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Risk Monitoring & Management Trends in Commodities
Where are the different risks managed? According
to the respondents, most risks are managed at both
the enterprise and departmental levels as might be
expected. However, whereas legal, regulatory and
treasury risks have a strong enterprise management
aspect, operational risks like scheduling are more
often managed at the department level. However, the
data does suggest that there are broad differences in
approach across the industry as there seems to be
little agreement between the respondents on which
risks should be managed at what level (Figure 5).
Figure 5: At What Organizational Level are Risks Best Managed
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Legal Risk
Regulatory
Risk
Treasury
Risk
Enterprise
IT risk
Operational Market risk Credit Risk Operational Operational
monitoring
risk - other
risk -
risk -
scheduling
employee & analytics
activities
Department
Both
Don't Know
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developed solutions were also sometimes deployed
in areas like regulatory risk, IT risk and legal risk.
Given the depth of concern over effective risk
management, there isn’t significant agreement
among the respondents on how to manage risks
systematically. However, the continuing use of
spreadsheets in particular as a risk tool causes
concern for a number of reasons. Aside from well-
publicized issues related to errors and omissions,
spreadsheets are not easily scalable and the data
and information on which risk decisions are made
can become cloistered within an organization.
This reliance on tribal knowledge introduces any
number of additional potential risk variables, and
as such, spreadsheets should not be considered a
replacement for enterprise grade, commercial-off-
the-shelf commodity trading and risk management
solutions.
Figure 6: How are Risks Managed?
100%
Finally, we asked the respondents how risks were
measured, monitored, and managed. The CTRM
solution was most often used to perform these
activities only for market risk, scheduling and credit
risk (Figure 6). Specific risk tools or software were
also often used in market risk, credit risk, treasury
risk, IT risk and regulatory risk.
Spreadsheets continue to be popular risk
management tool for market risk and treasury risk
specifically, while business processes and controls
were mechanisms often used for operational risk
management, legal risk and regulatory risk. Internally
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Market Risk Operational Credit Risk
Monitoring
Risk -
& Analytics Scheduling
Treasury Operational Operational
Risk
Risk - Other
Risk -
Employee
Activities
E/CTRM Solution ERP Solution Internal Solution
Spreadsheets Business Processes Don't Know
IT Risk
Legal Risk
Regulatory
Risk
Specific Risk Package
The low number of respondents noting that their
E/CTRM systems are utilized to address many of
the common risks faced by market participants
is somewhat surprising in light of the broad and
sophisticated capabilities offered by the larger
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