CTRM Software

If your trading firm is still dependent on manually entering data in spreadsheets or using ERP solutions to manage fluctuating trade margins, you’re falling behind thousands of traders who now use modern, dedicated systems to manage their deals.

Spreadsheets create silos of information with multiple file iterations and they need manual analyses to derive insights. Similarly, ERPs require a lot of customization, are difficult to upgrade, and definitely expensive to maintain.

In this buyers guide, we’ll talk about software tools that are specifically designed to handle commodity trading operations. Known as commodity trading and risk management (CTRM) software, the system helps track real-time trading data and address probable risks associated with commodity price, quality, volume, and logistics.

We’ll cover:

• What is CTRM software?
• Common features of CTRM software
• What type of buyer are you?
• Benefits of CTRM software
• Key considerations

What is CTRM software?

CTRM software helps manage activities related to commodity transactions such as buying and selling consumer goods, power, oil, gas, grains, and metals. It helps businesses with better trade, risk, bid, and contract management as well as effective trade settlement, accounting, and reconciliation.

The software is mostly used by procurement specialists who purchase raw materials and other commodities on behalf of their company or clients. The system comprises a broad set of features that can vary depending upon the traded commodity, assets employed in the business and their location, and the company’s business strategy and operational processes.

Commodity trading in Eka software (Source)

Common features of CTRM software

Each vendor offers a unique mix of features, however, there are some common features in all CTRM solutions.

Commodity trading	Manage commodity transactions such as purchasing, selling, and bidding.
Risk management	Identify, evaluate, mitigate, and report on trading risks such as fluctuating commodity prices.
Reporting/analytics	View and track pertinent metrics related to sales, quality, and inventory of trading resources.
Document management	Collect, upload, store, and share all documents in a centralized location, making it easier for everyone involved in the business to access relevant information.
Financial management	Provide a comprehensive overview of the organization's financial performance.
Logistics management	Plan effective movement and storage of commodities from one location to another.

What type of buyer are you?

CTRM solutions are often customized to meet specific business needs, so the type of software you’d need will depend on the type of commodity you deal with:

Energy/metals and mining: If you are involved in trading energy commodities (crude oil, electric power, gas, coal, etc.) or the mining value chain (as a miner, recycler, etc.), CTRM solution will not only allow you to transact and capture data in real-time but also provide business intelligence to make decisions around price fluctuations and trade execution. You will also benefit from functionalities such as position management, valuation, scheduling, confirmation matching, and reconciliations.

Agriculture: Agribusinesses use CTRM solutions to predict cash flow based on historical data on payment and shipment dates. They can track risk drivers and get notified when risk limits cross certain thresholds. They also benefit from features such as derivatives trading, risk and supply chain management, and hedging.

Consumer packaged goods (CPG): CPG companies are often searching for ways to effectively handle hedging price volatility and ensure optimum supply. CTRM solution allows them to tackle these challenges by managing demand aggregation, procurement, finances, delivery scheduling, inventory management, supply chain optimization, and hedging.

Benefits of CTRM software

Here are the biggest benefits you will see from using CTRM software at your organization:

Better risk management: The software provides analytical capabilities to perform portfolio stress testing, sensitivity analyses, and what-if analyses that help prepare for risks associated with market fluctuations. Users can analyze real-time position and exposure—market, volumetric, credit, and delivery—at granular levels for smarter risk decisions.

Effective scheduling: The software allows users to plan and optimize the physical movement of bulk commodities. They can manage transactions such as simple trade matching and itinerary scheduling that involves multiple trades, commodities, modes of transportation, and inventory.

Compliance management: A CTRM solution can automate the entire hedge accounting process for commodities. Businesses can define, measure, and manage fair value levels and meet disclosure requirements for ASC 820 (FAS 157) and IFRS 7 compliance. The software also helps ensure compliance with hedge accounting regulations such as ASC 815 (FAS 133), ASC 815-10 (FAS 161), and IAS 39 (IFRS 9).

Key considerations

With so many options and features to choose from, selecting the right CTRM software can quickly become an overwhelming task. To narrow the search list, here are some key factors to keep in mind when you evaluate different products:

Integration with accounting platforms: Generally, CTRM tools lack accounting features. In such scenarios, data needs to be entered manually or uploaded in spreadsheets, which can be inefficient and prone to errors. While searching for a CTRM solution, look for products that integrate with major accounting platforms, which will enable automatic data exchange between the accounting system and the CTRM software.

Multicommodity CTRM software: Some solutions that claim to support multi-commodity trading are often designed for trading a particular commodity and slightly adjusted to handle other commodity types. This means they often lack functionalities. While shortlisting a multi-commodity CTRM system, check if it offers industry-specific functionality such as terminal inventory management for oil traders and commodity-specific quality management tools.

Note: The applications selected in this article are examples to show a feature in context and are not intended as endorsements or recommendations. They have been obtained from sources believed to be reliable at the time of publication.