Algorithmics: Energy Risk Solutions ,
 Dear Colleague, 

Recent market events demonstrate how important it is for market participants to enact an effective and efficient assessment of counterparty credit risk. Over the past calendar year we have seen unprecedented deterioration of credit quality from some of the world's largest energy firms. As a result, many market participants have suffered significant credit losses, which have directly impacted their profitability and shareholder value. Moreover, it often took weeks or months for many of the affected firms to know the total amount of their exposure to these troubled energy companies. 

Over the past five years Algorithmics has been working with energy companies to solve these problems. Algo Energy <http://www.algorithmics.com/solns/algoenergy/index.shtml> enables firms to quickly analyze the risk of their portfolios and find answers to key questions. Specifically: 
  

What is the value of the transactions I have with the counterparty and what is my potential loss in case of default? 
How many affiliated entities are we trading with and what is the overall exposure? 
How are the agreements in place going to offset the transaction exposures and reduce this potential loss? 
What is the state of all posted collateral and guarantees and how does it mitigate my potential losses? 
What is my exposure to other counterparties that share similar characteristics or are exposed to the same troubled counterparty? 
How will these exposures change if market conditions change? 

Today, some companies are answering these questions proactively and allocating capital appropriately. They know the risks they are taking and they are managing their exposures to leveraged counterparties carefully. In the event of market downturn, they reduce their exposures before credit deterioration happens.  Many of these companies are able to do so as a result of Algo Energy, Algorithmics' comprehensive risk management solution for energy markets.   

Algo Energy helps a firm manage the complex interaction between market, credit, and liquidity risk. At the core of Algo Energy is a sophisticated risk engine that applies market leading valuation methodologies to all the physical and financial deals booked against a firm's counterparties, across all energy markets and using all plausible scenarios. This methodology allows a firm to establish how counterparty exposures will evolve over time and over scenarios and assess how market factors effect the credit quality of counterparties. Only through a scenario- based methodology can these interactions be computed efficiently and accurately at the enterprise level. 

Further, by applying netting agreements imbedded in complex counterparty structures, Algo Energy allows a firm to monitor and manage actual and potential exposures against counterparty limits structures, while taking into account the proper valuation of collateral and roll-off risk. Algo Energy, allows a firm to manage the various states of collateral agreements. By monitoring the agreement's threshold schedule (among other factors), the system identifies changes in obligations of the firm's counterparty due to changes in the firm's credit rating. The system in turn directs real-time states of agreements to assigned relationship managers or operation managers for active collateral management. 

Building on the award winning Mark-to-Future technology, Algo Energy helps a firm to manage their risk pro-actively. It provides transparency, flexibility and scalability at the enterprise level. This state-of-the-art technology is delivered in a distributed framework for the enterprise. Computed once, the same exposure calculations can be analyzed at either the desk level or the enterprise risk level, ensuring consistency in reporting and data quality. The distributed framework also ensures that the system is scalable and flexible to support the growing needs of the enterprise. 

Algorithmics is a world leader in enterprise risk management solutions. Headquartered in Toronto, Canada, with 15 offices and over 500 employees worldwide, Algorithmics has the largest number of dedicated risk management professionals under one roof. The Algorithmics energy risk team, located in our New York City and Toronto offices, would be happy to provide further information about our energy risk products and services. To reach us, call 212-625-5260 (New York) or +1 416-217-1500 (Toronto), to speak to one of our energy risk professionals. Alternatively, you can email us at info@algorithmics.com <mailto:info@algorithmics.com>. 

We look forward to providing further information on our energy risk solution. 

Sincerely, 

 
Thomas Severance 
Director North American Sales 

<http://www.algorithmics.com/>
rick.buy@enron.com