#4 What Do I Do about “Crazy Crude Prices:” Be Prepared for the Unexpected
After our previous post discussing the advantages of moving your database to cloud-based SQL Server, our series, 5 Reasons for Choosing Run Smart™ CTRM Managed Services, continues with Part 4. Today we write about how to ensure your system can handle unexpected outlier prices and other data.
We may never live to see crude oil prices tradeat negative $37 again, like we did in mid-April, but it is safe to say energy commodities will continue to fluctuate wildly over both the short and the long term. While the perfect storm that hit American crude futures may be a once-in-a-lifetime occurrence, it did expose weaknesses in several commodities trading risk management (CTRM) systems.
Many producers, refiners,, traders, investment funds, airlines, and major consumers of oil found themselves unable to process this unexpected data, creating errors in their reports and questions about how to manage their positions, credit, and risk.
Prepare for the Unexpected
The unprecedented demand-killing consequences of COVID-19, along with abnormal behavior from market participants under stress, shows that markets for any commodity are subject to extreme and unexpected volatility.. While rare in nature, Black Swans do exist; natural disasters, market shifts, technological advances, financial dislocations, and other disruptors can happen at any moment. It pays to ensure your CTRM system can handle the next onslaught of crazy crude prices or other outlier data:
Test your system for its ability to respond appropriately to severe deviations from the norm. When prices, risk, inventory, credit conditions, or other critical inputs creep toward the edges of the bell curve, you want to be sure your system can report your positions accurately and instantly.
If you don’t have the resources available in-house to evaluate your system, hire a professional CTRM managed service provider to conduct a comprehensive stress test.
Forewarned is forearmed. Build a leading indicator of possible upheaval into your system so you can fortify your forecasting and decision-making tools. You can develop better responses to potential calamities if you can anticipate when automatic price and other data feeds may become unreliable.
Edge-case data has the potential to throw your system into a state of chaos. It can create errors that leave you in the dark, grasping for the information you need to make sound decisions. And it can delay reporting and aggregating position and financial data when time is critical.
Don’t let this happen to you.
How Run Smart™ CTRM Managed Services Tames Outlier Data
Value Creed’s Run Smart™ Managed Services include dual timezone coverage, so there is always someone monitoring your data inputs. No matter what time of day or night the crazy data rears its ugly head, a Value Creed CTRM/ETRM platform expert will immediately begin reconciling it and rectifying any errors it causes.
Value Creed has automated the process of searching for and isolating outliers as they occur. By isolating the cause of errors in real time, we empower data users to begin remediating them right away. Problems that occur overnight in the U.S. often can be rectified before the trading day starts. Users can run P&L and other reports on schedule, aggregating prices and positions and making data-informed decisions.
Be Prepared, For Every Market Turn with Run Smart™ Managed Services
Value Creed’s Run Smart™ Managed Services on your team, outliers are resolved quickly so you can maintain optimal positions and manage strategies.
If you missed our former posts, learn three more reasons why more CTRM/ETRM application management teams and their CIOs are choosing Run Smart™ here: