CTRM – The Next Generation

There is no doubt that technology has undergone a sea-change over the last decade or so potentially making it possible to build and deploy software faster and more cost-effectively while offering a host of features that help users to work smarter, faster and with less opportunity for error. Additionally, the way that applications are designed and built has also changed to take better advantage of these technologies. While arguably there is no single technology that facilitates a paradigm shift in Commodity Trading and Risk Management (CTRM) software, when you combine advances in all areas of solution development and deployment technology, then such a leap forward is both likely and desirable.

Nowhere is the gap between the possibilities offered by these leaps in technology and what is available as commercial solutions more apparent than in the commodity trading and risk management software category. There are many aging, legacy, solutions still being utilized, marketed, and deployed and yet, this is an industry that is experiencing unprecedented demands and change, which in turn, are placing increasing demands on the software it utilizes. What most commodity firms are seeking is more agile software platforms that can allow them to adapt and evolve through these changes. This growing demand is also accentuated by the younger, more tech-savvy people entering the business whose expectations are not being met by many existing solutions.

Read the document online or download it from the CTRM Center CTRM – The Next Generation

Three Trends to Look Out For in CTRM/CM for 2021

2020 was a fascinating year for CTRM software especially as seen from the analysts’ perspective. As we entered the year, ComTech was already noting that the business environment was changing quite rapidly and that this was having an impact not only on CTRM software adoption rates, but also the kind of solutions that companies were selecting.

In particular, more agile cloud-based solution vendors were benefiting, largely at the expense of the large, traditional monolithic CTRM products. However, when the COVID-19 pandemic started and lockdowns began, many of these changes were acclerated and several new challenges emerged. There is no doubt that at the time of writing and for at least another 6-months or so, the situation will remain difficult with respect to COVID. Yet the pandemic and its direct impacts are not the only challenges facing commodity firms.

The effect of these issues has been to accentuate certain trends in CTRM software. Sometimes, these challenges are driving related initiatives like digitalization, which in turn, has a further impact on CTRM in commodity firms. As such, the market for CTRM solutions is rapidly changing, in terms of desired software capabilities and features, but also in how that software is delivered, implemented and used. As 2021 begins, it is worthwhile to examine some of the more important trends that we are seeing and to consider what they may mean for the not-too-distant future.

Read the document online or download it from the CTRM Center Three Trends to Look Out For in CTRM/CM for 2021

Achieving Digitalization in a Document Intensive Energy Market

As energy companies seek to become more efficient and agile in a rapidly changing marketplace fraught with risks, digitalization – the process of evolving from manual or analog processes to more efficient and cost effective digital processes by reducing the number of times data is touched and ensuring greater accuracy and more rapid movement of data and information throughout the enterprise – continues to attract attention from CIOs across the energy value chain. Unfortunately, many of the digitalization efforts by energy firms to date have met with mixed results as much of the data in this industry, and particularly that passed between trading and/or service partners, is not available in a form that allows rapid capture and systematic integration, particularly that data that exchanged in the form of paper documents, pdf’s, faxes and emails.

Though many of the processes of energy and commodity trading have become digitalized (exchange based trading, electronic pipeline nominations/ EDI, ISO interfaces, etc.), the reality is that in many ways the wholesale energy markets lag behind many others as manual processes and massive number of documents (both physical and electronically delivered) still exchanged among industry participants.

Read the document online or download it from the CTRM Center Achieving Digitalization in a Document Intensive Energy Market

Commodity Management and Supply Chains

For most raw materials and commodities, the supply chain is both long and complex. Increasingly, firms have been focusing on these supply chains in an effort to better control operational risks and exposures, but increased geopolitical and other risks have now served to sharpened that focus even further.

Issues like COVID-19 lockdowns and trade wars, for example, have meant that managing sourcing, movements, processing, production, procurement, contracts, storage and other activities along complex supply chains more effectively not only reduces costs and improves profitability, but also helps ensure business continuity. Meanwhile, although CTRM (Commodity Trading and Risk Management) sof tware applications that help manage trades and the risks associated with trading are seen as critical, the broader commodity management aspects around managing the supply chain more effectively are rightly gaining in importance.

Read the document online or download it from the CTRM Center Commodity Management and Supply Chains

Redefining ETRM

In the world of E/CTRM software much is changing and at a fair pace. Driven by a plethora of new business needs, massive shifts in technology, and changes in software procurement behavior, it is a software category that is ripe for a true paradigm shift. In a paper written a few years ago, Commodity Technology Advisory (ComTech) outlined a potential solution to some of the issues that have plagued buyers of E/CTRM software for decades.

In that paper, the authors proposed a different approach to architecting E/CTRM solutions – that is creating an ecosystem of software capabilities rather than relying on the monolithic applications that have, or invariably will, become increasingly expensive and difficult to deploy, update and maintain.

