Failure of Risk Management?

Global Crisis

3rd Annual Risk & Compliance SummitA Report

Customer PrivacyInterview with Vikas Tandon, ICICI Bank

Wipro InfotechImplementing Risk Solutions

Banking, Financial Services & Insurance

The Journal of

Compliance

Risk &

Opportunity

VOL III Issue 5March 2009

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Commenting on the key featuresof Commodity XL that set it apartfrom other industry competitors,Michael Schwartz, chief marketingofficer of TPT says ‘there are threekey differentiators; first of all, it isa true real-time, multi-marketplatform designed to becommodity agnostic from its veryinception. As a result, newcommodity classes can be easilydesigned and modeled.’‘Commodity XL also offerscomprehensive enterprise riskmanagement. With our acquisitionof both INSSINC (regulatory risk)and ROME (counter-party creditrisk), the risk platform nowintegrates the four key areasidentified by the Committee ofChief Risk Officers which includemarket, operational, regulatoryand credit risk.’ TPT had acquiredINSSINC, provider of treasurymanagement and regulatorycompliance solutions in June2008, followed by the acquisitionof ROME Corporation, a credit risksolutions provider for energy andcommodity trading, in July 2008.‘Both ROME and INSSINC areleaders in their respective areas,while ROME had more than 20enterprises using its creditsolution, INSSINC had more than

40 organisations using itshedge/fair value accountingsystem,’ he informs. He definesBusiness Intelligence area as thefinal key differentiator of TPT’sCommodity XL solution. ‘Althoughthe transaction layer of thesolution will always be important,we believe that the decision-making layer is where future valuewill be seen. Thanks to itsManagement Dashboard, thatmines vast amounts of trading,risk and supply chain data,Commodity XL can deliverpinpoint analysis that supportssuperior, proactive, executivedecision-making,’ adds Schwartz.

The product launched inDecember 2008 offers exposuremanagement, collateralmanagement, counter-partymanagement, credit analytics,credit scoring and reporting into asingle transparent frameworkmanagement. The solution comesas a response to the growing needof credit risk managementresulting from the counter-partydefaults that have increaseddrastically as a repercussion ofeconomic crisis that is felt

worldwide. ‘Over the last year, wehave seen extreme marketvolatility, tight credit markets andincreasing regulatory oversightand without a sophisticated riskplatform, companies put revenue,earnings and reputation at risk.The benefit of Commodity XLis that it integrates market, operational, credit and regulatory risk on a real-time platform,’ says Schwartz. Other benefits of the product include greater efficiencies generated by straight-through processing (STP) and the elimination of many time-consuming, error-prone manualprocesses present at each stage of trading workflow. ‘Theseefficiencies are obviouslyincredibly attractive in the currenteconomic climate. Greaterautomation also gives our clientsconfidence that they will be ableto meet the auditabilityrequirements of various marketregulators worldwide since theirdata is accurate, timely andvisible. The business intelligenceanalysis tools in Commodity XLtranslate data into managementinformation that improvesexecutive decision-making.Organisations using CommodityXL have a competitive advantagein decision-making speed andeffectiveness,’ he observes.

Historically, Commodity XL hasbeen the product of choice forenergy and commodity tradingfirms and the major clientele ofTPT includes the world’s most successful energy companies and global commodity houses. TPT’s Commodity XL service enables the companies to manage the physical and financial buying, selling, logistics, scheduling, accounting and risk management

Michael Schwartz

Triple Point Technology (TPT), one of the leading software solutions companies specialising in multi-market commodity and enterprise risk management recently launched its Commodity XL for Credit Risk™. The latest version is developed as an end-to-end solution for collateral optimisation that delivers improved cash flow reporting and liquidity savings for trading commodities with better risk management capability.

of multiple commodities includingpower, oil, gas, coal, metals,agricultural products, freight andbiofuels. ‘However, over the last18 months or so, consumerproduct companies, and othermainstream businesses such asdiscrete manufacturers, retailers,transportation companies andwholesalers have seencommodities become a far morevolatile part of their coststructure. These companies, forwhom raw materials or energyconsumption has always formed asignificant proportion of inputcosts, are beginning to recognisethat systems like Commodity XLcan help manage coverage andpreserve profit margins in the faceof today’s unprecedentedpressures,’ says Schwartz.

