Today we start a new research project – Trends in commodity risk management. Kindly sponsored by Amphora and the Nasdaq Market Technology Division, the study comprises a short survey , interviews with risk managers, and background research.
Commodity trading is fraught with risks of varying types. In recent years, the number of types of risks that businesses that trade, procure, consume of use commodities have increased considerably and now include not just price or market risk but also credit, regulatory, legal, political, operational, and other forms of risk. Moreover, the software used to track commodity transactions has also evolved considerably and is often light on risk analytics. Migration to software and/or services in the cloud has also introduced a whole series of other risks around IT, application, and infrastructure security. Fraudulent activities have also been in the news in recent months and years adding further checks and balances throughout supply chains to help minimize such risks.
Against this backdrop, ComTech has noted several trends that include,
- the development of more advanced risk analytical solutions in various areas of risk management to supplement CTRM-type risk functionality,
- the development of broad cross-commodity risk platforms that allow further enterprise-level assessment of risks utilizing data from disparate systems across the company,
- Increased risk functionality added to CTRM and CM solutions,
- A move to real-time calculation of risk metrics and away from overnight calculations of prior day.
With the emergence of ESG as another area that can and will impact risk management in recent months, ComTech would like to undertake research into the area of commodity risk management and solutions.
The objective of this research will be to document the various risks and solutions emerging to help manage them in the industry at a generic level identify application classes in the process. Additionally, we will attempt to classify vendors and products in the market according to their relative risk capabilities and footprints at a directory-type level. This ‘directory’ can provide a tool for buyers and investors seeking to build short lists of solutions and will be used to overhaul the CTRMCenter online directory as well.
We are still open to additional sponsorships and should your firm be interested please do let us know. We are also seeking risk managers for short interviews – again, if you are interested please do let us know.
Meanwhile if you work in risk for a commodity firm, please do fill out our short survey?