EKA > Digital + CTRM = Commodity Management Reimagined
November 15, 2018

Digital + CTRM = Commodity Management Reimagined

Digital CM enables faster decisions
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Spotlight on: speed of decision making

Companies have been relying on Commodity Trading and Risk Management (CTRM) systems for decades. CTRM systems enable users to make better trading decisions, improve reporting, reduce risk and increase profits. But, traditional CTRM systems cannot match the pace of today’s rapidly evolving commodity markets.

While commodity markets have always been volatile, decision making in today’s markets is especially multidimensional, with events from extreme weather, political changes, tariffs, etc. impacting profitability in real time. Static, on-premise CTRM systems do not work in volatile markets because they are not real-time systems, do not leverage modern collaboration tools like in-context chat or data sharing, and do not use Machine Learning principles to spot opportunities outside the norm, resulting in decisions that do not reflect real-time market conditions.

Let me show you how working on our bite-sized apps helps commodity enterprises transform their way of working, starting with how the speed of decision making is faster on a digital CTRM.

Rather than throwing a bunch of jargon at you, let me illustrate a real-life scenario contrasting a day in the life of a Vice President of Risk on the Digital CM Platform versus traditional CTRM.

How quickly can you adapt when markets change?

In dynamic markets, speed to response is everything.

Imagine you are a mid-sized agriculture trading company located in Canada. You have suppliers and customers throughout the world and business is good. Then suddenly and without forewarning, the political climate changes and trade talks sour. Unexpected tariffs hit your major suppliers sending grain input prices skyrocketing.

You need to analyze the impact of the price shock and make a plan to cover your commitments. Making the most profitable plan requires analyzing data from disparate sources – both internal and external to your company – and making a position change before markets open within hours in another part of the globe.

Digital Commodity Management turns a multi-day process into a few hours, resulting in a quick path to better decisions.

Meet Dave and John. They are both Vice Presidents of Risk looking to stay on top of risk exposure as their businesses grow.

Dave is on a Traditional CTRM System and John is on Eka’s Digital Commodity Management (CM) Platform.

12:30 pm

The new tariff is announced; markets immediately react to soaring prices and positions of several agri enterprises immediately change.

Traditional CTRM                                                                 Digital CM Platform  

 

12:30 pm

John receives an alert from the Eka app that refreshes market news 24X7. He sees a notification on his smart phone informing him of a breach in the risk position.     

 

12:31 pm

John opens the messenger on Eka’s app and immediately identifies the breach source. He takes a screenshot and sends it to the risk team via chat within the Risk app with suggestions for running scenario analysis.

 

12:45 pm

The Risk Manager runs the simulations and pings the two scenarios with recommended actions to John via messenger.

 

 

12:50 pm

John consults the Head of Trading on the two scenarios and decides next steps.

Meanwhile, the Risk Manager shares the impact view to John over chat. They discuss and agree on a mitigation strategy and test it by simulating a few more scenarios.

 

1:00 pm

John notifies the global team to adjust their positions as per the risk mitigation strategy and heads out for lunch.  

1:30 pm

Dave receives a call from his Head of Trading an hour after the new regulation announcement. He is concerned about a big market swing causing a serious impact on their exposure. 

 

1:35 pm

Dave emails the Risk Manager and asks him to find out the impact on the business, but Dave will have to wait until the next End of Day (EOD) report is run at 6:00 pm to assess the business impact.

 

3:30 pm

The Risk Manager finishes preparing a market price file, followed by an EOD pre-check to make sure there are no errors before he runs the EOD report at 6:00 pm. This takes him a couple of hours.

 

6:15 pm

Having run the EOD report, the Risk Manager takes the output and creates a business impact report, verifies it against business policies and creates risk violation reports manually – this takes him an hour.

 

7:15 pm

Dave finally gets to assess the business impact and calls the Risk Manager for a meeting over Skype to discuss a risk mitigation strategy.

 

9:00 pm

Dave notifies the global team to adjust their positions as per the risk mitigation strategy. Because markets have opened in other regions while they were creating the reports, opportunities were lost.

 

The Digital CTRM empowers trading companies to make better decisions faster. Think the power of CTRM + ease of Apps combined.

To discover how the Digital CTRM helps you reach beyond trading/risk to connect sourcing and supply read our next blog on “Work as one: Digital Collaboration with producers and suppliers”.

Watch the video to learn how Eka improved decision making at Renewable Energy Group