Ricardo-AEA launches Energy Efficiency advice service

02 June 2015 Consultancy.uk

In 2012, the EU created an Energy Efficiency Directive to help European countries reach a 20% energy efficiency target by 2020. As part of the Directive, large companies will need to comply with each individual Member States’ interpretation of Article 8 of the Directive. In a move to prepare businesses for the compliance deadline in December 2015, Ricardo-AEA has launched an energy efficiency advice service.

Energy Efficiency Directive
The Energy Efficiency Directive is a 2012 agreed upon binding measure aimed at helping EU countries reach their 20% energy efficiency target by 2020. The Directive sets all countries on the path toward using energy more efficiently throughout the whole of their energy chains – from production to consumption.

Energy Efficiency Directive

Article 8 of the Directive pertains to the requirement that energy audits be carried out, with the purpose of obtaining adequate knowledge of the energy consumption profile of a premises as well as identifying and quantifying cost-effective energy saving opportunities. In the UK this is a requirement for large companies employing more than 250 people or having an annual turnover or balance sheet value exceeding pre-set limits, with all companies needing to comply with the Directive – or the relevant National interpretation of the Directive – by 5 December 2015.

To assist large companies be fully abreast on how different Member States are implementing Article 8 of the EU Energy Efficiency Directive and what requirements their businesses need to meet, consulting firm Ricardo-AEA has launched an energy efficiency advice service. The Alerts service will provide companies the essential information about energy efficiency compliance delivered straight to their inbox, in monthly updates with regard to changes to compliance policies in countries relevant to their operations – as well as providing information about the steps required to ensure their activities are fully compliant.

Ricardo-AEA launches Energy Efficiency advice service

Paul Maryan, Managing Consultant at Ricardo-AEA, explains: “We are fast approaching the deadline for businesses to demonstrate compliance with Article 8. While the UK has set out its interpretation of Article 8 within its Energy Savings Opportunity Scheme (ESOS), many EU Member States have yet to prepare their national response to the Directive. This doesn’t give organisations with operations across Europe a lot of time to understand the still emerging national interpretations and ensure local compliance.”

Assistance scheme
For Ricardo-AEA, this is the second assistance scheme launched in a short period of time. Just recently, the firm published a guide to help least developed countries prepare their intentions to reduce emissions under a new UN agreement; their so-called Intended Nationally Determined Contributions.

Profile

More news on

×

An 8-step framework for banks to prepare for FRTB changes

02 April 2019 Consultancy.uk

With FRTB expected to come into force in 2022, it is critical that banks implementing necessary changes remain on track for their compliance timelines. Whether a company is aiming for the mandatory Standardised Approach (SA) or the voluntary Internal Models Approach (IMA), the programs often represent a significant investment, requiring process, systems and cultural change. 

Drawing from its experience in helping banks meet the milestone set in their compliance timelines, Capco – a management and technology consultancy for the financial services industry – has developed an eight-point prioritisation framework for FRTB preparation and implementation. Natasha Leigh Giles, a Managing Principal at the consultancy, outlines the main dimensions of the framework: 

Prioritisation framework for FRTB

1. Front office operating model

For those who have already implemented the Volcker rule, the desks are well defined with monitoring and governance frameworks. However, for companies that have not been required to adhere to the U.S. regulation, there may be additional work involved in implementing desk-level controls as required under FRTB. The trading desk structure is especially important for banks planning to implement IMA, as this regime is applied at the desk level and requires that the full flow of the selected desk is able to pass the IMA requirements (including the modelability test for the risk factors). Key business decisions may be required if a desk trades complex products that are more aligned for SA treatment. 

2. Product scope

In order to reach the IMA status, products are required to be supported with additional data sets including historical market and reference data as well as risk factor pricing evidence. The opportunity for 2019 lies in refining the assessment on the feasibility of each product type to ensure a clear scope is agreed for the IMA environment. If the challenges are too complex or costly to overcome, such as access to historical market data, availability of price verification for the risk factors or significant enhancements to support computational capacities, then these products should be scoped out of the IMA program as soon as possible in order to save time and effort on continuing analysis. 

3. Client & trading activities

There is no need to wait until the FRTB implementation timeframe to undertake a holistic review of client and trading profitability – including the capital impacts. For example, running training and awareness campaigns within the front office can help the traders to understand the impacts of their activities and encourage changes in the way that they trade. By considering this holistically as a business and operational change, it can help keep the focus and resources on the primary (profitable) business in preparation for the compliance deadline. 

4. Internal controls

Methodology, reporting, auditability, and process governance for internal controls also need to be monitored in detail. We recommend having clearly defined processes accompanied by effective training across front-to-back office. For some banks, it will be beneficial to audit existing capital adequacy processes to ensure that findings are highlighted in advance of the implementation timeline and the appropriate focus is achieved within senior management.

5. Data & metrics

Financial institutions need to consider their overarching governance and ongoing management for the data (including ownership, quality control, golden source storage solutions, etc.) and the ongoing control framework for ensuring the data remains accurate and relevant for capital adequacy modeling. If there has not been a data lineage exercise already applied, this is a great opportunity to deliver business benefit, even in 2019. By creating agreed definitions, preferred sources, ownership and workflows for managing data quality, the benefits of more accurate data can already be applied to existing capital calculation models. 

Framework for FRTB

6. Model management & validation framework

In preparation for the FRTB regime, an opportunity for 2019 is to understand if there are gaps or control concerns to manage immediately. Model enhancements across SA and IMA will need to be productionized for output accuracy and refinement, however, these need to be maintained alongside existing Basel 2.5 BAU models and other concurrent changes e.g. LIBOR Transition. Business process optimization, testing environments and automation tools, documentation and model validation can all be reviewed for immediate benefits and prepare the process for a smooth implementation of the future FRTB models. 

7. Technology platform & testing environments

With regards to technology planning, the opportunity in 2019 is focusing on gaining agreement of the front-to-back FRTB future state architecture including the use of vendors as applicable. By ensuring a disciplined focus upon design and solution definition across all requirements, it provides a clear baseline for implementation planning and scheduling. Establishing a technology architecture which allows for FRTB data feeds, model enhancements, control definitions and accurate capital calculation outputs will provide the program with essential data and metrics needed for decision making. 

8. Leverging synergies

Once a baseline plan has been established, it is possible to identify synergies across other programs – such as the SA-CCR (Standardized Approach for Counterparty Credit Risk) or the IMM (Internal Models Methodology) – that could deliver overlapping benefits at reduced effort. Understanding requirements, defining the future state architecture, and implementing the change in a complex environment requires a mix of strategic principles and program management. Therefore, we consider it an opportunity for 2019 to take a centralized approach for data lineage and requirements gathering as this would be beneficial for optimizing capital costs across both the market and credit risk environment.

Conclusion

By considering each topic strategically in 2019, benefits such as data quality enhancements, strengthened internal controls and flexible test environments will not only bring immediate business value, but also set a solid foundation for a comprehensive FRTB implementation in the years to come. 

For more information on Capco’s model and the its approach in helping banks plan for FRTB, download the full whitepaper on the firm’s website.