ComTech noted that such an approach was both technically feasible given the advent of cloud technologies and desirable as it helped solve the myriad of business issues buyers face today. Since then, business trends have continued to evolve in directions around data management, digitalization and automation, and collaboration. More recently, lockdowns and the need for business continuity have only served to push the envelope faster and further.

Read the document online or download it from the CTRM Center Redefining ETRM

Risk as a Service – The Next Thing in Affordable Corporate Risk Management?

In the past, the use of ‘sophisticated’ risk tools and metrics was considered the bailiwick of the very largest entities that could afford to develop and run with such an approach. Often they saw advanced risk analytics as offering them a strategic and/or competitive advantage in the market. Others in the commodities space simply could not afford to perform sophisticated risk analytics and anyway, they often didn’t have the skills onboard to perform, or even understand, them appropriately.

Some firms resorted to using more simplistic reporting of positions, or other metrics, to monitor ‘risk’ and/or used somewhat simplistic limits for various forms of market and/or credit risk. Often, the calculation of exposures, or at-risk capital, value or earnings, or PFE, took a great deal of time to compute and if something went wrong, like a missing price for example, the calculation might simply crash before completion. This meant that often, risk exposures were only accurate well after the fact and were never available to inform the business when needed.

Read the document online or download it from the CTRM Center Risk as a Service – The Next Thing in Affordable Corporate Risk Management?

Is It Time to Replace Your E/CTRM?

Historically, the ETRM/CTRM replacement market has been quite small and relatively slow. There simply hasn’t been so many replacements and where replacements of ETRM/CTRM solutions have taken place, it had usually been because of a truly compelling need. Usually, that reason would be that the vendor had repeatedly and persistently failed to deliver the requirements, or support the ETRM/CTRM installed, and usually, this would be because the vendor had been acquired, gone out of business or had dropped support of the product.

The reality was that replacements were always extremely difficult to do, meaning that users would put up with almost anything rather than go through a replacement in order to avoid having to select another product and vendor. The risk is always that this will be no better than the original and will cost of lot of time and money to do it along with all of the business disruption.

The devil you know is better than the devil you don’t.

Read the document online or download it from the CTRM Center Is It Time to Replace Your E/CTRM?

Addressing Commodity Market Challenges With Digitalization Enabled By Platform Technology

The pace of change in the global commodity markets is accelerating and historical relationships among buyers, sellers and traders, and even the markets in which they operate, are being interrupted, reformed and reshaped at an ever-increasing pace. Trade wars, military conflict, climate change initiatives, regulatory mandates, sustainability and even as recently demonstrated, market shocks brought about by disease pandemics are shifting supply sources and demand patterns and interrupting industrial output, forcing commodity trading companies to adapt in almost real time.

Read the document online or download it from the CTRM Center Addressing Commodity Market Challenges With Digitalization Enabled By Platform Technology

One for all, all for one – Does any CTRM solution fit your industry requirements? Challenges and considerations

Does any CTRM solution fit your industry requirements? Challenges and considerations… A white paper

Many CTRM vendors have tried to create what we often refer to as the ‘all singing, all dancing’ CTRM solution. Their goal is to create that single CTRM solution that can cater for and meet the requirement of all commodities, both physical and financial, and also meet the needs for all industry segments in energy, metals and soft / agri commodities. However, after more than two decades and numerous attempts to get there, it is probably safe to say that most have failed to develop and bring to market a truly all singing, all dancing CTRM solution. However, new technologies and architectures make this vision ostensibly achievable through the use of an ecosystem of functionally deep vertical and wide horizontal services or applications. This white paper examines the idea of a single CTRM solution for all commodities and contrasts that with a different approach that some vendors are now pursuing in trying to develop commodity specific CTRMs that offer deep vertical and supply chain functionality.

Read the document online or download it from the CTRM Center One for all, all for one – Unus pro omnibus, omnes pro uno

US Gas and LNG Markets – Continuing Challenges are Forecasted

Even though drilling targeting natural gas has declined to a multi-year low, US gas production continues to increase as E&P companies grow oil production and with it, oil-associated gas. As noted by the Energy Information Agency (EIA), a new daily gas production record of 92.8 BCF per day was reached on August 19, 2019, up from about 72 BCF/day in January 2018. This substantial increase occurred even as the price of natural gas continued to slide, falling from approximately $3.20 in early 2018 to less than $2.30 at the end of August 2019.

Since that time, prices have rebounded somewhat with the normal seasonality of the markets, trading in the $2.50 – $2.70 range in September, though they remain well below the same period in most previous years. Further, according to EIA forecasts, little improvement is expected for the remaining months of 2019 and early 2020 as storage volumes are within normal ranges and production continues to keep pace with demand.

Read the document online or download it from the CTRM Center US Gas and LNG Markets – Continuing Challenges are Forecasted