased collateral demands have shifted risk to other areas

Cleaning

Compulsory clearing places greater emphasis cash requirements and liquidity management

Credit Risk Management in RightAngle

Credit Center provides information about a counterparty’s Total Available Credit versus its Total Exposures at any given time. The configurable tools and editable reports in Credit Center aid customers in regulating and managing trading activity with their counterparty. Credit Center reports provide insights that allow customers to predict future exposures and available credit so they can manage current exposures and available credit.

Credit Center allows customers to capture credit instruments for secured and unsecured allocation of credit and blanket instruments as well those specified by deal, deal detail, order, and movement. Credit Center supports RightAngle’s core credit instruments:

Credit Line
Prepayment
General Authorization
Bond
Letter of Credit
Promissory Note
Guarantee

Value Creed's Approach to Credit Risk Management

Value Creed’s SMEs have worked on various such configurations and customizations in RightAngle Credit Life Cycle:

Assisting the Credit analysts in setting up the different reference data like Counterparty Credit information which includes defining different instruments and limits.

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Designing custom workflows that integrate RightAngle’s available cash and cash release functionalities with External Accounting/Payment applications, for example, SAP, JDEdwards, Kyriba, etc. This is done to automate cash management and payment tracking in RightAngle to achieve real-time credit updates.

With the availability of a consolidated report highlighting the reasons behind P/L changes, risk analysts can better communicate with stakeholders and provide them with more detailed explanations, leading to better collaboration.

Credit Explosure Report >

A customized credit exposure report is built on top of the core report. This customization is done to process the real-time interfaced data related to payment information feeding in from external applications and display the updated counterparty exposure.

Purchase Explosure Report >

The custom Purchase Exposure Report is built using the invoicing and payment data generated by the customized interfaces and workflows to calculate real-time exposures. This helps to track the credit exposure and take an informed decision whenever any changes in Deal Quantity, Price, Scheduling dates, etc. are made.

Aging Report >

Similarly, Aging Reports are customized to track open balances, and due dates and update credit exposure whenever the payment due dates are breached.

Value Creed’s risk management services for RightAngle ensure the platform delivers all the functionality companies need to generate full transparency so they can make informed decisions to protect themselves while maximizing profits. This necessitates customizations in the RightAngle core Credit and Cash Application workflows, which are designed and developed based on the client’s business needs.

Recommended Resources

A Comprehensive Guide to ICE eConfirm Process in RightAngle

Strategic Market Risk Management in RightAngle

Enhancing NGL Management through Tailored Solutions in RightAngle

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Credit Risk Management in RightAngle

Understanding and Managing the Complex Challenges of Credit Risk

Credit Risk in the Energy Sector

Energy Supplier Logistics Risks

Sunk Costs and Overhead

Dwindling Margins

Unpredictability of Demand

Key Factors and Challenges in Credit Risk Management

Analytics

Benchmarking

Sophistication

Focus

Tangential Risk

Cleaning

Credit Risk Management in RightAngle

Value Creed's Approach to Credit Risk Management

Click to Enlarge >

Credit Explosure Report >

Purchase Explosure Report >

Aging Report >

Recommended Resources

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