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Introduction
The only constant is change echoes an astute observation by the Greek philosopher, Heraclitus, some
2,500 years ago. Those of us who are engaged in the world of commodities are continually reminded of the accuracy of his observation, particularly recently, as commodity prices collapsed led by crude oil. In fact, our industry
is continually impacted by changes in the regulatory environment, supply/demand balance, global economic environment, technology developments, political intervention and more.
Recently, BP noted in its annual Energy Outlook1, Todays turbulence is a return to business-as-usual. Continuous change is the norm in our industry. The energy mix changes. The balance of demand shifts. New
sources of energy emerge, such as shale gas, tight oil,
ultra-deepwater oil or renewables. Economies expand
and contract. Energy production and consumption are
affected by disruptions, from wars to extreme weather.
New policies are created to address climate change or
bolster energy security.
Change is the very lifeblood of the commodity
trading world, creating opportunities for profit for those
who are swift and responsive enough to act. Good traders make money
in up or downwards moving markets, provided they are armed with up-tothe-minute data and the analytical tools needed to identify, analyze and
manage their trading decisions. However, depending on market direction,
other market participants might be caught in a more problematic situation
and experience cash flow and/or profitability issues should price movements undermine their naturally long (producers) or short (consumers)
positions. Nonetheless, if the company has the right tools at its disposal
to track up-to-the-minute changes, and properly and effectively manage its
exposure to those changes, then value can be protected and in some situations, profits might be made.
Focus on core competencies A pre-packaged solution along
with expert guidance from the vendors expert staff, frees up user staff
to stay focused on business processes and delivering value.
OPERATING EFFICIENCY/
COST AVOIDANCE
The availability of a golden copy of data in a single E/CTRM streamlines regulatory compliance, reduces the cost of building data extracts
for externally managed compliance processes, and helps ensure full
and accurate compliance with mandates.
Automation of complex and routine tasks and business processes eliminates manual processes and
reduces costly errors. A reduction in training and
support costs can also be achieved by consolidating
those processes onto a single platform. Users and
their companies benefit from the shared knowledge
provided to them as a part of a vendors user group.
Todays leading E/CTRM solutions will also provide
the necessary tools and analysis to assist inoptimizing physical assets, improving operational efficiencies and improving profitability.
RISK MITIGATION
A good commercial solution can help mitigate many
forms of risk exposures, including price, credit, legal,
regulatory and operational risk all supported by an
audit trail of actions.
REGULATORY COMPLIANCE
DATA ANALYTICS
Improved and robust analytics result in better decision making.
CUSTOMER RELATIONSHIP
MANAGEMENT
The comprehensive coverage of physical and financial instruments available in the leading commercially available systems expands the range
of products that user companies can offer to their customers, and with
quicker time to market. Having consolidated data on one platform with
advanced reporting capabilities allows businesses to better understand
the profitability of their individual clients.
CAPITALIZING ON CHANGE
A vendor supplied and supported solution can provide advanced and newly required functions and
features more quickly as compared to outdated or
disparate homegrown solutions, ensuring the business has the capability to respond quickly and appropriately to opportunity and mandates.
Plainly, these are just a few of the benefits that might be gained using
one of the better commercially available E/CTRM solutions on the market. In the end however, the actual benefits that may be accrued will
depend on the capabilities of the commercial solution, the quality of that
vendors support and the quality of the deployment/implementation.
// Streamlined various business processes based on best practices provided by OpenLinks consulting staff,
// Achieved a golden copy of operational and financial data; proving the company a real-time reporting capability that has helped
the company adapt to business changes and reduce IT costs,
// Positioned the company to add natural gas transactions on a
single platform.
In the end though, for this customer, the OpenLink system decision
wasnt about costs as much as about having a comprehensive and
robust mission critical system in place to support their business
through change.
Another OpenLink oil company customer
in North America has seen a number of
business benefits including;
// Improved business process and communication flow as well as
better cooperation within the company,
// Reduced reliance on spreadsheets and improved controls
across and within various business units,
// Improved ability to respond to market changes through a single
view of the business, improving accuracy and timeliness of decision making,
// Improved operational visibility across the business resulting in
improved cooperation and a clear view of processes and responsibilities,
CONCLUSION
As the fundamental conditions of commodity
transacting continue to change, visibility across
all aspects of the business must improve. While
some might be tempted to cut costs or defer expenditures by delaying new procurement projects
or even upgrades to existing E/CTRM software,
the ability to properly manage transactions, exposures, risks, and regulations on a timely basis
becomes even more imperative in turbulent markets. Ensuring that businesses processes are
both streamlined and auditable; providing traders
with up to the minute trading intelligence; providing management with key performance indicators
required for strategic decision making; and equipping risk managers with the analytical tools they
need is even more important under such circumstances. A commercially provided E/CTRM solution will assist the business by,
// Providing improved market awareness driven by data and a vigilant eye on macro trends. Strategies must be formulated around
those macro trends and managed on market data and the real-time or near real-time analysis delivered by the software,
// Improving internal visibility, as profit is made or lost on daily decisions. The E/CTRM provides the more accurate and timely position management, risk management and business intelligence
support that is key to ensuring that opportunities are exploited
and risks addressed,
// Ensuring regulatory compliance at a time when regulators are
quick to move, as once on their radar, businesses will be subject
to increased scrutiny for a very long time. The E/CTRM solution
can help to develop a culture of compliance and improved visibility for regulators helping to avoiding punitive and damaging
enforcement actions.
The chances of success in this market now, and into the future, are
increasingly dependent on the mission critical trading technologies
deployed by the business.
ABOUT OpenLink
www.openlink.com
info@openlink.com
ABOUT
Commodity
Technology
Advisory
LLC
Commodity Technology Advisory is the leading analyst organization covering the
ETRM and CTRM markets. We provide the invaluable insights into the issues and
trends affecting the users and providers of the technologies that are crucial for
success in the constantly evolving global commodities markets.
Patrick Reames and Gary Vasey head our team, whosecombined 60-plus years in the
energy and commodities markets, provides depth of understanding of the market and
its issues that is unmatched and unrivaled by any analyst group.
For more information, please visit:
www.comtechadvisory.com
ComTech Advisory also hosts the CTRMCenter, your online portal with news and
views about commodity markets and technology as well as acomprehensive online
directory of software and services providers.
Please visit the CTRMCenter at:
www.ctrmcenter.com
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Email: info@comtechadvisor y.com