With all the paperwork involved in sourcing, storing, and shipping commodities around the globe, commodity management often involves a high degree of document management. But this staple of real-world commodity operations introduces many points of weakness for operational risk management.
One of the major benefits of commodity management technology is that it can reduce the need for paper documents by digitalising information and communicating this data more effectively across systems and counterparties. And where documents are needed, the commodity management system can still reduce the operational risk.
Reducing the risk
Digitalising information in a commodity management system reduces operational risk by ensuring it does not need to be manually copied or re-typed in other systems and provides a single source of information for the entire organisation. This reduces the risk of lost documents, multiple working copies and people inadvertently using out of date information. And a good commodity management system reduces operational risk by systematising operations. Every team member manages every aspect of their role within the one system, so every contract and shipment follow the same process with the same risk controls.
However, legal requirements, financial institutions and international regulations for transporting cargo all mean that documents will remain a key part of commodity trading for a long time to come. Commodity management systems therefore need to include the ability to create documents from system data and to ensure these documents are progressed through the right channels quickly and efficiently.
Document management within CommOS
CommOS is Gen10’s powerful commodity management system. The cloud platform has many features that make it ideal for bringing together the different teams and workflows within the commodity management process, but today, here are some examples of its comprehensive document management functionality.
On top of shipment-specific documents such as a certificate of origin, there can be a wide range of counterparty documents that need to be included as part of due diligence checks. And with the rising importance of ESG and a focus on sustainability in supply chains, we will likely see an increase in the number of documents needed to onboard new counterparties, and to renew regularly for existing counterparties.
CommOS allows you to upload any documents to the counterparty CRM module so that they are ready for use alongside contracts, and allows you to specify which documents are mandatory when creating the contract. The automated workflows ensure that contracts cannot progress past an agreed point without these documents, and send each contract to the appropriate approver in line with how you design your process. You can also use the tasks calendar to create reminders of future document expiry dates so that your business is not slowed down waiting for renewals of expired documents.
The contract is itself one of the most important documents to manage. CommOS is designed to make this faster whilst also reducing operational risk. Contracts are created automatically within CommOS, based on the information traders enter and a contract template to ensure all your key clauses are included. All pricing is calculated automatically, including adding multiple premiums and discounts, quality or location variables and interest.
You can also specify any mandatory documents at this stage, and the automated controls will ensure they are included in the associated shipment schedule.
Once the contract terms are finalised, the document is automatically progressed – to an approval stage, or one click can generate a pdf and email it to the appropriate counterparty. The digital document management includes electronic signatures too. And CommOS includes an audit trail of all documents and emails, as well as all activities that take place within the system.
As with counterparties, any documents tied to the contract, such as the letter of credit, can be uploaded centrally and linked to the contract, with all contract documents ready to view at the click of a button.
Logistics is one of the areas where CommOS proves itself much more functionally rich than a traditional CTRM system. CommOS allows operators to manage their role within the system as well as traders and risk managers, so they have access to the same powerful automation, document creation and document management tools.
Shipping instructions and bills of lading are automatically populated based on the information already within the system, so that there is less risk of copying errors. And external documents are easier to import into CommOS. Documents such as weight certificates or inspection results can be uploaded and attached, or this data can often be shared digitally and imported directly from external systems rather than being shared only as paper or pdf documents.
Sharing data digitally still provides data security and an immutable audit trail but means that, where relevant, the data can be used elsewhere, such as to update your records for a bale of cotton after an inspection. And to carry on this example, CommOS also shows the inspections and results for every bale with the click of a button.
And as mentioned above, operational risk controls also extend to ensuring every mandatory document is included. Documents specified as mandatory for a particular contract are automatically pulled through to every associated shipment, making it much faster and easier to ensure all documents are in order.
As with other system-generated documents, CommOS allows you to create invoices based on information already entered into the system. Invoices are generated from the contract information and any details from the virtual lot or logistics that affect pricing are calculated automatically, within your standard format and terms. And the automated workflows allow you to email these documents to the correct counterparty with a click.
Many organisations manage payments through an accounting or ERP system. In these cases, with CommOS there is no need to for individuals to update the commodity management system once payment has been made, as CommOS can integrate directly with your other systems and update based on information in these other systems, with no need to create manual data-sharing processes or documentation.
Both creating and managing documents from external sources introduce a range of operational risks into commodity businesses. But the right commodity management software empowers your team to manage these documents more quickly and efficiently than ever before, and reduce the operational risks associated with them.
Find out more about CommOS commodity management.
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