The fluctuating energy market creates a finance environment like no other. As a result, heads of finance in this industry must be well versed in the market and able to consistently and effectively plan for changes at the same time as overseeing payment transactions and delivering financial reports. Here, Simon Reynolds, Head of Finance at Gazprom Energy, examines how the finance team’s role has changed from essentially ‘counting beans’ to playing a vital part in developing data-driven strategic business plans.
The energy market is an ever-changing beast that can be difficult to navigate. One of the main challenges of working in a commodity market is fast-paced and constant change. When you compare the roles of head of finance in the energy market and head of finance in manufacturing, for example, there is a stark difference. This is due to the nature of the product and the way it is processed throughout the supply chain – there is no tangible product in energy. The different elements of the energy industry, from sales margins through to trading and reconciliations, mean the head of finance must have a broad knowledge of how customers buy. They must also possess an in-depth understanding of key components such as a robust hedging foreign exchange strategy to reduce risk and financial impact to the business. This makes the role extremely complex and one that often takes years to master. For multinational providers, there is the added challenge of dealing with overseas teams and clients. This particular element emphasises the need for a well-led team with key structures in place in order to fully understand and strategise around a range of diverse finance regulations across many countries.
When working in energy retail, collaboration between the finance and risk teams is crucial to avoiding pitfalls. By working closely with the risk team, the finance team can adjust its processes through a ‘lessons learnt’ system. The two teams can collaborate by using live streams of data to review analytics of customer behaviour and conduct a fundamental analysis.
The synergy between both teams is particularly important when looking at credit risk. The risk team will assess the creditworthiness of potential customers at the start of the sale process and then on an ongoing basis after a supply contract has been signed. Any risk changes in the profile are fed through to the finance team for further assessment.