Over the last 20-years, CTRM solution providers have worked diligently to improve their product capabilities and expand their market reach, with some seeking to bring to market an “all singing, all dancing” solution that would get them in the door at just about any prospect of decent size that transacted in any commodity. At the same time, there have been trading shops and commodity companies (both large and small…but generally large), that haven’t been satisfied with what was available from the vendor community and have tried to build their own “Holy Grail” CTRM solution. A few of them succeeded (at least somewhat), but most failed (some spectacularly) as producing software that modeled part or all of the complex and dynamic business processes of the global commodity industry proved a puzzle too expensive and time consuming to solve.
Is this to say there aren’t any good vendor supplied multi-commodity systems available? Absolutely not. There are several mature and comprehensive products on the market that can address a multitude of commonly traded commodities or groups of commodities (like energies) in great detail and depth. And, there are vendors that can pull together multiple products within their own portfolios of software to create even an broader capability. However, there isn’t yet, and probably never will be, a singular seamless solution that can handle every permutation of every commodity, physical and financial, across all global markets.
As a result, over the same 20-year period, we’ve also seen cycles in which some of those same buyers that operate across multiple commodities and in complex global markets, switch from seeking a single vendor solution (which could require lots of enhancements and customizations), to trying a “best of breed” approach (a complex array of multiple systems from multiple vendors), and then ultimately try again with a singular solution…and so on. The pros, cons and experiences of those that tried each approach are reasonably well-known…suffice it to say, it has been a mixed bag of results.
Over the last few years, the commodities industries have changed fairly dramatically (think regulation, evolving trading patterns, new exchanges, etc.) and have become even more complex; but, so too has technology advanced and changed. The cloud, Big Data, mobile computing and any number of “web technologies” are now being rapidly integrated into the commodities industries…and into the technology solutions that service those industries. Could it be these advances that enable the development of the “Holy Grail” CTRM solution? Simply put, probably not as the minutia of the business processes of the commodities industry – from source to consumption – still have to be modeled, coded and maintained as complex software solutions. Nonetheless, these technology advancements are catalyzing a new way of thinking about how to solve the problem…and our latest ComTech whitepaper is an attempt at shining a little light on the conundrum and how it might be resolved.
In brief, it seems to us that we might do better to stop thinking of CTRM as an application and instead think of it as an architecture that leverages the advantages inherent in the latest technologies. In our paper, we view such an architecture as being comprised of mature, sophisticated vertical solutions to address the complexities of individual commodities or groups of similar commodities (ala “best of breed”); with horizontal solutions to address the complexities of federated risk management (including computational-intensive analytics), data management, accounting and consolidated information and reporting as required up, down and across the enterprise.
Developing and deploying such an architecture could prove the key in solving many of the vexing issues and problems that have haunted technology users and vendors. Things like:
- The need for straight through processing and complex transaction management while addressing the processing intensive requirements of sophisticated risk and optimization algorithms
- The need to slice and dice data and information in multiple different ways for different stakeholders, up and down the organization, in different offices and geographies…all in a way that is usable, intuitive and fast
- The need to handle multiple interpretations of the same data yet maintain a single “golden” database of record
- The need to handle the incredibly complex variety of physical supply chains, assets, locations, business processes and workflows inherent in each commodities
- The need to do all this in a cost effective way, yet still provide users a robust solution that can continuously adapt to rapid industry changes
It sounds like a tall order…and, in truth, it is. Yet, looking at CTRM architecturally allows one to break down, into components, the problems and their solutions. Utilizing the latest technologies, this approach – which ultimately isn’t all that dissimilar from the old “best of breed” approach – may provide some light at the end of what has been a very long tunnel.
You can access this new ComTech whitepaper here – https://www.ctrmcenter.com/publications/white-papers/ctrmcm-architecture-approach-20-year-old-condundrum/