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Cloud-based Technology is Transforming the Commodity Trading Value-chain

April 30, 2019 by Lape Runsewe

Cloud-based technology is transforming the commodity trading value-chain

As in so many industries, cloud technology, with all its inherent benefits, is being adopted by commodity trading organisations. Their tech landscape is definitely changing – and fast! Organisations are switching from on-premise commodity trading and risk management solutions to cloud-based systems.  Recent research from Commodity Technology Advisory and Cloud Computing News shows that cloud-delivered solutions now significantly outsell on-premise solutions for commodity traders. They’re disrupting the industry and will significantly outpace expenditure spent on traditional deployments over the next few years.

The benefits of cloud technology for commodity trading
As costs have risen and trading margins have flatlined, it’s been pretty much inevitable that the benefits of cloud technology would be seized on by the sector, bringing multiple benefits. These include:

  • Outsourced software expertise – Having the cloud software’s experts in charge of maintaining, upgrading, and securing the solution adds extra assurance. Firms with big plans for expanding into new geographies, commodities and business lines, see cloud-deployment as a vital enabler of growth.
  • Mobile enabled – Firms operating in remoter areas of the commodities supply chain are finding access to mission-critical information through mobile devices essential.
  • Optimal risk mitigation – Mitigating risks associated with extensive supply chains, multiple business lines, a network of overlapping counterparties and volatile markets is challenging. Cloud-deployed systems that can be implemented in less than 3 months can address regulatory and stakeholder mandates quickly and effectively.
  • Greater scalability – Commodity markets are volatile and businesses have to respond to market shifts in a shorter timeframe because the consequences of delays are severe. The simplified scalability of cloud-based solutions enables commodity trading companies to add new users, customers, counterparties, credit limits, commodity types and trading functions in hours rather than months. There are no capital expenditures required to expand either.
  • Maintenance all included – Upgrades and updates, DBA support, helpdesk and technical support that accompany cloud systems have huge appeal to CTOs who have seen maintenance of the status quo eat up more and more of their budget.
  • Better security – Cloud technology brings security and disaster recovery at significantly better value than an in-house approach. Cloud products offer data encryption, HTTPS protocols, field-level security and role-based hierarchy controls. Public cloud providers have had a massive security influence too, having invested heavily in cybersecurity measures at an economy of scale that individual players just can’t replicate.
  • Real-time insight – With cloud based technology, real-time insights can be accessed into chosen key metrics from counterparty exposures and risk reporting on the one hand to derivative P&L reports or value at risk (VaR) on the other, whenever they are needed – and not just when the IT system allows.

So multiple justifications for cloud technology adoption – including functional, regulatory, technical and financial ones – are sweeping the commodity trading landscape – and we expect it to continue!

How Digiterre can help
You can see that cloud technology has enormous potential for the commodities trading and risk management industry. If you have any questions about it or are seeking  a partner to assist you harness its opportunities, do get in touch with Digiterre. Digiterre has extensive experience designing and implementing technology solutions across the energy and commodity, banking and insurance and investment management industries. We typically deliver technology solutions requiring business agility, adaptability, innovation and a proven track record in order to solve high risk, high profile and complex technical challenges, very well and very fast.

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