The Need for Digitalization in Energy and Commodities Trading

In today’s competitive landscape, it is increasingly important for energy and commodities trading firms to provide a positive counterparty experience. Otherwise, they risk losing deals. Competitors with better, more efficient processes are creating more engaging experiences.

Unlocking an Exceptional Counterparty Lifecycle Experience 

Fenergo hosted a discussion with experts in energy, commodities, and risk to highlight the challenges organizations are facing in onboarding and managing client relationships. 

The speakers:

• Anthony Palmieri - Industry Lead – Commodity Trading & Senior Enterprise Account Executive, Salesforce
• Aoife Doyle - VP Product Marketing, Fenergo
• Marius-Christian Frunza - Director, Schwarzthal Tech

The speakers argued that a lack of digital transformation and integrated systems are the root of several problems. This leads to inefficiencies, frustration for clients, and opens firms up to potential regulatory risks. 

They emphasized the importance of investing in technologies such as client relationship management (CRM) and client lifecycle management (CLM) systems to streamline processes, automate tasks, and enhance the counterparty experience. 

The challenges firms face to providing an optimal experience for counterparties result from an inability to manage counterparty data and documentation effectively. 

The full discussion is available to watch on-demand here.

Challenges to Providing an Optimal Counterparty Experience

Energy and commodities trading firms are bogged down by data siloes, inefficient processes, and outdated systems. With this chaotic backdrop, it is no wonder that firms are struggling to provide counterparties with a smooth, digital counterparty experience. This is particularly felt at key touchpoints in the relationship like onboarding, know your counterparty (KYC) reviews, and risk assessments.

For counterparties a negative experience may end a deal. Evidenced by 69% of energy and commodities firms having lost trades due to slow and inefficient onboarding. 

Data Availability and Transparency

Energy and commodities firms operate globally, engaging in trades with counterparties located in diverse jurisdictions. These jurisdictions vary greatly in terms of their standards for data accuracy, completeness, and regulatory requirements around data disclosure. Varying standards hinder efforts to establish a single, reliable source of truth for counterparty data. Without a single source of truth, businesses are forced to repeatedly reach out to counterparties to source or verify data and documentation – causing delays and frustration.

Siloed Systems and Manual Processes

There are huge siloes between systems and teams thanks to a reliance on legacy systems for KYC and onboarding. Manual processes are a burden for trading and compliance staff. Ultimately, they contribute to longer onboarding times, increased error rates, and frustration for both clients and staff as communication and transparency are hindered.

Lagging Digital Transformation

Legacy systems and manual processes are prevalent in the energy and commodities sectors as they have been slower than other industries such as financial services to transform digitally. Legacy technology, or an outright lack of modern technologies, creates bottlenecks in the onboarding process and leads to longer onboarding times. This outdated approach also leads to negative staff experience and limited self-service capabilities for counterparties. The impact of low to no digital transformation in energy and commodities firms is that they sacrifice efficiency, competitiveness, and the ability to meet evolving regulatory demands.

Regulatory Risk and Compliance

Firms must prove to regulators and auditors that they know who they’re doing business with and have a sufficient framework for managing counterparty risks. Therefore, risk assessment and KYC are critical tools for energy and commodities businesses. 

Currently, businesses in energy and commodities trading are falling short on meeting sanctions obligations. 78% agree that their ability to meet sanctions obligations effectively is impacted by arduous processes in collecting, managing, and analyzing counterparty data for anti-money laundering (AML) and KYC .

Increased Regulatory Scrutiny and Risks

Regulatory bodies in many sectors are becoming increasingly focused on financial crime prevention and sanctions compliance. Energy and commodities firms are expected to implement appropriate measures to identify and mitigate financial crime risks such as money laundering and terrorist financing. They also face growing pressure to demonstrate robust risk management practices, including thorough due diligence on counterparties and suppliers. 

The lack of data availability and transparency at these firms can hinder these efforts and expose companies to potential regulatory penalties or growth restrictions.

Solutions for Enhancing the Counterparty Experience

Digital transformation is not simply about adopting new technology, but about fundamentally changing how firms operate to provide a digital experience for their counterparties.

Integrated CRM and CLM Systems

By integrating their CLM and CRM systems, firms can create a seamless and efficient counterparty experience. When these systems are working hand-in-hand, it becomes possible to automate tasks, streamline workflows, and centralize data to achieve a single source of truth for counterparty data.

“In our partnership with Fenergo, we, we really see the fact that an integrated counterparty relationship management and client or counterparty lifecycle management combined tightly together is a game changer because it will help to automate and streamline the entire counterparty lifecycle.”

Anthony Palmieri - Industry Lead – Commodity Trading & Senior Enterprise Account Executive, Salesforce

Centralizing Data and Analytics

Centralized data allows for a more comprehensive and accurate view of counterparty risk. This is crucial for energy and commodities firms operating in a global and volatile market where sanctions and geopolitical events can significantly impact risk profiles.

Centralizing data to create a single source of truth eliminates data duplication. It ensures that everyone across the organization is working from the same accurate and up-to-date information on counterparties. This leads to greater consistency in a firm’s interactions with its counterparties, building trust and improving the overall experience.

“A single source of truth will also help to improve consistency, transparency, and increase efficiency, obviously.”

Anthony Palmieri - Industry Lead – Commodity Trading & Senior Enterprise Account Executive, Salesforce

Conclusion

The message from our panel is clear: energy and commodities firms must act decisively to remain competitive in an increasingly digital and regulated world. Their recommendations for firms operating within this sector include conducting a thorough assessment of their current systems and processes around the management of counterparty relationships and data. They also urge firms to develop a clear digital transformation roadmap and prioritize investments in integrated CRM and CLM solutions. 

“There is one opportunity which is unique to commodities energy firms is to not repeat the same old paradigm and let's say the old same traps that traditional banking felt”

Marius-Cristian Frunza – Director, Schwarzthal Tech

Access the full discussion on unlocking an exceptional counterparty lifecycle experience through our on-demand webinar here.

Book a demo of Fenergo’s Counterparty Lifecycle Management and Counterparty Onboarding solutions to learn more.