When word processing and spreadsheet software had just hit the market in the early days, they were sold as separate software packages. The case of vendor software for commodities trading was pretty similar to this. There were separate software packages for risk management and commodity trading. It was around the 1990s that we saw the birth of CTRM software.
A CTRM or Commodity Trading and Risk Management software is a highly specialized buying and selling and risk management software developed for commodity trading firms.
Now, one might ask, what exactly is commodity trading? Commodity trading refers to the purchase and sale of commodities, their movement and distribution, and associated risk management activities.
CTRM software was created with the nuances of commodity trading and risk management in mind. CTRM software can help you handle the entire resource management value chain instantaneously, including analyzing and reporting results, and ensure your company operates with a single, accurate view of its operations.
CTRM software is used by commodity traders, processors, and buyers to handle:
- Multiple physical trades
- Accounting
- Derivative trades
- Position
- Mark to market
- Origination
- Logistics
- Risk assessment
- Sourcing
- Planning
- Scheduling
CTRM software can be applied to all asset classes, including:
- Agricultural production (coffee, cocoa, grains, oilseeds, sugar, rubber, palm, and so on)
- Energy (crude oil and refined products, natural gas, natural gases, liquefied natural gas, power, coal, renewables, and so on), and
- Metal alloys (base metals, refined, steel, scraps, and concentrates).
CTRM solutions vary on the basis of the commodity markets, the assets used in the business, the location of those assets, and the company’s business strategy and associated business operations.
CTRM vs. ERP vs. Spreadsheets
ERP software is designed to support standardization, manufacturing, and service environments and incorporate these environments with financial accounting from a transactional standpoint. Its architecture and design are intended to remove variance in processes to ensure their effectiveness.
Earlier, many businesses used to rely on spreadsheets for commodity management. Even though spreadsheets are simple to use and inexpensive, they don’t capture all of the specifics of a transaction. Spreadsheets also create information silos. Multiple versions of a spreadsheet are frequently available, with various teams manually updating and sharing new versions of the excel spreadsheet. As a result, various parts of the business are spending a lot of time and effort to operate and try to report on incomplete or inaccurate data sets.
CTRM, on the other hand, is designed to handle the dynamics of commodity pricing via flexible pricing options to keep a tab on changing trade volumes, delivery dates, quality, etc. Also, commodity trading contracts are more complex than fixed value contracts. ERP systems cannot manage these fluctuations and are limited in scope for futures contracts or taking long or short positions.
You need more than spreadsheets to cope in the ever-changing commodity markets. Spreadsheets are manual and mere databases, whereas CTRM is a live system with added functionalities that gives traders real-time consolidated exposure and coverage report.
Capabilities of CTRM
CTRM systems primarily replace the spreadsheets and legacy spreadsheet platforms that previously served the company’s operations before automation and digitization had altered the business landscape.
CTRM makes it possible to manage business operations efficiently and profitably. It forms the backbone of modern commodity trading firms and has been most commonly found in commodity processors and trading firms.
Commodities trading is more volatile than coastal weather, which means trading partners can change as quickly as political situations, while operational costs fluctuate and commodity prices plummet even as profits vanish. CTRM is designed to deal with variation because commodities are traded in various markets and currencies, and their monetary and trading values vary depending on the environment.
CTRM is cloud-native and allows quick trade execution without sacrificing the functionality you require for effectiveness and business improvements. The software can be deployed in half the time of conventional on-premise systems. You also get the required customization without buying new hardware or spending a lot of time working with internal IT teams.
CTRM software allows for a user interface that is intuitive and thus simple to use. Users can quickly learn how to use the system and make the most of its features. This rapid implementation allows for faster and more informed trading decisions.
Why Should Commodity Trading Firms Opt for a CTRM Software?
Commodity trading comes with its own set of challenges – one of them being managing wildly fluctuating pricing dynamics. Most commodity traders would be terrified of the commodity markets, but fortunately, CTRM provides several advantages to help them avoid and manage such circumstances:
- Easier cash flow management: By examining credit records and behavior patterns to use available payment information, One can ascertain estimated payment dates. To evaluate various options, you can forecast projected cash flow based on payment terms and run methods based on shipment start, middle, and end dates.
- Risk management that fits: One can stay on top of risk drivers by analyzing real-time data as quickly as possible. And when risk limits are exceeded, one can set up alerts to act immediately.
- Boost productivity: You can reduce wait times and bottlenecks by matching available time slots for expected deliveries to vehicle availability.
- Creating email alerts: CTRM provides the trading firms with many added functionalities, including email alerts when market changes occur to gain real-time marketing intelligence.
- Conforming to compliance: Automated processes make it simple to adhere to trade repository regulations. You can take immediate action based on consumer alerts across geographies and asset classes.
Modern CTRM solutions like those provided by Robosoft Solutions help you get real-time views of the market conditions to better visibility and control over your trading business. At Robosoft, we cover a wide range of industries and verticals. We are a GOLD partner of Microsoft, aiming to bring technological innovations and comprehensive business acumen across verticals and processes that help clients achieve rapid productivity business advantage.