As we have explored in the past, traceability is a critical consideration in commodity trading, and is increasingly expected by a wide range of stakeholders. On top of commodity traceability, which verifies the origin and production method of commodities, there are also growing expectations of greater business transparency. These can come from stricter legislation, but also from your value chain, such as trade finance providers tightening their lending criteria.
If your organisation is looking to improve commodity traceability, this will likely involve sharing more data with supply chain partners. For example, if you want to realise a price premium for certified agricultural goods, you will need to provide the certification, and possibly details of your verification processes. Equally, if your organisation is looking to build a reputation as an ethical supplier, these claims need to be supported by evidence of your traceability and auditing processes or they risk greenwashing.
This means that many traditional CTRM systems are falling behind their clients’ needs. Many of these systems have a reputation for pulling data into an information black hole, where it exists within the system but is difficult or impossible to get out again. But modern Commodity Management and CTRM systems allow for much greater collaboration and have multiple ways for organisations to share data across their value chain.
Many commodities organisations have also been working to improve internal data transparency. This has many benefits, including allowing for better risk management, empowering logistics teams, and allowing traders and managers to make faster, better-informed decisions.
Both internally and externally, traceability and transparency improve efficiency and reduce risk. But this sharing of data can also introduce risks to your business, particularly operational risks. These risks can occur in many ways, from sharing the wrong information, to errors copying data across systems and documents.
Internal transparency and operational risk
The main issue in internal data sharing is often around transparency – we are often asked how we can help organisations share more data between teams, but sharing too much is rarely a concern.
Gen10’s CommOS commodity management platform is designed to help your teams share data more efficiently and in real-time with any internal teams who need it. This can include real-time information on the actions that traders and operators are taking throughout the day. This enables each team to make the best decisions based on the live situation, and without needing to interrupt their own or others’ work for clarification.
Data is instantly shared with risk managers, and risk metrics are shared with trading desks in real-time. So, for example, a trader can view a counterparty’s credit line and be assured that their deal is compliant and authorised from the get-go.
And with CommOS you can share information across systems as easily as you can within the CTRM. With a range of integrations and APIs, you can connect to ERP and accounting systems, pricing feeds, vessel tracking, inspection companies and more, to bring in and share data within your business. This means that credit lines can be updated through the day as invoices are paid. And quality information can be updated after inspections, with none of the risks of manually copying information between systems.
And as well as sharing data within systems and providing custom reports, the automated workflows that power CommOS ensure that the right people always have sight of key documents. For example, you can set up your own approval workflows that progress contracts to the appropriate person or team for approval at any stage.
Reducing supply chain traceability risks
With external data demands increasing, the risk of oversharing or sharing the wrong data can increase if you are not careful. The first step to improving external data flows is getting the right level of internal data sharing, so that you can be sure anything shared externally is correct and approved for distribution.
For trading firms used to information providing a competitive edge, sharing more data can represent a big mindset shift, so it is important to have processes and controls in place to ensure that the correct data is shared with the right people.
And as mentioned above, the other major barrier to sharing information can be your CTRM system. Ironically, these systems that were brought in to reduce risk for commodity trading companies introduce operational risks by forcing users into time-consuming manual workarounds to share data. Using a CTRM that readily allows you to distribute select data externally means that the data-sharing processes and controls are a core part of your operating systems.
Most of the near-term data-sharing challenges will likely be similar to the information you already share, such as adding quality fields to contracts or attaching more certification documents. This is very easy to add to a customisable CTRM such as CommOS, where you can make most of the system changes yourself without involving our team.
CommOS includes a CRM that allows you to complete initial and ongoing KYC due diligence so that information is only sent to verified counterparties, with optional alerts if agreements are due to expire. And documents are all created within CommOS, using your own templates or past contracts. The automation workflows then pull in the correct data for the document you are creating, so that you know the document is always correct and relevant.
Workflows provide a further level of protection in that if you are sharing documents, you can create workflows that automatically email PDFs created in CommOS directly to the counterparty, again eliminating the all-too-human error of sending an email to the wrong person. And you can also use the approval workflows to add oversight at any stage if required.
Long-term commodity traceability trends
Future data demands are harder to predict, so this is where system flexibility is critical – enabling you to change your processes as required to respond to market demands. Our clients are increasingly using secure APIs to connect data into their commodity management ecosystem, and it may become more common to use similar APIs to share data externally.
As mentioned above, the advantage of these connections is that they enable you to provide ongoing updates between systems without manual copying. This reduces the risk of copying errors but also means that data-sharing processes are controlled within your CTRM and fully auditable.
It is important to ensure that these APIs are secure and set up to only share the correct fields, so working with an experienced team like Gen10 can be an advantage in preparing for longer-term transparency projects.
Traceability and transparency are of growing importance in commodities, and your counterparties are likely to expect more data from you in future. Sharing this data can present a significant administrative burden and introduces operational risks in ensuring your data is accurate and only sharing the necessary information.
But with the right technology, you can share all your data live without creating any additional admin, and can empower your people to share information with external partners just as easily.
Creating transparency that provides better access to trade finance, better relationships with counterparties and more quality data can have a real impact on your profitability. And with the right technology, these goals can be achieved, all whilst providing better protection from operational risks and accelerating your operations.
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