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Risk as a Service for Commodity Firms
Dr. Markus Seiser | Division Executive, Cross-Asset Trading & Risk, FIS
December 17, 2019
In the recent FIS Trends in Commodities white paper – we provided an overview of how geopolitical tensions are now impacting the sector. Trade wars, tariffs, slower global growth, sanctions, and social and environmental issues have all had the effect of keeping commodity prices generally lower and increasing price volatilities. Today, any type of company with an exposure to raw materials, from producer to a food & beverage company, is exposed to these issues and their potential impacts. Global tensions can turn markets volatile or disrupt supply chains in seconds. Geopolitical risks are unavoidable and join market, credit and other risks that commodities firms are exposed to. In commodities, everything can change in an instant – making risk management a key attribute of any commodity firm.
For many involved with commodities or raw materials, it is also about increased operational efficiencies, speed and business agility across the supply chain. Delays or disruption can result in penalties, additional costs and margin erosion – where margins are already razor thin. Managing operational efficiency and all of the inherent risks to the business and its transactions is very difficult, often requiring significant expertise as well as investment in top-of-the-line IT systems. The costs of maintaining a complex suite of risk models is large, but it also required talent and investment to maintain the data and IT platforms as well as anticipate and analyze all of the possible risks to the business.
One growing solution to these challenges is Risk as a service (RaaS), whereby risk management processes are outsourced. Initially, the idea of outsourcing risk management processes might appear to be a leap of faith, but many businesses are now doing exactly that. By buying RaaS, firms can obtain access to well-integrated trading and risk management technologies and expertise at a reduced cost of ownership. Through better use of powerful technologies, the RaaS provider can help firms drive further operational efficiencies as well by managing processes more effectively. It also provides access to expensive quants and analysts that can help identify and prepare firms for many types of risk, including those unexpected geopolitical risks.
This is why FIS is using its systems and expertise to bring a multi-asset class RaaS solution to market for clients. This includes market, credit, liquidity and geopolitical risks as well as regulatory compliance. As your provider, FIS will host, run, maintain and upgrade any applications and take care of the underlying infrastructure in the cloud as well. In a world where firms need to demonstrate that they are managing risks effectively, FIS can provide a cost-effective means of doing so.
For those exposed to raw materials and commodity risks, RaaS can provide a way to ensure that risks are properly assessed, measured and managed in an increasingly uncertain world. This helps the firm focus in on operational efficiencies and opportunities across the supply chain and within its core business process.
If you would like to read our white paper, please download it here. If you would like to know more about RaaS, please contact us.