Demand is spiking for technology that can bolster performance for commodity traders. Some estimates suggest that the commodity trading and risk management (CTRM) software market will exceed $13 billion by 2031, up from $7 billion in 2024. Demand is being driven by organizations that are increasingly transitioning from outdated methods like spreadsheets and legacy technology systems to solutions that integrate data across all functional areas, enhancing visibility, operational efficiency, and risk management.
Picking and successfully implementing a CTRM system should not be taken lightly. Both steps require thorough investigation and planning and must be aligned with broader strategic goals. Companies need to select a CTRM system that not only addresses current needs but can help the organization evolve as market dynamics shift. Failing to be strategic about deploying a CTRM system can result in wasted resources — both financial and human capital. Leaders need to consider that it can take up to 18 months to deploy a CTRM system. There can also be hidden costs related to third-party licenses, technology infrastructure, implementation, and ongoing support. Understanding the total cost of ownership before embarking on CTRM implementation is a must. We’ve identified key factors before a project go-live and how to manage things in the critical weeks after deployment.
Areas to consider before implementing a CTRM system
It’s vital that companies have a strong foundation before deploying any technology system. Putting new technology on top of flawed processes will merely lead to bad results. Companies should keep these five guiding principles in mind before embarking on a CTRM deployment:
1. Identify the problem you are trying to solve in CTRM implementation
Defining the scope is crucial. Clarify whether the focus is on risk modeling, accounting, or scheduling. Establishing a clear scope helps manage the project and prioritize tasks. It’s equally as important to deter scope creep and clearly articulate how it will be addressed during the project.
2. Create a credible roadmap for CTRM implementation
After defining the scope, develop a roadmap for implementation. Identify dependencies and prerequisites, such as the need for subject matter experts to outline business requirements or the creation of new technical environments.
3. Prepare the organization for change management
Effective communication is critical. Clearly convey the scope, timeline, and expectations to minimize user frustration. Users should be aware that results from the new system may differ significantly from the old system. They also need to understand how their workflows will change and that new processes are required. Deploying a new technology is about change management, not just the technology itself.
4. Focus on data quality and process integrity for reliable reporting
Ensure data is inspected and cleaned before migration to the new system. Post migration, establish processes to maintain data quality, ensuring that reports generated are accurate and reliable.
5. Build trust in system outputs and numbers through reconciliation
Once results from the new system are produced, reconcile them with those from the old system. Understanding the reasons for differences is crucial; repeated reconciliation helps build trust in the new system's outputs.
How to navigate the stability phase in CTRM system implementation
Having established the need and plan for the new system, it is equally important to navigate the post-launch stability phase effectively. The weeks following the launch, known as the stability phase — typically 12 to 16 weeks — are crucial for determining whether the project will succeed or fail. Project leads should:
1. Respond rapidly to project pain points
After go-live, the response time to issues should shift from days or weeks to minutes or hours. The project team must be prepared to address problems quickly, particularly with high-stakes outputs like the profit and loss statement (PnL). While the PnL may never be flawless, rapid issue resolution is vital for building user confidence.
2. Embed project team members into key business units for support
Integrating project team members, such as business analysts or super-users, into business units — like trade floors or accounting teams — facilitates immediate responsiveness and knowledge transfer. This on-the-ground presence helps users adapt and ensures that support is readily available during critical periods, such as month-end closes. It also accelerates the eventual handoff to the relevant business units.
3. Focus on knowledge transfer empowering users and IT for long-term success
Knowledge transfer from the project team to business users and IT is vital for stabilization. While project team members have been fully engaged, many users may not have experienced the project directly. A structured knowledge transfer plan will empower more individuals to troubleshoot and support the new system. Focusing on change management before the project go-live will smooth out this process considerably.
4. Control the message through proactive communication with stakeholders
Effective communication is crucial for shaping perceptions. Initial user feedback may center around issues, which can lead to frustration around transparency about issues, consistency in updates, and ensuring all information — both positive and negative — is shared to build trust and integrity in the process.
By anticipating challenges and planning effectively during the stability phase, organizations can ensure a successful transition to their new CTRM systems, ultimately realizing their business goals and maximizing value.
Implementing a CTRM system is a complex but rewarding endeavor that requires thorough planning, clear communication, and active user engagement. By focusing on key considerations, embracing best practices during the post-launch phase, and avoiding common pitfalls, organizations can ensure a successful transition. Ultimately, these efforts will empower businesses to effectively manage risks and capitalize on opportunities in the ever-evolving commodity trading landscape.