A Commodity Trading & Risk Management Application is a complex system which is required to manage OTC and exchange traded deals and positions of different commodities (crude oil, power, natural gas, natural gas liquids, refined products, emission, and agricultural products) along with physical delivery and management of risk (market, credit and operational) facing the trades in the market. Before making a decision on which CTRM application to select, organizations must first assess their needs and then decide on the basis of the features of a CTRM application. Typically a CTRM system consists of 4 broad functions – Front Office, Middle Office, Back Office and Administration – which are aligned with each other.
Trading (Input, View and Modify – OTC and Exchange Based Trades)
Pricing/Deal Structuring (Formula Based Pricing, Secondary Costs, Deal Level Pricing Simulation)
Trade Capture (Pre-deal Analysis and Credit Check)
Trade Confirmation (Batch Validation)
Credit Exposure – Analysis & Monitoring (Credit Ratings, Counterparty Risk, Physical and Financial Exposure)
Risk Exposure – Analysis & Monitoring (Market Risk, VaR, Options Greeks, MtM, PnL, Simulations)
Legal Analysis & Monitoring
Pricing Information using Pricing Curves (Market Price Data, Volatilities, Correlations, Forward and Exchange Curves)
Commodity Scheduling (Mode of Transport, Blending, Back to Back, Washout, Memo Sale, Circle Trade, Inventory Management and Reporting, Demurrage, Actualization)
Contract Administration (Force Majeure, Jurisdiction, Incoterms)
Trade Settlement and Accounting (Invoices, Confirmations, Accounts Payable and Receivable Postings, Tax, PPA, Financial Closing)
Trade Workflows (End of Day Processing and Reporting, Trade Validations, Options Exercise, Trade Price Fixing)
Reference Data Management (Counterparties, Portfolios, Traders, Schedulers, Risk Managers)
Setup and System Administration (System Setup, Security Groups & Audits, Products and Locations Configuration)
Automation of Workflows (End of Day Run, Risk and Credit Exposure Monitoring)
Selecting a CTRM Application requires deep professional analysis of the clients business and then aids them in choosing a CTRM Application which caters to the needs and requirements of the clients and aligns with the long term goals and targets of the organization to attain maximum ROI.
Our highly skilled Commodity Consultants at Value Creed with experience of working with the leading CTRM Applications globally help you determine the ‘as-is’ and ‘to-be’ situation of your current business functions and provides you expert advice on which CTRM Application will suit your needs. We design the RFP and act as a negotiator between client and the CTRM Application Vendor. Thus you get the maximum out of the minimum investments.
To know more on how Value Creed can be a process guide while selecting a CTRM Application which can add value to your business partner with us today.