White Papers Value Study: Investing in ETRM / CTRM in Turbulent | Page 2

Introduction
The only constant is change echoes an astute observation by the Greek philosopher, Heraclitus, some
2,500 years ago. Those of us who are engaged in the world of commodities are continually reminded of the accuracy of his observation, particularly recently, as commodity prices collapsed led by crude oil. In fact, our industry
is continually impacted by changes in the regulatory environment, supply/demand balance, global economic environment, technology developments, political intervention and more.
Recently, BP noted in its annual Energy Outlook1, “Today’s turbulence is a return to business-as-usual. Continuous change is the norm in our industry. The energy mix changes. The balance of demand shifts. New
sources of energy emerge, such as shale gas, tight oil,
ultra-deepwater oil or renewables. Economies expand
and contract. Energy production and consumption are
affected by disruptions, from wars to extreme weather. 
New policies are created to address climate change or
bolster energy security. “

Change is the very lifeblood of the commodity
trading world, creating opportunities for profit for those

who are swift and responsive enough to act. Good traders make money
in up or downwards moving markets, provided they are armed with up-tothe-minute data and the analytical tools needed to identify, analyze and
manage their trading decisions. However, depending on market direction,
other market participants might be caught in a more problematic situation
and experience cash flow and/or profitability issues should price movements undermine their naturally long (producers) or short (consumers)
positions. Nonetheless, if the company has the right tools at its disposal
to track up-to-the-minute changes, and properly and effectively manage its
exposure to those changes, then value can be protected and in some situations, profits might be made.

THE ENERGY/COMMODITY TRADING & RISK
MANAGEMENT (E/CTRM) SYSTEM IS MISSION
CRITICAL SOFTWARE IN ANY BUSINESS ENVIRONMENT
As of today, commodity prices have dropped dramatically while the costs of doing business have increased
in many areas, such as regulatory compliance. In this
environment, it is more difficult to make money and
companies are increasingly focused on cost containment. As the market enters into the other side of the
so-called ‘commodity super cycle’, most forecasts indicate several years of over-supply and lower commodity
prices; a situation exacerbated by a stronger US Dollar. Despite this, companies that produce, consume, or
trade commodities still need to manage transactions,
risks, cash flows and all of the other complexities that
are part and parcel of the commodities world.

At any time, but particularly under the current
market circumstances, having the right personnel, pro-

cesses and systems is key to success. An ETRM or CTRM system isn’t a
luxury; it is an essential business tool - a “must have” piece of software to
help effectively manage the complexities of a rapidly changing business. A
capable E/CTRM solution will deliver the requisite analytics and analysis
to ensure that the right decisions are made on time to minimize costs or
increase profits. While total cost of ownership and the value of accrued
business benefits from an E/CTRM software solution are often difficult
to measure, the fact is that these systems are truly mission critical to any
business in the commodity trading and management industries.

Under today’s market conditions, some may be tempted to cut costs
or defer expenditures by delaying new procurement projects or even upgrades to existing E/CTRM software. However, in tougher market conditions, the ability to properly manage transactions, exposures, risks, and
regulations accurately and in a timely manner becomes even more imperative.

1 | BP Energy Outlook 2035, February 2015
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.