A consistent view of risk across the organisation

Recent geopolitical risk and market volatility have accelerated the trend among energy firms for enterprise risk management and renewed the focus on scenario- and stress-testing capabilities, says Brian Wood at Beacon by CWAN

Growing demand among energy firms for enterprise-wide visibility and valuation consistency paid dividends for Beacon by CWAN in this year’s Energy Risk Software Rankings. It won positions in 10 of the 13 enterprise risk categories in the rankings, including number one in Risk registers, and second place in Multi‑strategy storage, Analytics and Creativity and innovation. 

Beacon – whose clients span the full spectrum of sophisticated energy and commodities participants – was acquired last year by Clearwater Analytics (CWAN), providing the latter with “a unified platform that spans the full investment lifecycle – from trading and modelling to accounting and regulatory reporting”, CWAN said at the time.

Within energy markets, clients’ main use case for Beacon by CWAN is independent valuation and risk, providing firms with a single, consistent view of mark-to-market, Greeks and risk exposure across all their positions, regardless of which trade capture systems they’re running. “For many clients, that means aggregating across multiple ETRMs [energy trading and risk management systems], which is a real operational challenge that we solve,” says Brian Wood, Beacon’s principal product manager, energy and commodities. 

What sets Beacon by CWAN apart from its competitors? 

Brian Wood: I’d highlight three things. First, genuine ETRM agnosticism. We sit as an independent analytics layer and integrate with any source system. That matters enormously in energy, where firms are rarely running a single, clean ETRM – they have legacy systems, regional platforms, exchange feeds and bespoke spreadsheet workflows all running simultaneously. We consolidate that.

Second, depth in commodity-specific instrument coverage. This is where a lot of risk platforms fall short. Accurately pricing gas storage, power tolls, liquefied natural gas (LNG) swing contracts or APX-style average price options requires specialised models. We’ve invested heavily in that coverage.

Third, the valuation engine is genuinely independent. It’s not a reskin of an ETRM’s built-in pricer. Clients use our platform precisely because they need marks they can defend to risk committees, auditors and counterparties. That independence, with full transparency of model assumptions and market data inputs, is increasingly non-negotiable for clients.

Would you agree you’re seeing a greater focus on enterprise risk at energy firms these days? If so, how does Beacon by CWAN help? 

Brian Wood: It’s one of the more significant structural shifts we’ve observed over the past few years. Energy firms are no longer comfortable managing market, credit and operational risk in separate silos with independent teams and systems. The interconnectedness became very visible during the volatility events of 2021 and 2022 – firms that had robust market risk frameworks were still caught out by counterparty failures, liquidity squeezes or operational disruptions they hadn’t stress-tested against.

Beacon addresses this through centralised exposure aggregation. When Greeks, counterparty exposures and scenario outputs are all computed from a single, consistent model using the same market data and the same portfolio snapshot, you can genuinely start to look at risk holistically rather than reconciling across three different systems that never quite agree.

Clients use our platform precisely because they need marks they can defend to risk committees, auditors and counterparties. That independence, with full transparency of model assumptions and market data inputs, is increasingly non-negotiable for clients

Brian Wood, Beacon by CWAN

What sort of requests have you had since the onset of the most recent Middle East conflict? Have you noticed any changes in what firms are trying to do? 

Brian Wood: The geopolitical volatility has reinforced several themes we were already seeing. The most immediate was a renewed focus on scenario- and stress‑testing infrastructure. When you have potential supply disruption scenarios – the Strait of Hormuz, Red Sea routing changes, regional gas supply rerouting, and so on – firms need to be able to run credible, hypothetical shocks quickly and communicate the results to senior management and boards who aren’t necessarily quants themselves. So there has been demand for more accessible, configurable scenario tooling.

We have also seen heightened attention to cross-commodity linkages – the gas-power-LNG nexus in particular. When oil-linked LNG contracts interact with European gas benchmarks, and power curves all react simultaneously to a geopolitical event, the correlations between those markets shift in ways that historical value-at-risk (VAR) models don’t necessarily capture well. That has pushed more interest in stress- and scenario-based risk measures to complement VAR.

And, on the counterparty side, credit risk has come back into focus. The memory of some high-profile counterparty failures from 2022 is still fresh, and the geopolitical environment has added another layer of uncertainty around counterparty concentration and jurisdictional exposure.

What major enhancements have you made to Beacon by CWAN over the past 12 months? 

Brian Wood: We’ve made significant investments in our physical commodity coverage, expanding instrument scope and lifecycle workflow support for natural gas across European hubs, power and LNG. That reflects where our client base is evolving: firms that used to run primarily financial books are increasingly managing physical positions alongside their hedges, and they need a platform that handles that integrated portfolio accurately.

On the analytics side, we’ve advanced our profit-and-loss (P&L) decomposition capabilities, specifically the ability to attribute daily P&L across multiple dimensions simultaneously, such as delivery tenor and price location. This is critical for power and gas portfolios where basis risk is a primary driver of unexplained P&L.

And we’ve continued to invest in the configurability and usability of the platform, giving risk analysts and middle-office teams more autonomy to manage their own instrument mappings, curve assignments and book hierarchies, without requiring developer intervention. 

What was behind the acquisition by Clearwater, and what benefits has it brought for clients? 

Brian Wood: Clearwater’s acquisition of Beacon brought together two highly complementary capabilities: Clearwater is the leading platform for investment accounting and portfolio analytics for institutional investors, while Beacon brings deep commodity trading and risk management expertise. 

What’s compelling about the combination is that the investor universe has expanded its exposure to real assets, energy infrastructure and commodity-linked investments. Therefore, the need for a platform that can bridge investment portfolio analytics with commodity risk has grown substantially.

For energy clients specifically, the acquisition brings access to a much larger investment and technology platform, with greater research and development capacity, a broader data infrastructure and the ability to serve clients who increasingly sit at the intersection of traditional commodity trading and institutional investment.

What are you focusing on next? 

Brian Wood: There are a few areas I’m particularly excited about. Physical commodity workflows are a priority. We’re deepening coverage of gas nomination and scheduling integration, physical power and the regulatory frameworks that govern physical trading in Europe, the Middle East and Africa markets, such as the Regulation on Wholesale Energy Market Integrity and Transparency. The demand from clients trading financial and physical books on the same platform is strong, and closing that gap is a near-term focus.

On the analytics side, we’re continuing to evolve our model library for structured products – improving our coverage of nodal power pricing, storage valuation and volatility surface construction for less liquid commodity markets. There’s real client demand for defensible, independently governed models for instruments that are hard to value.

And, more broadly, we’re investing in the configurability and usability of the platform, making it easier for risk analysts and middle-office teams to own their setups without heavy IT dependency. As our clients’ books evolve, they need to be able to adapt their risk infrastructures quickly. That’s a competitive differentiator we’re actively building on.