Optimizing Your Commodity Trading Risk Management (CTRM)

Optimizing Your Commodity Trading Risk Management (CTRM)

Switzerland is one of the world's leading hubs for commodities trading, with approximately 900 firms headquartered there. At the core of every firm is a platform for Commodity Trading and Risk Management (CTRM). Whether it’s packaged, custom-built or a combination of both, each of these 900 firms has one.

Global commodity markets are dynamic, constantly driving new business requirements with technological implications, including the need for updated interfaces. Advanced logic may be required to calculate and properly value innovative instruments. Fresh reports should be designed, built and tested.  And entirely new technologies are emerging that merit adoption into a company’s deal-to-cash CTRM processes. The combination of all these factors may eventually drive a company to consider a substantial technology initiative. For firms using commercial off-the-shelf (COTS) software, upgrading to the latest release is recommended. For those companies with custom in-house-built solutions, major code refactoring may be necessary to support new business workflows. And many firms rely on a combination of both; some custom-built and some COTS solutions, integrated in some fashion. EPAM provides pragmatic guidance applicable to all the above scenarios, ensuring the effective outcome of your technology initiative. 

In this series, EPAM will address the critical path factors to maximize the chances for success in your CTRM upgrade project. We will cover overall trading platform strategies, scope expectations and boundaries, detailed planning and scheduling, budgeting, quality planning and proper resourcing in successive articles.

Part 1: CTRM Strategy: Enhance, Upgrade or Re-Evaluate?

If you are in the business of commodity trading, you will eventually be faced with the fact that your existing platform needs attention. New products, such as battery energy storage solutions (BESS), may have been introduced since the original deployment. If your company has set up a trade desk in power, then it’s possible you have BESS that needs to be modeled, valued appropriately and hedged. Or perhaps it is carbon emissions or another commodity product that has emerged. Commodity markets are ever-changing, and new business requirements are constantly introduced. Lastly, improved system speed or performance is often a driver, as the amount of data to be processed is always increasing at an exponential rate.

Because these systems are mission-critical in nature, broad in organizational impact and very complex, sometimes companies sensibly defer change – updating or upgrading – for as long as possible. However, at some point, decisions need to be made to update or enhance existing systems. If custom in-house-built, you may be considering a substantial rewrite, refactoring or development of a major new functional area is warranted. If COTS, then perhaps an upgrade of your vendor-packaged CTRM software is necessary.

Choosing to change a trading company’s Commodity Trading and Risk Management (CTRM) platform is a complex endeavor for firms seeking to stay competitive, optimize operations and manage risks effectively. While the process comes with challenges, careful planning, structured execution and leveraging experienced resources and AI tools can transform potential pitfalls into opportunities for growth. By following the pragmatic guidance outlined in this series of articles and engaging experts as necessary, trading companies can ensure their CTRM ecosystem is future-ready – poised to support the evolving needs of commodity trading in an increasingly dynamic landscape.

Stay tuned for the next article in this series, where we’ll dive into detailed requirements gathering to help you take the next step with confidence.

Optimizing your CTRM system, whether it’s a COTS solution or a custom-built platform, requires a deep understanding of market specifics and modern technologies. EPAM’s experts in Switzerland have the experience and knowledge to support you with tailored solutions and deep industry expertise.