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types of risks - correct answer operational, financial, credit, other (technical, security, data, environmental) operational risk - correct answer involves risk of mistakes or fraud resulting in financial exposure field operations (accidents) - correct answer traders, transaction confirmations, online trading supply chain operations - correct answer traders, transaction confirmations, online trading, scheduling and storage, mistakes and omission financial risk definition - correct answer financial exposure due to market fluctuation financial risk examples - correct answer protecting against or falling charges, locking in margins, mark to market daily tracking credit risk definition - correct answer risk of non-performance of financial commitments credit risk examples - correct answer credit limits (receivable), liquidity limits (payable), mark to market, accts payable and receivable, complete picture purpose and approach of Mark-to-Market is - correct answer Measure the current value of the assets rather than just recording historical values properties of the Middle office - correct answer Properties are CONTROLS and COMPLIANCE which includes roles such as Auditors' Role Management's Role Technology's Role Government's Role why the middle office sector is vital - correct answer In recent years the Middle Office of the Natural Gas (Energy) Industry has become one of the fastest growing sectors in our industry. As our Industry becomes more fast paced and risk averse, the role of the Middle Office becomes more and more vital. what the roles of Auditors are. - correct answer Controls designed to protect the company from harm are in place, When issues are identified, new safeguards are put in place, Auditors need to involve Management on a timely basis, GAAP different types of audits - correct answer Internal External Jurisdictional Governmental Management's role as it relates to the middle office - correct answer Management must ensure that: -Controls are constantly monitored and enforced -Staff is aware of Controls and their importance through Staff Meetings, Directives, Participation, -Management must be open and transparent different types of controls - correct answer Volumetric Balancing Pricing Validations Required Information Limits are being adhered to Forecast vs Actual Technology's roles are - correct answer Automation has greatly enhanced Auditing Automated detection does not tire and is lighting fast Automated seamless End-to-End Process Technology monitoring Technology different types of automated controls - correct answer Credit Limits Volumetric Balancing Contract Quantities Accounting Results Know what the Government's roles are - correct answer working to ensure that the industry is conducting their business in a manner conducive for the good of the public. Sarbanes-Oxley of 2002 - correct answer A federal law that established sweeping auditing and financial regulations for public companies. Lawmakers created the legislation to help protect shareholders, employees and the public from accounting errors and fraudulent financial practices.The Act came in response to financial scandals in the early 2000s involving publicly traded companies such as Enron Corporation, Tyco International plc, and WorldCom. Dodd Frank - correct answer Signed into law by President Barack Obama in 2010 in response to the financial crisis that became known as the Great Recession. Dodd-Frank put regulations on the financial industry and created programs to stop mortgage companies and lenders from taking advantage of consumers. basic accounting model - correct answer asset-what you have liability-what you owe equity- what you own left- debit right-credit balance sheet - correct answer Statement of financial position at a specific point in time Assets: what you have, Liabilities: what you owe, Equity: what you own income statement - correct answer Statement of profit and loss over a specific period of time Revenue: what you made, Expense: what you spent accounting process - correct answer Source Information: who, what, where Business Process: acquisition, logistic, disposition Operations Results: accounting, reporting who is affected by accounting statements - correct answer Staff Personnel and Management Stockholders / Investors / Lenders Potential Investors / Lenders Trading Partners / Suppliers / Customers Cash Flow Statement - correct answer Cash Position and Forecast accounts payable - correct answer commodity charges if something doesn't make it to Accounting, it: - correct answer "IT NEVER HAPPENED" Prior Period Adjustments - correct answer prior period adjustment is the correction of an accounting error that occurred in the past and was reported on a prior year's financial statement, net of income taxes. In other words, it's a way to go back and fix past financial statements that were misstated because of a reporting error. credit limits - correct answer Each of the counterparties on a traders' desired list have to be vetted and assigned trading credit limits. Limits are given because of the potential risk of non-performance of financial commitments. They are considered RECEIVABLES. Fast Growing Industry - correct answer Middle Office of Natural Gas mainframe - correct answer Technology Arrives (Benefits and Pains) Extremely Expense (Capital and Operating) Much better than Manual Process in Place Security and Controls (Strangling) Required multiple levels of Approvals Developed by IT only (With User Input) Long and Tedious Approval and Design Phase Long Development Cycle (Months, sometime years) Managed By IT LAN - correct answer Local Area Network, Productivity was maintained internet - correct answer connectivity and collaboration cloud - correct answer leasing instead of buying ad hoc reports - correct answer canned reports, configurable and customizable SAAS - correct answer software as a service