TABLE OF CONTENTS Utility models for the delivery of computation are currently appearing, driven by business needs for cost savings and increased flexibility. [*] Grid computing (Foster et al., 2001) is one of the technologies most in vogue for supporting this delivery, with its emphasis on open standards and support for heterogeneous and geographically dispersed platforms. However, while much attention has been paid to systems technology, there has not been a similar development in business awareness of the new environment from the point of view of financial risk. This is in strong contrast to the emphasis in conventional deregulated utilities, where risk management is seen as a core competence for the utility providers, wholesalers, and traders with an extensive literature (Pilipovic, 1997; Clewlow and Strickland, 2000; Jaillet et al., 2003).
The aim in this chapter is to raise awareness of the importance of financial risk management for companies considering utility delivery of computation or becoming a provider, wholesaler, or trader. First, a background is provided on conventional utilities and on how computing is ordinarily seen. After establishing this background, elements important to financial risk management in utility computing are introduced. The main two elements here are delivery risk, which concerns the logical and physical design of capacity delivery, and price risk. Price risk includes availability risk, as this can be seen as just a very high price. The environment that influences and shapes these risk factors is described, as well as their importance and what can...