‘The timeline can vary from 3months to more than a yeardepending on the projectcomplexity,’ responds Schwartz tothe question on the estimatedtimeline for deploying CommodityXL solution. For organisationslooking for a fast and reliableimplementation, TPT develops afull-service program, known asQuick Start, which enables therapid deployment and utilisationof Commodity XL’s trading andfront-office features, includingtrade and contract entry, marketdata and curve management,physical and financial positionreporting, profit/loss calculationand portfolio risk management.‘By using Quick Start, clients canget up and running on thesoftware in as little as 12 weeks.It has proved to be a veryattractive proposition for many ofour clients who recognise thatimplementing Commodity XLdoesn’t have to be a long, drawnout process. One of the thingsthat TPT is most proud of is ourtrack record of on-time and on-

budget implementations,’ headds.

Founded in 1993 andheadquartered at Westport,Connecticut TPT serves clients inAsia, Africa, Australia, Europe,North and South America. Infinancial stream, TPT’s clientsinclude ABN AMRO, ARCIMAdvisors LLC, Bank of Nova Scotia,Bear Stearns, Fortis Bank,Macquarie Bank and MorganStanley. In India, major banks likeCenturion Bank of Punjab (nowHDFC Bank), ICICI Bank, KotakMahindra Bank, State Bank ofIndia (SBI), UTI Bank, HDFC Bankand Canara Bank use TPT’ssoftware solutions. What are themajor solutions that the Indianbanks have opted for? ‘Primarilythese banks have been usingCommodity XL for Precious Metalsto manage both thetreasury/wholesale and retail ofprecious metals on a singleplatform,’ responds Schwartz. ‘Onthe wholesale side of thebusiness, Commodity XL forPrecious Metals caters to thebullion business and presents anintegrated approach to physicals,forwards and loans. It monitorsclient exposure and margins inreal-time and supports a robustrisk management and regulatorycompliance programme. And onthe retail side of the business,Commodity XL automates bankoperations from centralconsignment to point-of-sale. Ithas sophisticated inventorymanagement and tracks sales andsales performance,’ he elaborates.

TPT’s acquisition of Chennaibased CoralGrid (P) Ltd, a preciousmetals software solutions providerin 2007, helped the vendor tobecome a major provider of multi-commodity solutions for financialinstitutions. ABN AMRO Bank,

Bank of Nova Scotia, HDFC Bank,ICICI Bank, Kotak Mahindra Bank,Reliance, UTI Bank Limited and SBIwere major customers added toTPT’s client list post CoralGrid’sacquisition.

Commenting on the majorgeographies that TPT is focussedon Schwartz says, ‘We have seentremendous growth in Europe inthe last 12 months and weanticipate continued growth inNorth America. We also see LatinAmerica as a major growth arealargely because of its strongagricultural base and the growingtrade in agricultural commodities.

For similar reasons, we expect tosee growth in Asia as a whole,most notably in places likeMalaysia and Singapore where thebiofuels market is very strong,’says Schwartz. ‘However, werecognise that India doesrepresent a tremendousopportunity for us. It may be anascent market but there is hugepower requirement and as thestate-controlled entities movetowards a more market-focusedmodus operandi, we expect to seea significant expansion of tradingactivity and with it the need tomanage trading and enterpriserisk,’ he adds.

TPT has worldwide supportcentres located at Houston, Texas;Westport, Connecticut;Parsippany, New Jersey; London,UK; Pune, India; Chennai, India;Sao Paulo, Brazil; Vienna, Austriaand Singapore. In India, both thePune and Chennai offices areinvolved in substantial marketingand business developmentfunctions. The Chennai office ismore focused on the preciousmetals business, while Punecovers the broader Commodity XLproduct range.

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