Digitalization is driving change in commodity management

We all know that not investing in the future and thereby missing the boat on any given innovative solution can end up costing money. We’ve spoken about that at length in our previous entry on the hidden cost of keeping around legacy systems. Now, we’d like to focus on the obvious advantages of committing to digitalization.

Stating that digitalization has become an increasingly important subject in, well, everything, is 1) a bit of an understatement and 2) quite belated. However, the commodity business as a whole has not necessarily been at the forefront of digital innovation. Even when digitalization has snuck into every sector, most notably finance, the commodities market may have been somewhat lagging. While financial markets indeed stepped up their automation in a big way, development and innovation of the necessary tooling has been low in the commodity industry. Yet, a lot has changed over these past few years, expedited by global events. If the year 2020, now well into its 33th month, has pointed out anything in the world of commodity trade, it is the inefficiencies around trading and supply chain management, and the fact the most digitized operations have been the best off.

Digitalization

Digitalization: the use of digital technologies to adapt business models and move towards a (more) digital business. Not to be confused with digitization, which is the process of changing from analog to digital form and strictly relates to converting data.

However, confusion aside, you need the one for the other. To fully leverage new technologies, businesses must first digitize their data and workflows, as the primary benefit of digitalization in commodities is the ability to extract insights through data analysis, obtain real-time business information, and reduce costs – all of which are critical considerations in a market with extremely thin margins.

“Agiblocks has been battling inefficiency and time-consuming labor during and outside office hours for well over a decade now”, says Jan van den Brom, Agiboo Managing Director. “That’s why our web-based, easily embedded technology shares the same advantages any in-the-cloud solution offers: you get to quickly keep up with developments and, more importantly, you can work from anywhere; at the office or on the road, at home, on any device that has a browser. We would love to share that story of digitalization.”

Agiblocks: part of the AgTech Ecosystem

Agricultural technology, often abbreviated as AgTech, is a collective term for the use of (and developments in) technology in agriculture, horticulture, and aquaculture with the aim of improving yield, efficiency, and profitability. Advances in everything from agricultural science and engineering to agronomy and have led to applied developments, and that goes for software solutions as well. We are proud to mention Agiblocks is part of the AgTech Ecosystem as it was specifically developed for agricultural commodities.

Agiblocks is not just the next generation of CTRM systems, but a solution that truly meets all technical as well as business needs for anyone working in the trade business. We take pride in the fact that our software solution is a true multi-commodity system right out of the box, not limited to a particular commodity and built on modern technology. Our CTRM offers unique features to cater to all their complexities – from origins, grades and unique conversions to certifications and exchanges – that are either not supported in a generic CTRM software solution, or would require time-consuming work-arounds. You can read more about the AgTech Ecosystem and the digital transformation of agribusinesses here.

agtech-ecosystem

The power of technology

We are all convinced that technology will change a lot of things and eventually fully transform the sector of commodities trading. Even the ones who still keep the traditional mindset of keeping most records in paper and spend hours and days in organizing their book cases, oh yes, even the ones who right now are checking the newest contracts in their Excel sheet. However, there is a long way to feel secured and let technology overcome our businesses in that extend. We can, though, make baby steps in accepting the reality.

Take blockchain for example. Implementing commodity trading and risk management software, powerful enough, which can be our “friend” in a daily routine of a trader, is probably one of the first steps. Only once you have digitized the transaction and trade management process you can make a step towards blockchain. In a nutshell, blockchain is the future for transaction validation and now is starting becoming the present in a variety of transnational environments. This technological concept is triggering the foundation of a new era in commodity trade and an inspiration for the CTRM software solutions providers.

We could all agree that evolution of things is humanity’s moving force, Information Technology being the evidence of this philosophy. From that perspective of information technology and the commodity trade industries are bound to become close friends on the longer term. And the best way to anticipate that friendship is to invest in and keep your technology platform updated.

We understand that technology has become a huge part of the selection criteria again, rapidly become a high-priority item. Digitalization is a huge part of that. Buyers know exactly what technologies they want. That is why Agiblocks offers;

  • Multiple entities & intercompany trade, multiple trade books
  • Physical contract management for bulk, break bulk, containers, parcels
  • Flexible position management (origins, specifications, premiums, certifications)
  • Mark to Market valuation by position/parities/premiums and cost
  • Hedging & derivative management (futures, options, OTC, forex)
  • Cross markets (futures/forex) and/or ratio pricing, hedging, hedge allocation
  • Logistic management (documentation & freight), physical inventories, sampling
  • Financing & collaterals, invoicing, cost accruals, profit & loss: unrealized / realized
  • Flexible reporting, document management, quality and trading dashboards
  • General Accounting API, IFRS 15 & IFRS 9 compliant

Digitalization is of significant importance in decision-making

So yes, digitalization has already led to huge changed in commodity trading. Computer analysis can easily process huge sets of data, vastly improving everything from ease of contract creation, easy access to your data – anytime, anywhere – and improved risk management tooling to smart mark to market, to name but a few.

Using a smart CTRM solution and combining it with, for instance, the future-proof solution of our friends at Tradesparent, is the safest bet to get the most out of your data. A wholly holistic approach such as the Tradesparent data hub easily and quickly unifies, collects and harmonizes any type of business data from CTRM, ERP, finance systems or Excel spreadsheets and broker statements across all business levels (mid, front and back office) into one single source of truth data repository for faster and enhanced reporting and analysis. That CTRM doesn’t even have to be Agiblocks – although we’d much prefer it.

