Commodity trading is fraught with various types of risk. In recent years, the number of types of risks that businesses that trade, procure, consume, or use commodities are exposed to have increased in both intensity and breadth. In the current environment of commodity shortages, geopolitical conflict, increasing environmental regulation and continuing covid impacts, risks of all types must now be constantly measured, valued, and ameliorated where possible. Where once price or market risk was the almost sole focus for commodity firms, a plethora of emerging risk now must also be front and center for these companies, including credit, regulatory, legal, political, operational, liquidity and multiple other forms of risk.
Though the Commodity Trading and Risk Management (CTRM) software used to track, value, and manage commodity transactions has continued to evolve, these solutions are often ill-equipped to address the plethora of risks that exist outside of a portfolio of commodity transactions, and even then, are often light on commodity-specific risk analytics or use overnight batch jobs to calculate positions.
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