The striking lesson of ComRisk 2019, held in London this May, is that operational risk is now one of the key topics in the risk management conversation and can no longer be ignored. Comparing this year’s event to even recent ComRisk Forums highlights how quickly operational risk is rising in importance, and we expect it to form a crucial part of the risk management agenda moving forward.

Across every commodity, operational risk both within the business and across the supply chain was discussed in a number of presentations, including technology’s central role in overcoming these challenges to drive profitability, and tips on how to ensure stakeholders adopt new risk-limiting behaviours.

So what are the main operational risk challenges, and how can technology help you address them?

“Poor data introduces operational risk”

The panel session Achieving more efficient trade surveillance and trade control commented that poor data introduces operational risk, and this sentiment was repeated across the 2 days in reference to supply chain management, compliance risks and corporate social responsibility.

Implementing technology with powerful logistics capabilities can solve many of the challenges associated with collecting data, from using accurate sources to maintaining one version of the truth and removing delays. The advantage of using commodity management apps such as Gen10’s is that they are designed to remove the need for offline work, so you no longer need to collect data; your team create the data as they work through their day job.

And as the technology also ensures trades progress faster across both front- and back-office teams with fewer errors, more stakeholders have a vested interest in the technology than in a purely compliance-driven solution.

Counterparty risk now encompasses the entire value chain

Counterparty risk management is no longer just a case of carrying out due diligence checks when onboarding a new counterparty. There were several cautionary tales throughout the event reminding traders to not only assess their counterparty, but also to ensure that partner is not themselves engaging in trade with risky counterparties. As traceability and sustainability remain important concerns to businesses and customers, the reputational damage alone from failing to take adequate steps to mitigate this risk can be significant.

Technology to improve due diligence and KYC already exists, and the best solutions, such as Gen10’s Aud.IT app, interface with your CTRM and ERP technology for full reporting, visibility and a reduced risk of errors. Gen10 technology allows you to complete compliance surveys against your own KPIs, manage credit limits in real-time (without waiting for end of day reports), and set notifications for upcoming certificate expiration dates or ongoing KYC activity.

And as for complete downstream traceability, this is an area where we expect to see future growth as businesses increasingly bring their other counterparty risks under control. Commodity management technology in this area is more advanced than many people realise, and is ready to be deployed as business appetites grows. Gen10’s collaborative commodity management technology allows businesses to share more data than ever before, for complete supply chain traceability and added customer service without adding complexity to the process.

IMO2020 is changing the face of the supply chain

The upcoming IMO2020 legislation will introduce volatility and counterparty risk to the global shipping industry, with predictions of less available credit, a less commoditized market and more upstream players moving into the marine fuels market. This increased disruption comes at a time when traders already need to be more aware of the risks posed by shipping partners.

Again, technology can be used to not only manage risk but to also facilitate faster contract progression and reduce the manual workload of each trade. Gen10 technology allows you to integrate with compliance data including the OFAC Sanctions List and build due diligence into workflows. Our systems allow you to check every vessel against the real-time Sanctions List as you book freight and either prevent processing or notify your Compliance team.

Traders have lost their logistics edge

As with any discussion of digitalisation, many presentations discussed how technology is impacting the people within the industry, including how the ready availability of information has eroded much of the value traders create.

However, technology can also help solve this problem. With prices and market data instantly available to everyone, logistics, speed of origination and destination arbitrage are some of the key areas where traders need to capitalise on the opportunities presented by technology to make incremental gains and add value.

Gen10 apps accelerate each trade by helping you improve data flows, processes and logistics. Which means that you can improve asset turnover, gain real-time position visibility to add optionality and value at every stage and create real-time reports to manage risk and improve operational efficiency.

Operational risk is a growing concern in the commodities landscape, but the technology does exist to help create opportunity from this challenge. At Gen10, our focus has always been on developing commodity management technology with powerful collaborative tools, logistics functionality and automated workflows so that you have both control over operational risk and the flexibility to create business processes that add real value to your business.

 

Watch Gen10’s highlights of the event and explore the ComRisk presentation between Gen10 and Concord Resources in our ComRisk 2019 highlights.

Managing documents in commodity trading

Interoperability: have we finally learned from the past?

Carbon markets and technologies driving the journey to net zero