Asset-Backed Commodity Trading
What all companies in the hydrocarbon value chain have in common is that their fortunes often rise and fall as a direct result of forces that are beyond their control. With so much volatility related to the price of crude oil, manufacturing excellence alone is no longer enough to ensure financial success for companies where commodities are traded like in the hydrocarbon value chain. Long term commitments become more and more costly to hedge in the absence of liquidity.
The Asset-Backed Trading is a style of commodity trading used to seek to exploit market volatility in order to monetise operational asset flexibility. It views physical assets as portfolios of traded instruments.
Today, companies must link their manufacturing excellence to market and financial intelligence to remain competitive. It poses a challenge on the business process as well as effecting the IT landscape; a move is necessary from a technology-centric focused on certain processes to a technology that is embedded into all processes and equally weighted toward financial instruments. A well-defined, streamlined, synchronised and documented process is the base to provide the necessary information, to fulfil regulatory tasks and compliance requirements such as IFRS and SOX.
How BearingPoint brings value
When implemented properly, asset-backed commodity trading can help companies:
- Drive better measurement and control of market-driven and price-related risk by a straight through processing - end-to-end
- Identify the level of risk acceptable to the organisation and its shareholders.
- Keep a “finger on the pulse” of key markets and quickly identify overcapacity, tight markets or supply disruptions that could affect price and availability.
- Reduction of functional redundancies and manual effort (e.g. by centralisation of managing commodity trading, settlement, risk management and logistics)
- Revising traditional supply-cost curves by adding previously unavailable make/buy/exchange options; find additional options e.g. for moving, storing and selling commodities; quickly identify overcapacity, tight markets or supply disruptions that could affect price and availability
- Gain access to more timely and accurate information related to operational constraints, transportation costs and constraints and inventory levels.
- Improve the balance sheet, P/L statement, thereby enabling them to attain a better credit rating. This improvement has long-term implications for cash flow, profitability and shareholder satisfaction.
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