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This week Dr. Hui He, Managing Director of Analystics for Enuit had an interview with ComTech Advisory, the leading Analyst firm for ETRM/CTRM.
Below can be found the results of that interview which written by the ComTech team:
Enuit Gets Focused on Risk Analytics
An Interview with Dr. Hui He Managing Director of Analytics, Enuit
28 Feb 2020 By Commodity Technology Advisory LLC
Risk analytics have long been a bit of a weakness in many E/CTRM platforms and solutions.
Recently, ComTech read that Enuit had hired a new Managing Director of Risk Analytics and seemed focused on beefing up its risk capabilities. We asked Dr. Hui He of Enuit why and what the company was planning in terms of risk management.
ComTech Advisory: What is your role at Enuit and why were you attracted to it?
Dr. Hui He: I joined Enuit last July with the goal of helping the company to develop and enhance the analytical capabilities of our flagship product, Entrade. I’ve come to know Enuit over a number of years through colleagues and friends. Over the last few years, our company has entered a phase of rapid growth as Entrade becomes more powerful and well accepted in the commodities trading community. I felt that there is still so much room to grow for the company, in terms of the product functionalities and client services that we can offer.
ComTech Advisory: What specific trends do you see in risk management today in energy and broader commodities?
Dr. Hui He: Due to the complexities of the commodities world, the commodities trading operations have always been a high-risk-high-return business. The commodities supercycles are the artefacts of many nonpredictable events that affects the world. Historically, commodities trading and risk management have been done through simpler financial instruments due to fatter trading margins arising from relatively low market transparencies. However, with the advances in technology and increasing information flow, the market has become much more mature, transparent, and tighter. Subsequently, the trading activities also become much more fast-paced. These evolutions result in not only more diverse and advanced types of trades in the traders’ portfolios but also the complexities of these trades.
Such change requires that successful trading houses be equipped with state-of-the-art CTRM/ETRM systems to facilitate tracking of trades through their lifecycles, mark-to-market at different portfolio granularities levels, and various risk reporting needs. Handling such tasks is beyond the capabilities of individual spreadsheets, hence we are seeing more and more trading organizations looking for better CTRM/ETRM systems.
ComTech Advisory: As the business tends to go more physical – what sorts of analytics can people use to get a better understanding of their exposures and risks that are really meaningful in the context of energy and commodities?
Dr. Hui He: The physical nature of the commodities business requires properly capturing all type of risks. While market risk being the most important, other risks, such as credit risk and cash flow risk, cannot be ignored. Many of these risks are hard to quantify, sometimes requiring empirical analysis in order to arrive at an approximation. Even so, having some kinds of, albeit not necessarily the most accurate, measurements of risks is better than not knowing risks at all.
ComTech Advisory: In the last year or so, geopolitical risks have exploded – I’m thinking sanctions, trade wars and tariffs, strikes on Saudi oil facilities, Coronavirus in China and so on. What advice would you give to risk managers needing to evaluate such risks?
Dr. Hui He: What you have described are the so-called black swan events, these are unpredictable and unforeseen events that tend to have tremendous impacts on the market as well as on people’s lives at large. A good risk manager should always keep in mind the intrinsically risky nature of the world that we live in, and the business environments in which we operate. Commodities traders should expand their focus beyond market risks, into other types of risks, such as liquidity risk.
ComTech Advisory: What can we expect from Enuit in the future in terms of enhanced risk capabilities in its software?
Dr. Hui He: The users should continue to see improvements in Entrade. We are diligently working on improving and streamlining existing features and introducing more advanced pricing models and risk frameworks to handle exotic options and complex physical assets, such as LNG, pipeline transportation, natural gas storage, and power plant tolling.
ComTech Advisory: What is it about the Enuit software that you believe offers users – especially those in the risk area, an advantage?
Dr. Hui He: As a multi-commodity platform, Entrade offers the best of both worlds, i.e., its already state-of-the-art deal booking and tracking functionality with advanced analytics, to give its users a powerful tool to improve the efficiency and accuracy of trading and risk reporting and management.
About Dr. Hui He Managing Director of Analytics, Enuit Dr. Hui He is Managing Director of Analytics. Over the past two decades, Dr. He has been leading modelling and
analytical efforts at a number of major energy and commodities trading shops in the United States, including bulge-bracket Wall Street investment banks and an integrated global oil and gas supermajor.
Dr. He has extensive industrial knowledge and experience in asset valuation and optimization, options and derivatives pricing, trading and hedging strategies, and risk analytics in physical and financial natural gas (including LNG and NGL), power, crude oil and refined products, coal and emissions, base and precious metals, weather derivatives, and commodities index.
Prior to joining Enuit LLC, Dr. He had held senior front office desk quant roles at BP, Bear Stearns, J.P. Morgan, Credit Suisse, and most recently, Citi. Dr. He received his B.S. degree in physics from University of Science and Technology of China, and his Ph.D. degree in atmospheric physics from Yale University. Dr. He is fluent in both English and Mandarin Chinese.
About Commodity Technology Advisory
Commodity Technology Advisory is the leading analyst organization covering the Energy and Commodity Trading and Risk Management (E/CTRM) technology markets. We provide invaluable insights, backed by primary research and years of experience, into the issues and trends affecting both the users and providers of the applications and services that are crucial for success in markets constantly roiled by globalization, regulation and innovation.
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