CTRM/CM as an Architecture – An Approach to A 20-year old Conundrum

Wholesale commodity trading and risk management can encompass any number of business processes and strategies, from brokered trades in which the buyer purchases some quantity of commodity and then immediately resells it at the same point for (hopefully) a profit – to multi-commodity transactions involving global supply chains, transformations, and complex financial hedging strategies. Vendor provided software to service this wide-ranging market, commonly known as Commodity Trading and Risk Management or CTRM software, will similarly vary in possible functional coverage, with some CTRM solutions addressing specific functional components (such as deal capture or risk analysis for a specific commodity), while others will attempt to model and provide wide-ranging functional coverage for all possible commodity classes and the unique physical operations associated with each and every possible combination in between.

Given this, the Commodity Trading and Risk Management (CTRM) software category is very difficult to define except in the broadest of terms. When the term “CTRM” was first coined, it was essentially used to expand the breadth of the software category known as Energy Trading and Risk Management (ETRM). Both terms broadly mean the same thing, with ETRM reflecting software solutions that address the capture, position management and accounting for any wholesale energy trade; and CTRM reflecting a wider reach (including energy in some cases) and encompassing other commodity categories including ags, softs, and metals. In the last few years, CTRM has been increasingly regarded as a component of an even larger software category called Commodity Management (CM), further muddying the classification of the types of software that address the needs of the wholesale commodity marketplace. Commodity Management solutions are most commonly utilized in the mid- and downstream commodity markets, including food processing and packaging companies, agricultural merchants, and manufacturers. Additionally, there are a number of terms used to describe different aspects of Commodity Management such as ‘ERP for Commodities’.