CTRM Technology Struggles ...
Outside influences impact business decisions – market globalisation, liberalisation, regulation, and economic crisis
Decisionsmust still be made in terms of how to maximise returns while minimising risks
Technology struggles to keep-up
Margin requirements Capital requirements
Management and optimisation of unique asset portfolios Market risk, regulatory risk, and operational risk
… while still ensuring you “play by the rules” and protect share holder value…
Source: CommodityPoint
enterprise resource planning (ERP) process. Technological advancement now allows companies to
streamline/strengthen the risk management function, enabling them to deliver more strategic value and lower operational costs, with the expected benefits of higher enterprise-wide visibility, a transparent and
Multi-commodity, multi-asset portfolios Increased volume and velocity of data Regulatory compliance and reporting
CTRM System Advancement Recent developments have highlighted the
risks and volatility inherent in the commodity marketplace. This has focussed attention on the critical systems that record the company’s activities – the CTRM systems – supporting decision making and potentially integrating a full range of services across the supply chain. These ‘complete solutions’ for multiple commodities are optimised on a single platform for the buying, selling, trading, and procurement of commodities. They offer enterprise risk management; can include modules for scheduling, logistics and/or storage, as well as processing, settlement and accounting. ‘Full systems’ are provided by the titans of the
CTRM world who’s sales pitch is a ‘one stop shop’ for all your trading, processing, risk management,
Using technology to automate key aspects of the commodities trade life-cycle is imperative in the following areas:
• Integrated & scalable infrastructure for multi-asset commodities processing.
• Flexible workflow management to support complex business logic.
• Superior real-time connectivity to electronic matching and confirmation services.
• Real-time reporting & controls at any level of trade detail. • Buy-side solution adoption to ensure STP across all counterparties.
collaborative environment, together with more accurate data-driven decision making. For companies engaged in physical commodity business, it has therefore become all the more important to connect trading and risk management to the supply chain, ideally integrating the CTRM system to the wider ERP.
Tech & Functionality Constraints ...
CTRM systems based on highly structured, complex & rigid dbase schemas
Expansion into new commodities require extensive rewrites endangering client retention – may force reimplementation
Full Integration of M&A product’s data structures is rarely if ever possible – usually require rewrite of datamodel
Experience has shown that commodity specific solutions cannot be readily adapted to manage other physical commodities
reporting and logistical needs; exemplified by the major vendors in this space like Triple Point, OpenLink, Allegro and Brady. These systems are offered as a full service or as ‘modular architecture’ enabling companies to add new functionality as the business grows oand develops. However, of the 40 or so “E/CTRM” vendors in this space, much of the technology is finding it difficult to keep up with changes in markets. The reason these systems struggle is because many on the market today reflect the time that they were developed [that met the commercial need at the time; e.g. the 1990s and 2000s]. Unfortunately, many tend to be very rigid structures, which are difficult to “re-plumb” as the market evolves, according to Patrick Reames, Managing Director of analysis and consulting group CommodityPoint. Their studies show that
system-centric issues have now become the dominant requirements for the end-user community, including portfolio management, reporting, and getting data in and out of these complex systems. While many of the larger, re-architectured solutions
provide much of this functionality, others are being left behind in what has become a two-tier market: the established legacy vendors with a large number of users, as opposed to those meeting more defined and/or specialised needs under stricter cost constraints. “The first group includes conservative risk-
Commoditized gas/power have no quality – virtually all other commodities contain some quality measures thatmust be accounted for
Systems arising out of ags or softs markets have not yet been successfully extended to physical energy commodities
Bulk commodities, including fuels,may require “blending” capabilities
Risk or financial only systems are more readily adaptable to other commodities/derivatives; however they don’t address physical requirements
Complex supply chains –many commodities require specific, complex functional models
Multimodal models are required – rail, waterborne, truck, etc. Source: CommodityPoint 34 June 2012
averse companies while the latter includes progressive players seeking innovative nimble vendors,” according to Salim Jabbour, CEO of Abacus Solutions Inc., providers of integrated enterprise CTRM system SATURN. “Users are becoming increasingly sophisticated and more demanding. What was suitable 3-4 years ago is no longer acceptable. For example, the widespread use of smartphones and tablets and quick access to information is impacting user needs and expectations of CTRM systems; users
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