I would welcome the opportunity to discuss this with you both ( probably 
separately given our diaries ). I am keen to understand whether we have the 
same perceptions of the control process and of the timetable for moving 
forward to our shared vision !

I will try to call later today

Mike
---------------------- Forwarded by Mike Jordan/LON/ECT on 12/10/2000 11:38 
---------------------------


Mike Jordan
12/10/2000 11:16
To: Fernley Dyson/LON/ECT@ECT
cc: Steve W Young/LON/ECT@ECT, James New/LON/ECT@ECT, David Hardy/LON/ECT@ECT 

Subject: RAC issues

Fernley

Output from a meeting with David and James on the specific issues :-

David's view is that a detailed factual list of issues is as yet not 
available but the summary is as follows :-

At present Europe is substantially hitting the two key deadlines of 
'officialisation' of the books by Risk management by 6 am Houston time and 
Summary DPR received in Houston by Noon ( indeed have internal deadlines 1 
hour before that for contingency )
However, there are some IT problems in that the feeds to Houston post 
officialisation are currently taking a number of hours - and IT are currently 
looking to rewriting feeds and purchasing a dedicated server for feeding to 
Risktrac.
Additionally, because of the time difference between the two targets and the 
fact that Risk Managament do not obtain MTM information until completion of 
the overnight batch ( ie start working first thing in morning UK time ) there 
has been scope for continuing to work on the raw MTM data. Consequently,
there is potential for Risk Management 'top siding' for corrections such that 
the summary DPR will be 'different' from the risktrac information - We do 
topsides because it is impossible, given current systems, to rerun the 
overnight batch and extract the data from the valuation systems - our p&l 
explain processes are themselves spreadsheet based.
The majority of topsides are caused by inaccurate data capture at the deal 
entry stage - itself a symptom of underinvestment in the data validation 
process of risk systems
Whilst the topside adjustment is communicated to Houston  - Risktrac requires 
a fully automated process
Whilst we should consider the materiality of the topside - RAC rightly are 
trying to implement zero tolerance - to help flag all the issues
Within the last fortnight we once received the incorrect curves on UK Power 
such that the full database was incorrectly valued - there was insufficient 
time ( for reason stated above ) to rerun and reextract and indeed today the 
batch failed because the UK Power server ran out of processing diskspace.

We are doing a reasonably good job given the significant systems inadequacies 
we face ( and that have been flagged on a continuous basis - they are on the 
long list for development ).

The recent daily taskforce meetings will provide more structured reporting of 
the root causes that will allow better escalation of systemic issues - and we 
should seek to discuss these in the context of the goal of corporate policy 
compliance ( we should recommunicate the policy internally within Europe )