Perspectives

Charting the commodity markets with new-age CTRM solutions

How tech ecosystems can turn the tables on risks

In the dynamic commodity trading ecosystem, staying ahead of the curve requires more than traditional strategies; it demands tailored solutions. Enter a genuine game-changer: an advanced commodity trading and risk management (CTRM) ecosystem. Uncover the impact of CTRM solutions on boosting operational efficiency, enhancing performance, mitigating risks, and setting new benchmarks in the commodity markets.

From complexity to clarity

The landscape of commodity markets is complex, typically filled with potential yet fraught with challenges. Inadequate operating models, siloed structures, and subpar data quality could pose hurdles for many organizations. These issues could obscure visibility into vital operational details and impede effective decision-making processes. However, overcoming these challenges can lead to substantial benefits. Enhanced financial performance, improved cost of capital, reduced costs, and more robust governance and control lie within reach for organizations that effectively address these issues. Capturing these benefits may require a shift toward integrated operations underpinned by innovative digital solutions. While many organizations invest in CTRM and enterprise resource planning (ERP) solutions, more is needed to extract greater value. Progressive organizations often build upon these systems to derive additional value from their integrated commodity value chain.

With an effective blend of common platforms and best-of-breed solutions, organizations can navigate the hurdles, harness opportunities, and boost overall performance.

The five cornerstones of advanced Trading and Risk Management Ecosystems

A spectrum of architectural options

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Common platform

A common platform approach offers the benefit of a uniform data model across the organization, promoting consistency and simplifying data management. It also streamlines the IT landscape for ongoing support and maintenance, potentially lowering long-term operational costs. However, users may need to adapt their processes and activities to fit the platform, which could be particularly challenging across different commodity classes and trading strategies.

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Best of breed

A best-of-breed approach allows for customized solutions that suit different business needs. It can be faster and cheaper to implement but could also require more governance and integration efforts. Also, a particular focus is needed to provide visibility across the value chain that is not siloed―which is crucial to avoid data fragmentation and maintain operational cohesion.

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Hybrid model

Organizations typically embrace a hybrid model between these two poles, leveraging a common platform as the central IT architecture while incorporating specialized solutions for specific functions. This model strikes a balance between a common platform approach, where one system serves most functionalities, and a best-of-breed approach, where different systems are chosen for each functionality based on their superiority in specific areas.

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Achieving agility and innovation in trading ecosystems

Whether leaning toward a common platform or a best-of-breed architecture, the challenge is integrating these systems effectively to work harmoniously together. This strategic choice can significantly impact an organization’s agility, flexibility, and ability to innovate, making it a critical consideration in the journey toward a next-generation trading ecosystem. Investment in advanced technology ecosystems is critical for organizations seeking to outpace their competitors in the commodities industry. This approach can unlock value in their asset networks and enable agility in a rapidly changing market landscape.

Contacts

Tom Lochbichler
Principal | Risk & Financial Advisory
Deloitte & Touche LLP
tlochbichler@deloitte.com

Sam Stuckey
Managing Director | Risk & Financial Advisory
Deloitte & Touche LLP
sstuckey@deloitte.com

Scott Rehns
Senior Manager | Risk & Financial Advisory
Deloitte & Touche LLP
screhns@deloitte.com

Kate Shirey
Senior Manager | Risk & Financial Advisory
Deloitte & Touche LLP
kshirey@deloitte.com

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