The hub can export the data to any system but mainly offers a full suite of business solutions for users. Based on industry knowledge and experience, it helps companies comply with regulations, provides thorough volume and risk performance reporting and enhances forward margin and yield forecasts. 

It offers a tangible tool to steer your digital transformation forward, by communicating key metrics in a consistently, accurate, timely and transparent fashion. The net result is significant lower investment and, often more importantly, much less interference of the ongoing business. | You can read more about our partnership with Tradesparent here

Digitalization and easy access to all your data

Digitalization has given consumers in general thirst for ‘I want it now’ and the technology to make that happen to boot. Working in a next-gen CTRM solution facilitates the alignment of your analytics requirements with your operational systems. Now, we’ve moved into real-time data and reporting.

There is a trend towards actively reporting risk positions and metrics throughout the trading day, or at the least, with an update at the end of the trading day. With Agiblocks, you are ‘real-time ready’ to handle those needs. By loading all relevant company data on a daily basis, the dashboard becomes a rich and informative data hub in and of itself. Based on end-of-day snapshots & real-time data flows an accessible and clean repository is created with historic information available at your fingertips for analytical as well as decision making purposes. You can retrieve data from all aspects of your organization, add price data, map it and create dynamic interactive risk related information to support proper analysis and severely reduces the time to create relevant reports.

“My hopes for the near future? There will be an interesting decrease in overall cost, no doubt. Just looking at the amount of time wasted on adjusting and readjusting odds and ends in our current system leaves me cautiously optimistic for good synergies. I expect scalability has more benefits to offer, as being able to familiarize future traders with a far more practical software solution will go a long way in recouping our investment as well.”

While a lot of companies talk about the cloud, usually that just implies their systems are in the cloud and not on on-location servers. With Agiblocks, you can actually work from the cloud. You get to quickly keep up with developments and, more importantly, you can work from anywhere; at the office or on the road, at home, on any device that has a browser. It’s extremely user-friendly.

Also: it’s a gateway to better risk management.

Observe, react, adapt – digitalization and risk management

Agiblocks offers advanced risk management tools way beyond the scope of any ETRM or CTRM software out there. Through exposure modeling capabilities with sophisticated risk metrics, we can enable prediction of performance volatility under the most complex market conditions – with real-time VaR, stress testing to limit structure and option analytics.

Mastering your data management is the true road to reporting company prowess and progress – in a meaningful way, thereby optimizing processing, enhancing efficiency and controlling risk. With commodity trading companies, in general top management has a good understanding of risk and there are solid policies in place. The main question is whether the individual traders are fully aware of all risks involved and if the exposures are in line with the overall risk appetite of the company. As we all know, very often this is not the case. Our basic functionality is to provide the required transparency and deep insights. What is our risk tolerance? Have we properly evaluated it? Is it – securely and flexibly – adjusted on the basis of all the relevant, real-time data within our software?

Pro-active management ensures you aren’t taking actions after the fact and should be at the center of your data-driven decision-making. When you understand your position, you can adjust the numbers based on real-time input and reset your course.

You’ll never be surprised by price volatility again.

In order to take their commodity trading and risk management to the next level, Germany’s Albrecht & Dill have turned to Agiblocks as an answer for their CTRM software needs. We sat down with Carlos Schröder-Castendyck, one of A&D’s partners and the designated expert to lead the transition of an Agiblocks CTRM implementation over these past few years. “An expert? You give me too much credit! I like to work with intuitive smart systems, whether at work or at home.”

Full control

Agiblocks provides detailed insight in your commodity trade chain and offers full control of every aspect of your business operation. Within a single, consistent environment offering customizable configuration, our software enables you to drill down in your trade book, your logistics chain or financial documentation and allows you to act quickly and easily if need be. It also keeps a full audit trail of transactions. 

There has been a trend towards greater flexibility in CTRM software solutions for a while now. Not too long ago, only the big firms could have it all in terms of scalability and flexibility of software solutions, as they had the time and resources to build their own platforms. Thanks to the modern approach of CTRMs as an ecosystem as well as the availability of cloud service, those previous luxuries are now commonplace. 

Agiboo has decided years ago to migrate CTRM architecture to easily accessible cloud services, while platforms on client/server or Java.net need to seriously rewrite their software to keep up with the times. The system architecture has been developed in a specific and flexible technology stack to allow superior performance in both a hosted environment and a traditional on-premises arrangement. You are in control.

agiblocks-product-sheet

Agiblocks CTRM

Agiblocks is not just the next generation of CTRM systems, but a solution that truly meets all technical as well as business needs for anyone working in soft or agricultural commodities. That’s why anyone looking for CTRM software for the commodity trade – whether you are a trader, buyer or seller dealing with single or multiple soft and/or agricultural commodities – should look no further. Download our latest whitepaper here.

News stories and events
News, stories and events

We want to share our knowledge with the CTRM Community and Agiblocks users. Agiblocks is continually being developed further and expanding its functionality.

The (hidden) cost of legacy software solutions

Read more

Carfax Commodities implements Agiblocks – Case Study

Read more

Agiboo is so busy it has a waiting list

Read more
¨
Commodity trade and risk management
with just a single click