Risk Management
Every client will have their own attitude to risk in terms of purchasing energy. Clearly the objective is to buy it as cheaply as possible, but when do you know when you are at the bottom of the market? And if energy prices are escalating, how far up are you willing to let the market go before you lock out?
Given the volatile nature of the market, it is highly unlikely that any client would successfully purchase their energy contracts at the lowest point. At the end of the day, you can only identify a market bottom after you have passed it.
We have developed a series of strategies for larger buyers which allows them to to purchase energy on flexible contracts. They do not have to commit to purchasing all of the volume at one time, at one particular price. By purchasing smaller amounts over time, the price per unit potentially averages out to lower costs. While they may not have purchased everything at the lowest possible price, they didn't buy it high either. This allows us to minimise some of the risks involved in purchasing energy and therefore manage costs more effectively.
For smaller clients, we can make the same benefits available, by grouping them together in what we call Market Trackers.
Risk management strategies are tailored to each individual client's attitude to risk, and they need to be considered very carefully before any form of flexible contract is taken out. Examples of some risk strategies are shown in our Procurement download.
