Digiterre’s Rajesh Jethwa is named in the top 30 of the 2023 CIO 100
Commodity Trading Week 2022 took place this week, covering all aspects of commodity trading: trade finance, risk, logistics, trading strategies and commodity digitalisation. It was also a chance to meet old friends and make new contacts from the 500 attendees who made the journey into the City for this face to face (and live streaming) event.
As the dust settles in the conference halls of the Hilton Tower Bridge and the final crumbs of Churros are swept away (IYKYK) we look back at the wealth of content, panel discussions and informal chat to share our key takeaways. What were the key themes of Commodity Trading Week 2022?
There was lots of talk across the two days of ‘the perfect storm.’ The intersection of increased supply, two of the world’s key commodity producing regions at war and the resultant political and social unrest having a major impact on prices. This has only exacerbated other factors such as pent up post-Covid demand, supply chain bottlenecks, and together these things have flicked the switch on the current commodities super cycle and unprecedented hour by hour market volatility.
What is certain is that prices are sky high and that we are in the throes of a European if not global crisis with inflation driving investment into commodities. Whether we have reached peak industry disruption is anyone’s guess.
In much the same way that Covid acted as a trigger for many tardy digital transformations, so the current crisis underlines the need to find and optimize alternative sources of energy and other commodities. The urgency to accelerate towards a more sustainable future has never been greater.
The commodities industry is built around having the right fundamental data to drive company strategy and then to deep dive into that data at a very granular level to make crucial decisions.
But being a data collection organisation is wholly different to being a data-driven organisation. You need to set goals for data usage and be clear about the outcomes you’re trying to achieve (better trading outcomes, better client servicing, reduce risk for example). Some organisations are further along the data maturity curve than others and this can impact on responding to the current market conditions and staying competitive.
With clear goals comes purposeful use of available data. And this drives process and culture change.
Accessibility of data throughout the trading lifecycle is of course crucial. Ill-informed trading decisions driven out by the quality or lack of real time or near real time data means opportunity is lost along with competitive position impacting on profitability. And in times of extreme market volatility, having timely, relevant, and accurate data is key to being nimble and proactive and at the very least staying in line with the competition.
The conference asked the audience whether they were satisfied with their current data architecture, 86% said no. This is a staggering response given what a crucial factor this is.
How to support a data driven organisation? The main point is in the data architecture. It needs to be scalable and grow as your data grows. You may begin with an on premise data warehouse that is being fed by many of the internal systems. But you may want to grow that into a hybrid or cloud solution (creating data lakes or warehouses) to take account of growth.
Other points to consider include legacy platforms and how well they serve data outcomes. In the case of older, over-customised legacy CTRMs/ETRMs this may mean scaling back functionality of core systems and building microservices around them that improve the availability and timeliness of data to inform trading decisions.
Find out more about the work we have done with clients facing similar challenges here.
Rapid change and volatility is the constant we live with. The challenge we face is that market volatility drives the need for better data and analytics at a faster pace than ever before. Can your current RISK/analytics platform keep up with these sudden changes in the market?
If you are going to use high quality data analytics to drive risk platforms what could this look like? These are the measures to score against to establish quality; the speed at which you get new data, the quality of inbound data, the speed at which you can compute necessary analytics, the speed at which you can consume the analytics. In essence, the speed of data inputs must be matched by equally paced outputs or the potential advantage is wasted.
Delivering against this challenge means that the business can focus on the problem rather than gathering and formatting data needed to make a decision. Without excellent data at every stage managing risk is impossible. And it’s worth noting that risk is constantly evolving. The risk we face today is different to yesterday or the risk we will face in the future.
(See Commodity Trading Week Comrisk panel discussion from 27th April, featuring Digiterre’s Ian Murrin)
Despite the current environment is there still a focus on environmental projects? Two thirds of the audience said yes and that they had environmental targets to meet.
However, there are still plenty of questions to answer about reporting, how energy companies performance is being assessed and benchmarked, given the inherent differences of each company and the compliance of existing systems. Added to this is the challenge of creating IT systems to support companies in managing risk (for example) as they move to new transition assets.
ESG is a still a major focus as shareholders place more importance on the sustainability policies of the companies that they invest in. In addition, 76% of millennials want to work for a company with sound sustainability policies. As millennials are predicted to make up 75% of the workforce by 2025 this work continues with even greater importance.
Commodity Trading Week continues to deliver multifaceted debate across the sector. This year was no exception. Thanks to all of those who attended, delivered presentations and panel discussion and who made it such a great success this year.
If you would like to know more about the services provided by Digiterre or to discuss any challenges you currently have, contact us at [email protected]
By: Rajesh Jethwa
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