Kiodex, a provider of Web-based risk-management solutions for the commodity markets, has released its flagship Kiodex Risk Workbench application for energy markets. The Kiodex Risk Workbench is aimed at firms and corporations looking to manage their energy price exposures on the Internet.
"We wanted to create transparency, even the playing field and balance the markets for users of energy," says Raj Mahajan, president and co-founder of Kiodex. The Kiodex Risk Workbench provides pricing tools, market data and financial reports over the Internet. The application also facilitates compliance with U.S. GAAP and FAS 133 requirements. Compliance with FAS 133 is based around a framework for positions and deals to be matched and grouped for accounting and reporting purposes, market data to accurately value trades and positions and documentation and audit trail information for verification by auditors.
"The functionality allows the user to say 'I want to purchase a contract to hedge my exposure to natural gas prices next quarter," says Mahajan. "The first question is how much should I pay for that contract. The second question is once I execute that contract people within my office are going to want reports as to what the market to market is because that has broad accounting implications." He adds that the Risk Workbench addresses other questions such as what happens to earnings when, for example, natural gas prices move 10 percent if a user has hedged.
"It allows the user to engage in best practices around energy risk management," says Mahajan. The risk reporting functionality can also be run on a scheduling service, with reports created automatically for specific dates and times. The reports can be distributed in Excel and PDF form and include profit and loss, mark-to-market, settlement, position and portfolio sensitivity. The scenario analysis function allows market data to be changed by the user to model hypothetical market situations for stress testing.
Users obtain user names and passwords through Kiodex and log onto the Risk Workbench site at http://risk.kiodex.com using Internet Explorer 5 to access the application. The subscription prices are based on activity, rather than the number of users at each location. "Companies that hedge a lot or have a large number of positions will pay more," notes Mahajan. While the Kiodex Risk Workbench initially covers energy, the company plans to expand into other asset classes such as foreign exchange and interest rates in the future.