Historically, commodity markets – specifically energy markets – have been known to be tough, volatile environments, hence risk management has long been a central concept in these markets. But even by commodity-market standards, the changes witnessed in the last few years are unprecedented and unique.
How the markets have changed
Extreme volatility in supply/demand balances, difficulties associated with constraints on storage & distribution and renewed focus on regulations have caused physical markets to evolve into more complex, segmented structures with new asset classes that require specialized knowledge and tools. Rapidly changing business environment is the new normal and consistent margin volatilities have fundamentally changed market participant pool with banks and other financial institutions significantly reducing their involvement while physical trading houses and asset operators taking a greater share of market. Such changes in market dynamics and market participant pools have fundamentally altered conventional assumptions around liquidity, funding profiles, risk management, hedging and portfolio valuation.
Role of CTRM systems in new world
Changes in fundamental market conditions have not only moved CTRM systems and risk management to center
of energy business, they are bringing a different set of requirements and demands upon CTRM platforms such as:
- Greater emphasis on end-to-end supply chain visibility and optimization
- Integrated risk management with combined view of market, operational and credit risk
- Better view of logistics risks
- Incorporating value of complex physical reality, such as operational choices in contract pricing
- Greater focus on physical asset management and portfolio risk
- Support business analytics and opportunity identification
- Effective surveillance and compliance components
How capSpire can make a difference?
RightAngle is a leading CTRM platform capable of meeting demands of new world. capSpire’s expertise in RightAngle and deep understanding of risk management enables us to help clients implement processes and tools that help them stay a step ahead of markets.
One of our clients is the largest consumer of jet fuel in the world and a recent strategic buyer of an oil refinery. They embarked on a multi-year project to improve process efficiency and collaboration across two locations with the goal to make the company more self-sufficient and effective across the entire supply chain.
capSpire analyzed the system and business environment, as well as management’s vision for the future, and implemented a solution that eventually resulted in:
- Best practices based process controls via system functionality to enable the client to manage the risks of transacting new business.
- Integration of RightAngle with different refinery systems to allow an end-to-end view of the supply chain and to better optimize utilization of physical assets.
- Reduced reliance on spreadsheets by providing visibility to key information from system-generated reports.
capSpire is a strategic advisory, system integration and technology solutions firm with offices in North America and Europe. Leveraging centuries of collective experience and a drive to find a better way, capSpire has shifted the paradigm on how innovative solutions create value for its clients in commodity trading, transportation, diversified energy and consumer-packaged goods. Since 2009, capSpire has worked with more than 100 companies around the globe to implement and maximize value from the leading trading and risk systems, deliver world class bespoke solutions, apply enterprise content management expertise to optimize business processes and leverage deep data analytics skills and disciplines to create data driven organizations.