Proving Clean Hands In The West African Trading Environment
Written by Kevin Fiske, Sage – Kevin Fiske is a guest writer with extensive experience in industrial correspondence and high-tech PR consultancy. He co-founded the Sage Partnership in 1989 where he now serves as Director.
Recent West African government moves against judicial and commercial corruption in countries across the continent seem to suggest that the tide may be beginning to turn against the few who seek to profit at the expense of the many. Of course, corruption is not just an issue in Africa. There continue to be plenty of high-profile cases in countries right around the world.
However, in Africa the corrosive effects of corruption are particularly felt by ordinary citizens. They are helpless while trust in government and business life are undermined, and public education and healthcare are starved of monies that would improve living standards and quality of life for all. Corruption holds back national advancement. But across the region progressive governments seem increasingly determined to stop the rot.
What will happen when their gaze turns to petrochemical and agricultural commodities trading? A particular challenge for these sectors is that the sheer complexity of their operations, and the perfectly legitimate commercial desire not to weaken positions by disclosing profit and loss (P&L) to counter-parties in the value chain. These make proving that trading has been conducted with honesty and integrity potentially very hard indeed. Paper records? Spreadsheets? Forget it. They can be altered after the fact. The only unimpeachable way of proving clean hands is the complete transparency and audit-trail integrity provided by a trade and risk management solution.
The good news for West African trading houses is three-fold.
One, commodity trading and risk management (CTRM) systems give business managers a real commercial edge by automating the capture of all elements of complex trading and generating real-time reports on positions and performance so that decision-making is fully-informed. This is precisely why the world’s most dynamic and profitable trading operations rely on it.
Two, modern, cloud CTRM systems are not hugely costly and slow to deploy enterprise bloatware like traditional software. While there remain a good number of CTRM vendors still peddling legacy products that conform to that unfavorable profile, the best CTRM is delivered from the cloud, and deployed in a few weeks, unlike the legacy offerings that take many months or even years.
Three, when it comes to transparency and proving ‘clean hands’, contemporary cloud-based CTRM is also unmatched. In essence, it can trace and record the hydrocarbon molecule, grain, or other commodity at each step of the title transfer, creating not just a commercial audit trail that enables the business to be more effectively managed for less risk and more profit, but also creating a credible and legally compliant record of the entire value chain.
For example, it can capture transfer costs and inspected commodity quality at each point of transfer. It can illustrate total profit and loss showing full itemizations of primary costs related to the transfer of commodity from A to Z via the chain, and all the secondary services costs, like port costs, inspection costs, bill of lading, demurrage, with automated functionality removing human error and human influence. It can illustrate full exposure to USD transactions against local currency, such as the Naira, and show how P&L and FX shifts as volatility changes. This quite extraordinary level of transparency is fully under the control of the trading operation. It allows users to choose whatcriteria and how much detail to share with external parties.
Spreadsheets can’t do all of this and provide an audit trail of activity.
Nothing to fear from a government enquiry? A trading house might know it has clean hands, but with today’s cloud CTRM system it can prove it, and at an affordable, no- risk cost to the trading firm.