The holistic commodity
management approach
25-3-2014
Agenda
Introduction
Trends
The PwC holistic commodity management approach
Different types of trading require different system Functionality
CTRM Systems
Roadmap Dycotrade
PwC
PwC
2/1/2013
7/1/2012
12/1/2011
5/1/2011
10/1/2010
3/1/2010
8/1/2009
1/1/2009
6/1/2008
11/1/2007
4/1/2007
9/1/2006
2/1/2006
7/1/2005
12/1/2004
5/1/2004
10/1/2003
3/1/2003
8/1/2002
1/1/2002
Historic Volatility
High volatility in commodity prices
Historic Volatility 2002-2013
50
45
40
35
30
25
3 Month Euribor
20
CRB Commodity Index
15
Rogers Int. Commodity Index
10
5
0
Slide 3
Trends
• From decentralised to centralised commodity management
• More liquidity in markets/ more products and banks offer more and
smaller products
• Awareness and increased opportunities for portfolio optimisation
(Arbitrage)
• Interest in Commodity Risk Management Systems
• More Regulations (MiFID II, MAD, EMIR, Dodd Frank act)
• New Accounting Regulations (IFRS 9, IFRS 13)
• Need for improved liquidity forecasting and cash management
• Need for a system that supports valuations including basis risk and
CVA/DVA
PwC
Slide 4
Holistic Commodity Management Approach
The Commodity Management value chain
Accounting
&
Internal
control
Influencing
business
strategy
What
Value
throughout
the business
Integrated
Commodity
Management
How
PwC
Tax & Legal
Treasury
Commodity
Management
Minimizing
cost
Risk
Management
&
Compliance
Efficient and
effective
processes
Regularly
compliance &
control
Safeguarding
assets
Maximizing
shareholder
value
Logistics
IT
Complying
with
regulation
Time
Slide 5
An end to end view on Commodity Management
deal life cycle
Commodity Management Strategy
Deal
Negotiations
Deal
Capture
Deal
Management
Deal
Execution
Settlement
Planning & Portfolio Management
Risk Management & Reporting
Accounting & Reporting
Systems
PwC
Slide 6
Deal
Capture
Deal Negotiations
• Deal Analysis
• Deal Entry
• Logistics and
Nominations
• Deal Management
• Inventory
Management
Deal
Management
• Deal Entry
Validation
• Transaction
Reconciliation
• Confirmation
• Contract
Management
• Limit Monitoring
• MTM & Valuation
• P&L Calculation
• Risk Measurement
Deal
Execution
•
•
•
•
•
Actualization
Settlement
Journal Entries
IAS 39/ IFRS 7
Disclosures
• Performance
Measurement
Settlement
•
•
•
•
•
•
Actualization
Settlement
AP/AR
Journal Entries
IAS 39/ IFRS 7
Disclosures
• Credit Risk
Management
Infrastructure
Technology
Organization
• Business Objectives and Risk
Appetite
• Front, Middle and Back Office
Functions
PwC
Measurement & Analysis
•
•
•
•
Risk Limits
Portfolio/book management
Pricing Models & Analytics
Metrics/KPI
Reporting
•
•
•
•
Future State Environment
People
Process
Our Holistic approach
Risk Reporting
Performance Reporting
Compliance & Regulatory Reporting
Financial Reporting
Slide 7
We distinguished three different types of Trading for
benchmarking
1. Supply chain
Trading
2. Asset backed
Trading
Freight/physical trading
Sales/procurement
driven
PwC
Paper trading
Risk profile
Low
Less
3. Proprietary
Trading
Arbitrage
Controls / open positions /MtoM accounting
High
Directional
More
Slide 8
CTRM systems
Commodity Trading & Risk Management requires specific
functionality
• The ETRM market is dominated by
niche vendors
• Average ETRM supplier revenue is
in the range of $20 – $24 million
per vendor
• Many consolidations in the last
years
• There is not a wide variation in the
platforms offered by vendors
Gartner Magic Quadrant
PwC
Selection criteria and weighting factors
Overall we differentiate between the following areas, the final criteria will be determined
in close cooperation with Customer:
1)
Overall system vendor information (credentials)
2) Cost estimations (license / maintenance fees)
3) Deal Negotiations
4) Deal Capture
5)
Deal Management
6) Deal execution
7)
Settlement
8) Portfolio Management
9) Freight Logistics
10) Risk Management, Treasury & Reporting
11) Governance & Controls
12) Systems & Interfaces
PwC
Roadmap Dycotrade
Some of the elements
currently in place
Some of the work in progress
elements
• segregation of Duties
• More advanced pre-deal
• Deal capture, pre deal analytics,
analytics
real time reporting
• Regulatory reporting under
• Portfolio management, Wash
outs, circles and strings.
• Hedge accounting solution
• Interfaces with back-office and
logistics
(these are the elements where PwC
is involved)
• FX Management
PwC
EMIR/MIFID II